How can cities use ARP funds to expand workforce infrastructure and programs?

The U.S. Department of the Treasury’s (“Treasury”) Final Rule on Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) states that “general” economic development or workforce development activities are typically not an eligible use of CSLFRF, because these activities do not respond to a negative economic impact of the COVID-19 public health emergency but rather seek to enhance the jurisdiction’s business climate.[1]  

However, Treasury clarifies in the Final Rule that any new or expanded workforce development program that specifically and directly addresses the negative economic impact of COVID-19 is considered eligible.[2] Treasury recognizes that the pandemic has generated broad workforce disruption. In the Final Rule, Treasury clarifies that recipients may provide job training or other enumerated types of assistance to individuals who are currently employed, but are seeking to move to a job that provides better opportunities for economic advancement, such as higher wages or more opportunities for career advancement.[3] Recipients must be able to justify and demonstrate a new or expanded workforce development program directly addressing the negative economic impact of COVID-19 for the program to be considered an eligible use of funds.

For example, Treasury enumerates a non-exhaustive list of eligible workforce development programs as follows:

• assistance to individuals who want and are available for work (e.g., job training, public jobs programs and fairs, support for childcare and transportation to and from a jobsite or interview, or incentives for newly employed workers);
• subsidized employment;
• grants to hire underserved workers;
• assistance to unemployed individuals to start small businesses; and
• development of job and workforce training centers.[4]

In determining whether a program or service would be eligible, the recipient should assess whether and to what extent there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID–19 public health emergency.[5] The recipient should then assess whether and to what extent the program or service would respond to or address this harm.[6]

Under the revenue loss provision, recipients may also fund any service that is traditionally provided by the government, which can include general economic development and business assistance. As a reminder, recipients are required to select between calculating lost revenue based on the Treasury’s formula, or by electing the standard allowance of up to $10 million, not to exceed the recipient’s award amount. Recipients may then apply these funds to the provision of traditional government services, as defined by the recipient.[7] Treasury’s list of eligible government services is non-exhaustive, and it is each recipient’s responsibility to determine what services it considers eligible.

Additionally, the Final Rule allows for an expanded set of eligible uses to restore and support public sector employment, including the use of funds for costs associated with rehiring government staff to bolster the government’s ability to administer services effectively. Eligible uses further include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring.[8]

Treasury may provide additional information when it issues new Frequently Asked Questions (“FAQs”) associated with the Final Rule.

Last Revised: March 31, 2022