Should federal, state, and local grants be included when calculating revenue loss for the ARP?

For calculating lost revenue pursuant to the American Rescue Plan Act of 2021 (“ARP”) and the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), intergovernmental transfers from the federal government should be excluded from general revenue calculations.  However, intergovernmental transfers from state and local governments can generally be included unless it is a pass-through transfer of funding from the federal government.

The U.S. Department of the Treasury (“Treasury”) Final Rule’s definition of general revenue excludes “intergovernmental transfers from the Federal Government, including transfers made pursuant to section 9901 of the American Rescue Plan Act.”[1] In particular, Treasury’s Compliance and Reporting Guidance states:

In calculating general revenue, recipients should have excluded all intergovernmental transfers from the federal government. This includes, but is not limited to, federal transfers made via a State to a locality pursuant to the CRF or [CSLFRF]. To the extent federal funds are passed through States or other entities or intermingled with other funds, recipients should have attempted to identify and exclude the federal portion of those funds from the calculation of general revenue on a best-efforts basis.[2]

However, intergovernmental transfers other than from the federal government are included in the definition of “general revenue.”[3] Intergovernmental transfers are defined as “money received from other governments, including grants and shared taxes.”[4]

Therefore, for the purpose of calculating revenue loss, municipalities should exclude funds transferred from the federal government and should include intergovernmental transfers between state and local governments. 

Last Updated: March 31, 2022