The American Recovery Plan Act (ARPA) included $350 billion in the State and Local Fiscal Recovery Fund, $195.3 billion of which was given to the states, with the remaining $154.7 billion divided among local governments, tribal governments, and territories.  Because states are not required to obligate their share of the funds until December 31, 2024, or spend them until December 31, 2026, several states have elected to take a patient approach to distribution.  The National Council of State Legislatures reported that 13 states have yet to allocate any funds sent to them by the Department of the Treasury, while the most of the others have allocated only a fraction of the funds given to them.  

Thus far, local governments have used their portion of the grants on a wide array of projects ranging from the expansion of broadband access and infrastructure repair to the promotion of green energy and the development of athletic fields.  In Alabama, the state’s only use of APRA funds has been the allocation of $400 million for the construction of two prisons.  Hawaii’s legislature designated $1 million for a Sea Urchin Hatchery in addition to $300,000 for an engineering assessment of Aloha Stadium.  Use of grant money designed to provide relief from the COVID-19 pandemic for these and similar projects takes a page from Sen. Kirsten Gillibrand’s (D-N.Y.) infrastructure playbook, when she claimed that paid leave, child care, and caregiving are all infrastructure.  Just as everything fits under infrastructure, so too can anything be sold as COVID relief, sea urchins included.

As state and local governments prepare to appropriate their remaining ARPA funds in their upcoming 2022 legislative sessions, governors and legislators must allocate the money with caution to avoid funding wasteful projects unrelated to COVID relief or creating unsustainable programs that will be unaffordable when the federal well runs dry.

Wyoming is among the states leading the way to fiscal responsibility.  In June, Governor Mark Gordon, Wyoming Senate President Dan Dockstader, and Speaker of the House Eric Barlow issued a joint statement citing the long timeline for funds to be distributed as the basis for their decision not to hold a special session over the summer.  Because Congress borrowed the funds “from many generations yet to come,” Governor Gordon said, legislators must keep in mind that “those future generations that will be paying for them must also benefit from them."  Such caution is particularly important in a state like Wyoming, where the ARPA funds are equivalent to 22.7 percent of the state’s fiscal year 2020 budget.

ARPA funds represent similarly significant percentages of many other state budgets.  While Wyoming takes its time, the temptation for state leaders across the country to use the money without restraint on what Governor Gordon described as “a few shiny distractions” will be great.  History has shown, however, that states cannot support new programs with federal funds forever.  Once legislators use federal funds to create or expand a state program, it places a burden on future lawmakers who will then have to find a way to support it after federal aid dries up.  Many of the taxpayers who will be on the hook for these new programs are the ones meant to reap the rewards of the new expenditures.

By taking steps to ensure that the funds are not earmarked for projects that will prove to be unsustainable in the future, state legislators can make sure that COVID-19 relief bills like the CARES Act, the HEROES Act, and ARPA fulfill their objectives.  If not, state legislators will once again lead taxpayers over the fiscal cliffs that many states experienced following the expiration of aid from the American Rescue and Reinvestment Act of 2009.

The caution shown by state leaders such as Governor Gordon should serve as a guide for others to follow.  In a time of fiscal insanity, when the national debt continues to skyrocket, Congress failed yet again to pass appropriations bills in a timely manner, and the two “infrastructure” bills would cost at least $4.7 trillion, this concern for the future provides a rare ray of hope.  Careful deliberation and concern for the long-term impact of all government spending should become the standard for legislators in the states and the nation’s capital to emulate for years to come.