The American Rescue Plan Act (ARPA) of 2021 distributed $350 billion across nearly every state and local government in the country, from the poorest rural areas to the wealthiest cities and suburbs, through the Treasury Department’s State and Local Fiscal Recovery Fund (SLFRF) program.

Despite President Biden’s declaration ending the COVID-19 public health emergency in May 2023, many local governments still had not spent the hundreds of millions of dollars they received through SLFRF between 2021 and 2022.  Indeed, as of summer 2023, many still have not even decided when or how to use these funds.

The $65 billion allocation from SLFRF set aside exclusively for county governments came with the requirement that recipient governments must make their budget decisions obligating SLFRF funds to a particular use before the end of calendar year 2024, and these funds must be spent by the end of 2026.  The debt ceiling agreement hammered out by the President and Congressional leaders in June did not rescind the Treasury’s SLFRF funding or change its spending or obligation deadlines.

Because ARPA allocated funding to governmental entities based on population rather than economic conditions, some of the wealthiest counties in the country, by per capita income, received hundreds of millions of dollars each.  And despite the end of the public health emergency, many of these wealthy counties continue to sit on tens of millions of dollars in unobligated funds.

For example, by the end of July 2023, Nassau County, N.Y., the nation’s 10th wealthiest, had obligated less than half of its $385 million SLRF windfall.  The county had appropriated $186.6 million, and rather than devote all of what it spent to provide pandemic relief or maintain public infrastructure, the county spent $10 million on discredited jobs training programs.  According to a 2019 Brookings Institution analysis, “Job training is simultaneously one of America’s most well-funded and poorly performing public programs.  A recent White House report found that of the $18 billion that state and federal agencies spend on job training, there was virtually no rigorously evaluated program that could be deemed a success.”  Apparently, some local officials prefer not to let evidence interfere with their spending priorities. 

The Washington D.C. suburb of Fairfax County, Virginia, the nation’s fifth wealthiest, attracted the attention of local taxpayer watchdogs when a July budget memo revealed that as of the end of July 2023, it had yet to decide how to spend $118.7 million, or 53.2 percent, of the $222.9 million it received through SLFRF.  Similarly, Howard County, Maryland, the nation’s seventh wealthiest, received $63.3 million and has allocated $31.2 million, or 49 percent of its SLFRF allocation.

In California, Santa Clara County, the nation’s third wealthiest, received $374.4 million in 2021, and by May 2, 2023, still possessed $34 million in unallocated funds.  Morris County, New Jersey, the nation’s 12th wealthiest, received $95.5 million in SLFRF funds, yet as of June 30, 2023, the county had obligated just $70.1 million and spent only $20.4 million, leaving Morris County with $25.4 million in unobligated funds, and $75.2 million in unspent funds. 

Following the announced end of the public health emergency, Congress adjusted the initial constraints it set on how recipient governments may spend their SLFRF funds, allowing for more flexibility to respond locally to natural disasters, make infrastructure improvements and support community development programs.  These changes were aimed at making it easier to obligate and spend these funds before the deadlines, even though their use is even further removed from their original purpose of  responding to the COVID-19 pandemic.

As the Brookings Institution noted, even “jurisdictions that ‘parked’ significant SLFRF sums in revenue replacement may, in future reports, specify programs and services those dollars will support.”  Using much of its $46 million SLFRF windfall for revenue replacement saved the Arlington, Virginia county board from having to abandon its plans to spend more than $4.7 million on a Potomac River boathouse intended to rival the yacht clubs of Washington, D.C. - at the taxpayer’s expense of course.  

ARPA funds come with an unprecedented lack of spending accountability.  Unlike the Troubled Asset Relief Program (TARP), the federal government’s economic relief spending package following the Financial Crisis of 2008, SLFRF has no provision requiring the automatic rescission of unspent grants.  Counties and municipalities may use revenue replacement to sustain means-tested programs under the guise of poverty relief, only to fast-track luxury projects like yacht clubs that might otherwise have been delayed or canceled under the pandemic’s tight fiscal conditions.  Local governments should not take advantage of this lack of oversight to fast-track spending items on their wasteful wish lists.

To guarantee recipient governments do not exploit this funding to pursue wasteful projects unrelated to pandemic relief, Congress should amend ARPA to impose tighter restrictions on remaining SLFRF funds to ensure local leaders stay focused on addressing the lingering fiscal effects of COVID-19 and the economic shutdown, from supply chain and labor market disruptions to workforce trends toward at-home and online work.

In preparing for the next economic crisis, local governments should focus on investments and structural reforms to enable their local tax bases to grow organically, from the bottom up, and set aside their own money for future emergencies instead of relying on the federal government.  In the meantime, Congress should increase its oversight to ensure the wealthiest counties do not prioritize luxury spending projects for the nation’s most affluent residents and that other counties similarly spend their SLFRF funds effectively and efficiently.  Better yet, Congress should rescind whatever is not truly necessary or related to ARPA’s original intent.