Final Rule issued on Coronavirus State and Local Fiscal Recovery Funds

The U.S. Department of the Treasury has issued the Final Rule on the use of Coronavirus State and Local Fiscal Recovery Funds, which were established under the American Rescue Plan Act. Securing funding and resources to help cities’ pandemic recovery was one of Cal Cities’ top priorities in 2020 and 2021, along with ensuring that cities have the information they need to access and spend those dollars.

The Final Rule provides additional clarity and flexibility for the use of recovery funds, most notably the following:

• Replacing lost public sector revenue: Under a new option, recipients may select a $10 million standard revenue loss amount or complete a full revenue loss calculation when replacing lost revenue. Recipients selecting the $10 million allowance may use that amount — in many cases their full award — for government services with streamlined reporting requirements. More than 90% of California’s non-entitlement city allocations fall within the $10 million standard allowance.
• Public health and economic impacts: The Final Rule clarifies that recipients may use funds for capital expenditures that support eligible COVID-19 public health or economic responses. Crucially, it expands the types of households and communities presumed to be “impacted” and “disproportionately impacted” by the pandemic and provides a broader set of uses available for these communities. It also allows for broader uses to restore and support government employment.
• Premium pay: The new guidance expands the number of eligible workers who can receive premium pay without a written justification, with a focus on low-income and frontline workers performing essential work.
• Water, sewer, and broadband infrastructure: The Final Rules broadens eligible broadband infrastructure investments to include projects that address challenges with broadband access, affordability, and reliability. It also adds additional eligible water and sewer infrastructure investments, including a wider range of lead remediation and stormwater management projects.

Cities are encouraged to refer to the Overview of the Final Rule, and the full text of the Final Rule for more information.

In July 2021, Cal Cities submitted a comment letter to the Treasury Department regarding the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule. The letter highlighted nearly 30 areas needing additional flexibility or clarification, including how local governments can calculate revenue loss and track and report premium pay allocations to non-government employment sectors eligible for premium pay grants. The Treasury Department’s Final Rule provides much-needed clarity on those issues.

Cal Cities will continue to provide important updates and resources so that cities can focus on responding to the crisis in their communities and maximize the impact of their funds. City officials seeking current information about the American Rescue Plan Act and additional tools for recovery are encouraged to visit the Cal Cities Guide to Local Recovery webpage. For more information or questions, contact Senior Policy and Legislative Affairs Analyst Jessica Sankus.