The State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act

What’s in the Bill?  

The Coronavirus State and Local Fiscal Recovery Funds (CSLFRF)passed through the American Rescue Plan Act (ARPA), included $350 billion of funds for States, Tribes and Territories ($219.8 billion) and local government ($130.2 billion) to respond to and recover from the pandemic. This funding can be used by states, municipalities, smaller cities, and counties in similar ways to the CARES Act Coronavirus Relief Fund (CRF).  

The State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act, if passed, would provide additional flexibility for CSLFRF. Some of this additional flexibility is contingent upon the passage of the Infrastructure Investment and Jobs Act (IIJA), which is referenced in the Act. The Act includes, but is not limited to, the following provisions: 

  • Adds a second optional threshold for the provision of government services spending of $10,000,000.  
  • Allows for CSLFRF funds to be used towards emergency relief from natural disasters or the negative economic impacts of natural disasters, including temporary emergency housing, food assistance, financial assistance for lost wages, or other immediate needs. 
  • Provides governments authority to use funds for certain infrastructure projects beyond those currently specified in ARPA (namely sewer, water and broadband projects).  
Example Eligible Transportation and Infrastructure Projects
  • Community Development Block Grant 
  • RAISE Grant Program 
  • Urbanized Area Formula Grants 
  • Formula Grants for Rural Areas 
  • Rural Surface Transportation Grant Program 
  • Territorial and Puerto Rico Highway Program 
  • Carbon Reduction Program 
  • Bridge Replacement, Rehabilitation, Preservation, Protection and Construction Program 
      

 

Considerations and Requirements 

For infrastructure projects, the total amount that a State, territory, or Tribal government may use from CSLFRF is not allowed to exceed the greater of either $10,000,000 or 30 percent of payments. 

Infrastructure project spending must be obligated by December 31, 2024 and completed by September 30, 2026 (as opposed to the December 31, 2026 deadline provided for other uses of CSLFRF).

Additionally, funding should supplement, and not supplant, other Federal, State, territorial, Tribal, and local government funds (as applicable) otherwise available for such uses.

 

Potential Impact

The bill would provide significantly greater spending flexibility to CSLFRF recipients who do not qualify for revenue replacement and to smaller recipients of CSLFRF funds (such as counties and non-entitlement units of local government with allocations at or below $10,000,0000), by enabling the use of some or all of their funding for the “provision of government services,” a spending category where Treasury provides “broad latitude” in determining eligible costs.

Similarly, the bill also allows CSLFRF recipients who may not have needs that fall under the four statutory uses to spend CSLFRF funds to respond to other disasters and/or improve roadways, airways, public transit, or other infrastructure.

However, this increased flexibility does not remove the restrictions on use of CSLFRF to offset tax cuts, make deposits into pension funds, pay for debt service or legal settlements / judgments, or support rainy day funds or financial reserves. Recipients will also still be required to comply with Treasury reporting requirements, including reporting on revenue replacement projects, and other funding requirements, such as complying with the federal government’s Uniform Guidance as it applies to use of the funds.

 

What’s Next?

On October 19, the U.S. Senate passed the bipartisan bill. The legislation is now heading to the U.S. House of Representatives for a vote. There is a template letter from the National Association of Counties (NACO) that counties may use to advocate for passage of the bill by their U.S. Representative. Towns, cities, and states may wish to modify that county letter template to similarly advocate for passage of the bill.

If the bill is passed the Secretary of the Treasury will be required to issue guidance or promulgate new rules within 60 days. 

 

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