New Flexibility for Coronavirus State and Local Fiscal Recovery Funds Granted in the Consolidated Appropriations Act, 2023

The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), passed through the American Rescue Plan Act (ARPA), included $350 billion of funds for states, tribes, and territories and local governments to respond to and recover from the COVID-19 pandemic. Originally, the allowed uses of this funding included:

• To respond to the pandemic
• To provide hazard/premium pay for those performing essential work during the pandemic
• For the provision of government services up to the reduction of revenue experienced by the state/local government (Lost Revenue)
• For investments in water, sewer, or broadband infrastructure

More than a year ago, additional flexibility was proposed in a Senate Bill (S.3011), called the State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act. This bill was passed twice by the US Senate but was never taken up by the US House of Representatives. On December 22, 2022, the provisions of S. 3011 were added to the Consolidated Appropriations Act, 2023 (CAA) as an amendment, by a bipartisan voice vote. It became law on December 29th, when President Biden signed the new omnibus spending bill.

The important details of how this flexibility will be implemented remain to be determined and published by the US Treasury, and SLFRF recipients should await anticipated guidance from Treasury before deciding to use SLFRF funds for any of the new eligible uses. The flexibility enacted includes:

Sets the amount of Lost Revenue funding that can be spent generally on the provision of government services to the greater of either the actual lost revenue calculation or $10 million. This change had already been made administratively by Treasury.

Allows for SLFRF funds to be used toward 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 state and local governments authority to use funds for certain infrastructure categories beyond those currently specified in ARPA (sewer, water, and broadband projects). Funds now can be expended for projects that meet existing eligibility criteria for a large number of existing transportation and infrastructure programs (see below for the list of programs). For these new eligibility categories, some specific requirements apply:

• Recipient governments would be permitted to use the greater of $10 million or 30% of their total SLFRF allocation toward these newly eligible infrastructure categories.
• These funds must supplement, not supplant, local budgeted spending on these uses. We anticipate additional guidance on these new criteria from Treasury.

Funds under this eligibility category must be obligated by December 31, 2024, and all expenditures completed by September 30, 2026 (as opposed to the December 31, 2026, expenditure deadline provided for other uses of SLFRF).

US Treasury Implementation

The new flexibility will take effect when Treasury issues guidance implementing the new law. Treasury is required under the CAA to either issue new guidance or promulgate a federal regulation (in consultation with the Department of Transportation) no later than 60 days after the CAA’s enactment implementing this new flexibility, and we recommend that SLFRF recipients wait for Treasury’s action before changing current approaches. SLFRF recipients, however, may wish to wait until after March 2023 to obligate remaining SLFRF funds, as additional projects related to transportation, transit, sustainability, and community development will be eligible for SLFRF use at that time.

Eligible Transportation and Infrastructure Programs Under New Flexibility

• Nationally significant freight and highway projects (can also be used for non-federal cost share)
• Fixed guideway or small start capital projects (can also be used for non-federal cost share)
• Mega Program, a.k.a. National Infrastructure Project Assistance (can also be used for non-federal cost share)
• Transportation Infrastructure Finance and Innovation Act (TIFIA) program (can also be used for non-federal cost share and loan repayments)
• Appalachian Development Highway System
• Community Development Block Grant programs
• National Highway Performance Program
• Bridge Investment Program
• Surface Transportation Block Grant Program
• Metropolitan Transportation Plan
• Highway Safety Improvement Program
• Congestion Mitigation and Air Quality Improvement Program
• National electric vehicle charging and hydrogen, propane, and natural gas fueling corridors
• Territorial and Puerto Rico Highway Program
• National Highway Freight Program
• Rural Surface Transportation Grant Program
• Carbon Reduction Program
• Promoting Resilient Operations for Transformative, Efficient, and Cost-Saving Transportation (PROTECT) Program
• Tribal Transportation Program
• Federal Lands Transportation Program
• Federal Lands Access Program
• Urbanized Area Formula Grants
• Bridge Replacement, Rehabilitation, Preservation, Protection, and Construction Program
• Rural Area Formula Grants
• State of Good Repair Grants
• Grants for Buses and Bus Facilities Program
• Rebuilding American Infrastructure with Sustainability and Equity (RAISE) Program
• National Culvert Removal, Replacement, and Restoration Grant Program