This post is by me and Phil Rocco. It is part of our ongoing research project examining local governments’ use of ARPA funds on community violence interventions (note: we will be transitioning to a new project website in 2023).
The State and Local Fiscal Recovery Fund (SLFRF) program was created in March 2021 as part of the massive American Rescue Plan Act. The SLFRF program is the one that provides $350 billion in flexible (although not totally discretionary) federal aid to states, counties, cities, U.S. territories, tribal governments, and the District of Columbia.
Governments receiving SLFRF aid are grouped into reporting tiers depending on what type of government they are, how much money they receive, and how many people live in their jurisdiction. States, DC, and cities and counties with populations of at least 250,000 must report their SLFRF spending to the U.S. Treasury Department on a quarterly basis. The most recently released data covers spending that has taken place up to the end of the second quarter of 2022 (which was June 30, 2022). Here’s a quick rundown of what we can see in terms of spending trends from that data.
Who Had to Report Spending and How Much Did They Have to Spend?
First, it’s important to note how many governments are reporting spending on a quarterly basis. While tens of thousands of governments are getting SLFRF aid only a small fraction (less than 10%) have to submit quarterly reports. Although a minority of governments are required to report on a quarterly basis, the amount of aid these governments are receiving accounts for the vast majority (85%) of the SLFRF program’s total amount of funding ($350 billion).
Not all governments receive their full SLFRF allocation at once though. For most governments the money is paid to them in two tranches. As of June 30, 2022, the governments included in the Q2 2022 dataset collectively had received $206.12 billion in SLFRF aid. Below is a breakdown of the number of governments that are included in the Q2 2022 dataset, their total SLFRF allocations, and how much money they’ve received so far.
|Type of Government||Number of Governments||SLFRF Allocation ($ Billions)||Amount Received So Far ($ Billions)|
|States + DC||51||$195.81||$156.25|
|Cities and Counties with populations of at least 250,000||1,896||$101.02||$49.87|
So How Much Has Been Spent? And What’s it Been Spent On?
Of the $206.12 billion that 1,947 governments had available to spend, they spent $86.74 billion (or 42%) as of June 30, 2022. Now there are many reasons why governments haven’t spent all of the money they have available to spend. Substantively digging into the reasons is beyond the scope of this blog, but there are few things worth spending. First, “slow” spending should not be interpreted as the money isn’t needed. Second, governments have been encouraged to solicit community input into how they spend the money. Community engagement is a time intensive process that will draw out the time between when money is available and when it’s spent. Third, even when spending plans are approved, there are still bureaucratic processes (contracts, subawards, application processes, etc) to go through before the money can actually be spent.
The bulk of the $86.74 billion that has been spent thus far has gone to things that are what I would refer to as administratively easy or least burdensome–meaning they don’t require governments to set up new programs, execute new contracts, or hire new people. They also aren’t projects or initiatives that take place over months or years (like building new, affordable housing). Of the $86.74 billion governments have spent, 70% has gone to just two things: revenue replacement ($41.36 billion) and replenishing unemployment insurance trust funds ($20.75 billion).
Because of the fungibility of money and nature of general fund budgets, the recovery aid that’s going to revenue replacement may be going to unique and noteworthy programs, but those stories aren’t visible or easily captured in the Treasury data. For example, Chicago indirectly used a significant portion of its recovery aid to pay off short term debt it had taken out at the start of the pandemic.
In addition to reporting what they have spent, governments also need to report to the Treasury Department their adopted budgets–that is what they plan to spend their SLFRF aid on. Of the $206.12 billion that 1,947 governments have received thus far they have adopted spending plans totalling $172.28 billion (or 84% of available funds). This highlights the lag between when SLFRF aid spending plans are made and when the spending actually takes place. Looking at planned spending allows us to see areas that governments are prioritizing. The table below shows the top 5 spending areas based on adopted budgets.
|Spending Category||Planned Spending ($ Billions)||Share of Total Planned Spending||Amount Spent as of June 30, 2022 ($ Billions)|
|Contributions to Unemployment Insurance Trust Funds||$21.58||12.32%||$20.75|
|Loans or Grants to Mitigate Financial Hardship||$5.38||3.12%||$3.52|
|Household Assistance: Rent Mortgage and Utility Aid||$4.64||2.69%||$2.59|
As with expenditures, revenue replacement and deposits into unemployment insurance trust funds are the most significant items, accounting for 53% of planned spending. The third most prominent category is broadband projects, which accounts for a little more than 4% of the total $172.28 billion in planned spending. While governments plan to spend $7.39 billion on broadband projects just $320 million had been spent by the end of June. Why so little of planned broadband spending has taken place is beyond the scope of this post, but it’ll be important to examine whether governments’ ultimate spending matches their planned commitments, and what might explain challenges government face when fulfilling these commitments.