February 4, 2022
The $1.9 trillion American Rescue Plan Act (ARPA) was signed into law on March 11, 2021 and provides for $350 billion in funding for eligible state, local, territorial, and Tribal governments. The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), a section of ARPA, provide significant revenue support to state and local governments, and in contrast to prior pandemic relief such as the CARES Act, the funding is not restricted to combating COVID-19. As part of SLFRF, larger governments will be required to provide performance and program reporting to the federal government with the goal of increasing accountability and effectiveness. This blog post will discuss the performance measurements required by the U.S. Department of Treasury and that must be followed by larger governments that received the SLFRF funds.
What is ARPA SLFRF?
Governments are allowed to use the Coronavirus State and Local Fiscal Recovery Funds for the purpose of supporting public health expenditures, addressing negative economic impacts caused by the public health emergency, replacing lost public sector revenue, providing premium pay for essential workers, and investing in water, sewer, and broadband infrastructure. The fund allocations include: $195.3 billion for states and the District of Columbia, $65.1 billion for counties, $45.6 billion for cities, $20 billion for Tribal governments, $4.5 billion for territories, and $19.5 billion for smaller units of local government. The State of Illinois’ distribution is a little over $8.1 billion, Cook County’s a little over $1 billion and the City of Chicago’s approximately $1.8 billion. The State of Illinois also received $253.7 million in Coronavirus Capital Projects Fund funding, more about which can be found here.
All eligible governments that were awarded SLFRF funds must follow U.S. Department of Treasury rules as laid out in an Interim Final Rule from May 2021 and a Final Rule released January 6, 2022 which will take effect April 1, 2022. The Final Rule provides further detail on eligible uses of funds, the ineligible use of funds, and the administration of the program.
As detailed in the Final Rule, Coronavirus State and Local Fiscal Recovery funds may cover eligible costs incurred March 3, 2021 through December 31, 2024. Funds that are obligated by December 31, 2024 can be spent through December 31, 2026. Funds that are not used by December 31, 2026 must be returned to the Department of Treasury. The ARPA legislation itself prohibited deposits of SLFRF funds into any pension fund or, for states and territories, to offset tax cuts. Treasury’s interim and final rules added prohibitions on funds being spent to service debt, to satisfy a judgement or settlement or contribute to a “rainy day” fund. Treasury’s reasoning was that these uses "do not provide services or aid to citizens.” A number of governments, including the State of Illinois, had asked Treasury to allow use of ARPA funds to pay off debt incurred due to the pandemic, but the Final Rule issued by the Department did not change this condition.
Performance Reporting Under ARPA
The Department of Treasury’s Office of Inspector General reported in May 2021 about its oversight of the receipt, disbursement, and use of the Coronavirus Relief Fund (CRF) that were a part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The OIG also identified a number of lessons learned from the implementation and administration of the CARES Act and their value for improving processes for ARPA. Among the lessons learned, the report highlights a need for performance measures. Specifically, the OIG said, “Treasury did not require recipient reporting of performance measures for the CRF. As a result, there is no consistent way to assess the impact of CRF funding on assisting with the pandemic.” The report recommended therefore that Treasury management develop performance metrics to evaluate the effectiveness of ARPA and include reporting requirements for recipients. Treasury responded to the OIG by saying they would require large recipients to provide the public and Treasury Department with an annual performance report. The performance reporting requirements were included in the Interim Final and Final Rules and further discussed in a Compliance and Reporting Guidance provided by the Department of Treasury in November 2021.
The performance measurement requirements apply to all states, territories, cities and counties with a population of more than 250,000 residents. All of these governments were required to first submit a Recovery Plan performance report within 60 days after receiving funding or by August 31, 2021. The reports were also required to be posted to the government’s website at the same time. Subsequent annual reports are required by July 31. The Recovery Plan is supposed to provide information about the projects the recipients plan to initiate with the federal funding and how they plan to “ensure program outcomes are achieved in an effective, efficient, and equitable manner.” Treasury required certain minimum information for the Recovery Plans, but allowed the recipients leeway in the form and content. The minimum information includes an executive summary, use of funds, promotion of equitable outcomes and several other types of information. It must also include performance indicators, some of which are required by Treasury and some of which are identified by the government itself. Treasury specified that there should be performance measures for each project or groups of similar projects.
Local governments within Illinois that are required to report performance for ARPA funds include Cook County and Chicago. The City of Chicago released its Chicago Recovery Plan in September 2021, which outlines new initiatives the City plans to undertake with both federal and borrowed funds, in addition to using $1.3 billion of its $1.9 billion distribution to close budget shortfalls. Those new initiatives focus on thriving and safe communities and equitable economic recovery. The City is establishing a dedicated project management office to handle implementation and performance measurement for its ARPA funds in the Recovery Plan. According to the City’s latest Recovery Plan Performance Report for 2021, released December 28, 2021, performance metrics are still being developed for the SLFRF funds the City has received.
Cook County received more than $1 billion in State and Local Fiscal Recovery Funds and plans to allocate the funds across three fiscal years based on six policy pillars previously identified for the County’s 2018 five-year strategic plan. The policy pillars are: health and wellness, economic development, criminal justice, environmental sustainability, public infrastructure and good government. On its American Rescue Plan Act webpage, Cook County reports that it is currently in its planning phase for use of the federal SLFRF funds. The County released its 2021 performance report in August and an American Rescue Plan Act at a Glance report in December 2021. Cook County is also creating a Program Management Office that will help develop metrics for each program and provide support and technical assistance.
In its analysis of the Chicago and Cook County FY2022 budgets, the Civic Federation urged both governments to produce ARPA performance reports with sufficient detail to help the public understand how the funds are being spent to achieve goals and evaluate whether the programs have been successful. The Federation will continue to review with interest future reports on ARPA spending from Chicago, Cook County and the State of Illinois.