Treasury Publishes Final Rule, Increases ARP Flexibility for Local Governments
Final Treasury guidance on SLFRF and ARP is now available.
The U.S. Department of Treasury has issued the final rule for the State and Local Fiscal Recovery Funds program, enacted as part of the American Rescue Plan.
The SLFRF Final Rule contains several significant changes from the interim rule published May 2021, specifically for smaller local governments. The changes increase the flexibility of eligible expenditures, provide clarity on certain spending categories, and simplify processes associated with those spending categories.
Perhaps most notably, the final rule has created a "standard allowance" for revenue loss of up to $10 million, where previously under the interim rule, local governments had to calculate revenue loss through a provided formula. This update, in effect, means that a vast majority of municipalities in North Carolina can use the entirety of their ARP distributions under the Revenue Loss spending allowance. The League has provided more information on this change here.
The U.S. Treasury’s breakdown of key changes, originally published via press release, can be read below:
First, Treasury has expanded the non-exhaustive list of uses that recipients can use to respond to COVID-19 and its economic impacts – ensuring states and localities can adapt quickly and nimbly to changing public health and economic needs. This includes clarifying that recipients can use funds for certain capital expenditures to respond to public health and economic impacts and making services like childcare, early education, addressing learning loss, and affordable housing development available to all communities impacted by the pandemic.
Second, Treasury has expanded support for public sector hiring and capacity, which is critical for the economic recovery and in maintaining vital public services for communities.
Third, Treasury has streamlined options to provide premium pay for essential workers, who bear the greatest health risks because of their service in critical sectors.
Fourth, Treasury has broadened eligible water, sewer, and broadband infrastructure projects – understanding the unique challenges facing each state and locality in delivering clean water and high-speed broadband to their communities.
In addition to these expansions, Treasury has greatly simplified the program for small localities – many of whom have received a historic federal investment in their communities through this program – including through the option to elect a standard allowance for revenue loss rather than calculating revenue loss through the full formula.
The final rule takes effect April 1, 2022, though recipients can take advantage of the final rule’s new flexibilities ahead of that date. The final rule states, “Treasury will not take action to enforce the interim final rule to the extent that a use of funds is consistent with the terms of the final rule, regardless of when the SLFRF funds were used.” Additionally, funds used consistently with the interim rule are in compliance with the SLFRF program.