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American Rescue Plan Act of 2021 offers $130.2 billion in relief for local governments

March 2, 2021 | Charlie Francis

American government building

Democrats from the U.S. House of Representatives released the full text of the $1.9 trillion COVID Relief Bill formally cited as the American Rescue Plan Act of 2021. In the bill is an appropriation of $130.2 billion for the Fiscal Recovery Fund to mitigate the fiscal effects on local governments stemming from the public health emergency. According to the latest report by ICMA, over 84% of local governments in the United States had revenue negatively impacted because of COVID-19, and federal aid to supplement the grants provided through the 2020 CARES Act is considered a critical need.

The appropriation, as proposed, will be distributed 50% to Cities and Nonentitlement Units of Local Governments and 50% to Counties.

The distribution of $65.1 billion of payments to Cities and Nonentitlement Units of Local Governments are further divided into:

  • $45.57 billion to Metropolitan Cities or municipalities with a population over 50,000; and
  • $19.53 billion to Nonentitlement Units of Local Government or municipalities with a population under 50,000.

The allocation of payment for Metropolitan Cities is pursuant to the formula under section 106(b)(1) of the Housing and Community Development Act of 1974 (42 U.S.C. 5306(b)(1)), except that, in applying such formula, the Secretary shall substitute ‘all metropolitan cities’ for ‘all metropolitan areas’ in each place it appears. Basically, the allocation will be in direct proportion to each city’s population.

There is no capped amount for Metropolitan Cities, but the capped amount for Nonentitlement Units of Local Government may not exceed the amount equal to 75% of the most recent budget for the Nonentitlement unit of Local Government as of January 27, 2020.

The remaining $65.1 billion are for payments to counties within the 50 States, including the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, and American Samoa. The amount allocated will be based on each County’s population as reserved under the Fiscal Recovery Fund.

There are special rules and definitions for urban counties and counties that are not Units of general local government, and consolidated governments. For the purpose of this proposed legislation, the District of Columbia is regarded as a single county.

A metropolitan city, Nonentitlement Unit of Local Government, or County receiving a payment from funds made available under this section shall only use such amounts to:

1.  respond to or mitigate the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) or its negative economic impacts;

2.  cover costs incurred as a result of such emergency;

3.  replace revenue that was lost, delayed, or decreased (as determined based on revenue projections for the metropolitan city, Nonentitlement unit of local government, or county as of January 27, 2020) as a result of such emergency; or

4.  address the negative economic impacts of such emergency.

Using a nonofficial and rudimentary methodology to estimate the distribution using U.S. Census data for 2019, the following apportionments are approximations of what might be expected by Metropolitan Cities and Nonentitlement Units of Local Government:

American rescue plan map

This map will be updated continually as the formulas and definitions are more crystallized.

The new aid could make all the difference for local governments needing to make tough decisions this year about essential worker layoffs, distributing the COVID-19 vaccine, and other public health and safety initiatives. The legislation was passed by Congress on Saturday and will now be passed on to the Senate for approval this month.

This article was originally published in the Questica newsroom.

For more information on maximizing your COVID-19 funding, download this essential guide.

About the author

Headshot of blog author Charlie Francis

Charlie Francis

Charlie is a retired municipal finance director. He has more than forty-five years of local government financial management experience in both the public and private sectors, including twenty years of experience as a city Chief Financial Officer. Charlie Francis now consults with GovTech firms, helping them build and deliver software that enables local governments to be more efficient, effective and strategic in their financial management.