States Building Capacity to Manage Influx of Federal Funds

By Kathryn White posted 30 days ago

  

The Coronavirus State and Local Fiscal Recovery Funds, authorized by the American Rescue Plan Act of 2021 (ARPA), allocated $195.3 billion for states and the District of Columbia and $4.5 billion for territories. In addition to Fiscal Recovery Funds, ARPA also sent other funds to states for a variety of purposes, including K-12 education, rental assistance, child care, capital projects and more. Planning, administering, and reporting on these significant additional federal resources will require a great deal of statewide leadership, coordination and oversight.

On October 18, NASBO released an issue brief describing how states and territories are planning to use their fiscal recovery funds, based on the reports they submitted to Treasury. But how are states building capacity to handle these and additional new federal funds and the responsibilities attached to them?

The multitude of new federal funding sources in ARPA presents both challenges and opportunities for states and territories. Some states are taking steps to centralize federal funds management to coordinate the various funding streams and ensure resources are used as effectively and efficiently as possible. In a recent survey of state budget officers,[1] 44 percent of respondents noted that their state or territory has set up a separate office or unit to manage federal COVID-19 funds, and in most cases, this new division reports to the state budget office. A majority of respondents (63 percent) also indicated that they have added staff to handle the increased federal funding. Some states and territories are also relying in part on existing federal grants staff to help.

While some states and territories are handling these funds entirely internally, others are turning to the private sector for assistance. Just under half of survey respondents (49 percent) indicated that they plan to use contractors to help with reporting requirements and/or other aspects of managing ARPA funds. Meanwhile, 24 percent of respondents noted that they are using or planning to implement a new IT system as well to help with reporting. Some respondents said that decisions are still pending on whether they will handle ARPA reporting responsibilities in-house or contract out for this.

NASBO will monitor and report on states’ approaches to managing fiscal recovery funds and other pots of federal money authorized in ARPA as they further develop and evolve. NASBO also continues to update our compilation of states’ recovery plans, which now includes reports from 43 states, two territories and the District of Columbia.

 

[1] As of November 1, 2021, 40 states and 3 territories had responded to NASBO’s survey, though not all respondents answered every question. Only “yes” and “no” responses are included in percentages; blank or “to-be-determined” responses to any questions were omitted from the results.


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