Budget Blog

ARPA Recovery Plans for 2022

By Kathryn White posted 09-26-2022 12:00 AM


Please Note: This blog was originally posted on August 18, 2022 based on partial data compiled by NASBO from recovery plans for 44 states and territories. The blog was updated on September 26 to incorporate more complete data from recovery plans for all 50 states, four territories and the District of Columbia.

The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), 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. Under the Treasury Department’s Compliance and Reporting Guidance, states, territories and the District of Columbia are required to submit annual Recovery Plan Performance Reports. This year’s reports were due to U.S. Treasury on July 31, 2022 and were to cover the period from July 1, 2021 through June 30, 2022.

As of September 22, NASBO had compiled links to 2022 Recovery Plan Performance Reports for 55 states, territories and the District of Columbia (hereinafter referred to as “states”). Based on a review of the information in these reports, supplemented with other state documents, states have appropriated or otherwise allocated approximately 81 percent of SLFRF funds towards specific allowable uses, including replacing lost revenue. The median percentage of funds allocated, based on NASBO’s analysis, is higher at 95 percent. This is more than double the share of funds that were allocated on average about a year ago, when states released their initial recovery plan performance reports covering the period through July 31, 2021.[1]

Since last year’s reports were compiled, states and territories have made substantial progress in allocating their SLFRF funds to priority areas. The chart below provides a comparison of the progress made allocating funds as of July 31, 2021 versus as of June 30, 2022, based on available Recovery Plan Performance Reports at those points in time. Note that some states included in their 2022 recovery plans information on more recent allocations adopted after June 30, 2022 but before the July 31st deadline, and these more recent allocations are included in this analysis.

* Figures as of July 31, 2021 are based on information in 2021 Recovery Plans prepared by 39 states. Figures as of June 30, 2022 are based on information in 2022 Recovery Plans prepared by 55 states and territories (and may include some more recent allocations that were adopted after June 30, 2022).

In their recovery plans, states provided details on the budget process for allocating SLFRF funds, how equity, evidence and community engagement were taken into account, and the performance measures to be used to monitor outcomes for funded programs. They also described the planned and actual uses of fiscal recovery funds so far within seven expenditure categories defined by the U.S. Treasury:

  1. Public Health – Activities in direct response to COVID-19 (testing, vaccination, PPE), prevention efforts, capital investments to improve public health, behavioral health services, and more.
  2. Negative Economic Impacts – Services to respond to the negative economic impacts of the pandemic, including for households, small businesses, nonprofits, and impacted industries.
  3. Public Health-Negative Economic Impact: Public Sector Capacity – Supports for public sector workforce and capacity, including public sector payroll and benefits for public health, public safety and human services workers, rehiring public sector staff, and bolstering capacity to improve service delivery or administrative needs.
  4. Premium Pay – Premium pay to essential workers in the public sector or through grants to private employers.
  5. Water, Sewer and Broadband Infrastructure – Projects addressing wastewater, sewer infrastructure, water conservation, drinking water infrastructure, sewer infrastructure, and broadband.
  6. Revenue Replacement – Funds used for the provision of government services or as a required non-federal match for other federal programs, available up to the calculated revenue loss of the state/territory using Treasury’s formula.
  7. Administrative Costs – Expenses associated with administering the SLFRF program, as well as transfers to other units of government.

Among the 55 recovery plan reports, NASBO identified $161 billion in total state fiscal recovery funds that have been allocated to specific uses so far. Of this total amount allocated, $148 billion was able to be broken down by Treasury’s categories listed above for all 50 states, three territories and the District of Columbia, based on the information provided in states’ recovery plans. Some states did not identify the Treasury category for all fund allocations, particularly allocations that were recently adopted and not yet assigned to specific projects, which explains why the total amount allocated exceeds the total amount able to be broken down by category. The fund allocations totaling $148 billion are broken down across the seven categories as follows:

Revenue Replacement claims the largest share of allocated funds, at 35.4 percent, with 45 states and territories allocating funds for this purpose. Treasury adjusted upward the growth factor used for revenue loss calculations in the Final Rule issued in January 2022, as well as clarified that this category can be used by states and territories to reduce their reporting burden, which likely contributed to states allocating more funds towards this category. It should be noted that use of SLFRF funds for revenue replacement does not necessarily mean backfilling programs and services typically supported with general fund dollars. A number of states detailed plans to use their revenue replacement funds for various one-time extraordinary expenditures, such as IT projects, transportation and other capital infrastructure, and economic development initiatives. Some states have chosen to take advantage of the allowed allocation in the revenue replacement category even if projects would be eligible under other Treasury categories due to reduced reporting requirements for this category.

Negative Economic Impacts closely follows as the second largest share of the pie, at 34.3 percent, with 51 states and territories allocating some funds to this area. At first glance, this appears to be a departure from a year ago, when states had directed roughly 27 percent of allocated SLFRF funds towards this category. However, this increase is explained by a revision to expenditure categories between then and now. Last year, the U.S. Treasury had defined a different expenditure category #3 – rather than Public Sector Capacity, the category was defined as “Services to Disproportionately Impacted Communities,” which made up roughly 15 percent of allocated funds in last year’s analysis of 2021 recovery plans. When Treasury eliminated this category, most of the allowable uses in that area were reassigned to the Negative Economic Impacts area, and therefore the majority of planned expenditures were absorbed by the Negative Economic Impacts category, thus explaining its larger share of the pie.

Water, Sewer and Broadband Infrastructure claims the third largest share in this analysis, at 16.6 percent of allocated funds, with 42 states and territories using funds for this category. It’s worth noting that states and territories are allocating significant additional SLFRF funds towards other types of one-time infrastructure projects that fall under other expenditure categories (mainly revenue replacement). This category strictly counts planned water, sewer and broadband projects funded through SLFRF. States are also using a separate pot of money, Capital Projects Funds, for broadband and other infrastructure, and these funds are not included in this analysis.

The Public Health expenditure category accounts for 9.9 percent of allocated SLFRF funds, , with 45 states and territories reporting allocations in this category. This includes allocations for direct response efforts to COVID-19, such as vaccination, testing, contact tracing and Personal Protective Equipment – with many of these allocations having been made early in implementation of the law. More recently adopted allocations in this area have also included efforts to address the broader health impacts of COVID-19, including behavioral health services.

The remaining expenditure categories each claim relatively small portions of the pie. Public Health-Negative Economic Impact: Public Sector Capacity – an expenditure category more recently added by Treasury – comprises 2.2 percent of allocated funds, with 26 states and territories reporting fund uses in this category. Nineteen states and territories have allocated funds for Premium Pay, which makes up a small share of fund uses at 0.9 percent. Finally, 30 states and territories have already specified fund allocations to cover Administrative Costs, with 0.8 percent allocated to this category.

[1] According to NASBO’s analysis of 2021 Recovery Plan Performance Reports for 39 states, the median allocation of funds was 41 percent. See “Planned Uses of Fiscal Recovery Funds as Reported by States to U.S. Treasury” (October 18, 2021), available at www.nasbo.org.