Budget Blog

States and Territories Continue Progress in Spending Recovery Funds

By Kathryn White posted 09-06-2023 08:03 AM


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 U.S. 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, 2023 and were to cover the period from July 1, 2022 through June 30, 2023. For the same deadline, states were required to submit their quarterly Project and Expenditure (P&E) reports.

NASBO has compiled links to 2023 Recovery Plan Performance Reports for states, territories and the District of Columbia (hereinafter referred to as “states”). States were guided to use the same template as last year while continuing to also rely on more detailed instructions in the full guidance document on compliance and reporting and the Recovery Plan Reporting User Guide.

In these plans, states provided narrative accounts of how they are using the funds, broken down by seven Treasury categories (1-Public Health, 2-Negative Economic Impacts, 3-Public Sector Capacity, 4-Premium Pay, 5-Infrastructure, 6-Revenue Replacement, and 7-Administrative Costs). Other narrative sections of the report include information on states’ efforts to promote equitable outcomes, implement community engagement strategies, track performance indicators, and incorporate evidence-based interventions when designing their SLFRF programs. States also provided information on labor practices employed – specifically for infrastructure projects or capital expenditures.  Detailed project inventories are included in states’ Recovery Plans, per Treasury guidance, providing descriptions of each project undertaken using SLFRF.

The federal Consolidated Appropriations Act, 2023, enacted into law in late December 2022, authorized new eligible uses of SLFRF, specifically allowing recipients to use program funds for emergency relief from natural disasters, community development, and surface transportation projects. Treasury released the 2023 Interim Final Rule implementing these new provisions in August 2023. Treasury’s reporting guidance and templates have not yet been updated to reflect these new eligible uses.

In addition to these annual recovery plans, states more frequently report data on their SLFRF project plans and spending in their quarterly P&E Reports. Treasury launched a reporting dashboard last fall where it tracks all SLFRF project information reported by SLFRF recipients in their P&E reports. Treasury’s dashboard has not yet been updated with the data from the latest P&E reports covering the second quarter of 2023 (through June 30, 2023), but the dashboard is up-to-date based on the P&E reports submitted in April covering project budgets, obligations, and expenditures through March 31, 2023. Based on this data, states, territories, and the District of Columbia have together adopted budgets for SLFRF projects totaling $159.3 billion – representing approximately 80 percent of total SLFRF payments. 


Adopted Budget: “The budget adopted by a recipient for each project associated with SLFRF funds. Recipients will enter the Adopted Budget based on information that exists currently in the recipient’s financial systems and the recipient’s established budget process.”

Obligation: “An obligation is an order placed for property and services, contracts and subawards made, and similar transactions that require payment.”

Expenditure: “An expenditure is the amount that has been incurred as a liability of the entity (the service has been rendered or the good has been delivered to the entity).”

Source: U.S. Treasury State and Local Fiscal Recovery Funds Project and Expenditure Report User Guide

Examining this data broken down by Treasury category, the largest share of budgeted SLFRF spending is designated for revenue replacement at 40 percent. It should be noted many projects reported under this category are also allowable under other expenditure categories but have been recorded under revenue replacement partly to reduce recipients’ reporting burden, as encouraged by Treasury guidance (for more discussion on states’ use of revenue replacement funds,
click here).  The next largest share of states’ SLFRF budgets in the aggregate is for projects addressing Negative Economic Impacts at 33 percent, followed by Water, Sewer, and Broadband Infrastructure at 13 percent and Public Health at 9 percent. The remaining share of budgeted spending is for projects to expand Public Sector Capacity at 3 percent, Premium Pay for essential workers at 1 percent, and Administrative costs at 1 percent. (See Figure 1.)

Notes: NASBO calculations based on U.S. Treasury, “April 2023 Quarterly and Annual Reporting Data through March 31, 2023.” Figures include recipient data from 50 states, five territories, and the District of Columbia.    

As of March 31, 2023, states had obligated $121 billion of budgeted funds. The deadline for states to obligate SLFRF funds is December 31, 2024. States have until December 31, 2026 to fully expend the funds (except for funds obligated for Surface Transportation projects and Title I projects, which must be expended by September 30, 2026 according to the Interim Final Rule issued in August 2023). As of March 31, 2023, states had cumulative SLFRF expenditures of $90.4 billion. The average time period between budgeting, obligating, and expending the funds varies considerably by Treasury category. For example, Premium Pay has, on average, the largest portion of budgeted items expended (86.4 percent). Meanwhile, at the other end of the spectrum, for projects in the infrastructure category, only 6.3 percent of budgeted items have been fully expended. This is not surprising, given the lengthy timeline for completion of large-scale capital projects. (See Figure 2.)

Notes: NASBO calculations based on U.S. Treasury, “April 2023 Quarterly and Annual Reporting Data through March 31, 2023.” Figures include recipient data from 50 states, five territories, and the District of Columbia.    

These figures, combined with the information in states’ recovery plans, illustrate how states continue making progress towards budgeting for and obligating their SLFRF funds towards allowable uses. At the same time, the addition of more allowable uses by Congress in the Consolidated Appropriations Act, 2023, in late December may have delayed obligation of some funds as states waited for guidance from Treasury. It is also evident in this data that fully spending these funds will take substantially more time, especially for certain uses like infrastructure. This means the economic impact of SLFRF program spending will be felt for years to come.