In March of this year, President Biden signed the American Rescue Plan Act of 2021 (ARPA) implementing a $ 1.9 trillion economic relief plan for individuals, families and businesses as well as governments. state, local, territorial and tribal.
Visiting a town hall near you is part of the $ 350 billion national and local fiscal stimulus package that aims to address lost income during the pandemic. Of course, the devil is going to be in the details.
The Treasury Department (DOT) recently released the “Interim Final Rule” which details how the local government can spend the money. The DOT is now taking comments on the details of the rule until mid-July and will finalize the spending plan after that. As of now, the rules are pretty specific for the tens of millions of dollars that will flood local government coffers. In the 151-page memo that only a seasoned financial bureaucrat could understand, it looks like money can be spent on:
- Respond to the public health emergency or its negative economic impacts, including assisting households, small businesses and non-profit organizations, or assisting affected industries such as tourism, travel and ‘hotel ;
- Respond to workers performing essential work during the COVID-19 public health emergency by paying a premium to eligible workers;
- Plan for the provision of government services to the extent of the reduction in income due to the COVID-19 public health emergency; and
- Make the necessary investments in water, sewer or broadband infrastructure.
How each city and Orange County will interpret these rules is going to be fascinating and the Orange County Taxpayers Association will be watching.
Financially, this past year has been devastating for the local government. City managers and city council members are eager to receive their share of the $ 350 billion. Anaheim is expected to receive $ 107.5 million, Santa Ana $ 142.9 million, Irvine $ 53.5 million, Huntington Beach $ 30.8 million, down to small Villa Park at $ 1.09 million of dollars.
There are a lot of things that cannot be done with money. ARPA dollars can be used for payroll and covered benefits for public safety officials, but only for the portion of an employee’s time spent responding to the COVID-19 public health emergency. They can, however, be used to provide general public services, but only to the extent of reducing income lost during the pandemic.
ARPA funds cannot be used to offset a “reduction in net tax revenue,” which means local cities cannot cut taxes and use the money to cover the deficit.
Funds also cannot be deposited into a pension fund, and they cannot be used to replenish reserves or funds for rainy days.
The intention of the US bailout is to pump money into the system to meet any remaining pandemic needs, but more importantly for the federal government, it is to rebuild a stronger and fairer economy. for everyone. Cities will approach this in several ways. Their financial services have all calculated their reduction in lost income during the pandemic and many cities as well as Orange County could use those dollars to fill the big holes in their budgets.
Taxpayers need to understand that unless normal revenues increase over the next year to close the gap, city councils and county are only filling a hole that could become a systemic fiscal problem in the future. when ARPA stops.
Other city councils will see this as an opportunity to use the dollars to expand government programs. Public health, medical and behavioral care, unemployment benefits, as well as the provision of bonuses to eligible workers are just a few of the permitted uses.
Food assistance, rent and mortgage assistance, and cash assistance for funerals, home repairs and vocational training are also permitted uses. Homelessness services, affordable housing development and assisted housing navigation can all create programs that will need to be funded once the federal dollars end.
More importantly, the cities of Orange County as well as Orange County must be transparent in how these taxes are spent. ARPA-specific budget summaries will help taxpayers see exactly how these funds are being spent.
Local officials should be aware that this is a one-time injection of money into their budgets.
They all need to be ready when the cash flow stops.
Carolyn Cavecche is CEO and President of the Orange County Taxpayers Association.