The American Rescue Plan and Economic Recovery

Janet Cowell, former state treasurer of North Carolina, and Kathryn White, director of budget process studies at the National Association of State Budget Officers, discuss the American Rescue Plan Act and the U.S. Treasury Department’s guidance on allocating funds to fuel economic recovery.

 

FASKIANOS 

Welcome to the Council on Foreign Relations State and Local Officials Webinar. I’m Irina Faskianos, vice president for the National Program and Outreach at CFR. We’re delighted to have participants from thirty-six U.S. states and territories with us today for this on the record discussion. As you know, CFR is an independent and nonpartisan membership organization, think tank, and publisher focusing on U.S. foreign policy. We are also the publisher of Foreign Affairs magazine. Through our State and Local Officials Initiative, we serve as a resource on international issues affecting the priorities and agendas of state and local governments by providing analysis on a wide range of policy topics.

 

We’re pleased to have with us today, Janet Cowell and Kathryn White. We previously shared their bios with you, so I’ll just give you a few highlights.

 

Janet Cowell, served as state treasurer of North Carolina from 2008 to 2016. As state treasurer, she oversaw over 100 billion in assets and maintain the top triple A bond rating. She is currently the president and CEO of the Dix Park Conservancy in Raleigh, North Carolina. And previously, she was CEO of girls who invest a nonprofit dedicated to increase the pipeline of women in portfolio management and executive leadership in the asset management industry.

 

Kathryn White is the director of budget process studies at the National Association of State Budget Officers. In this role, she tracks changes in budget and financial management practices and authors the fiscal survey of states report. And prior to joining NASBA, she was a research associate for the George Washington University Regulatory Studies Center. So thank you both for being with us. I know many on this call are really anxious to hear about the American Rescue Plan and guidelines for that.

 

So Kathryn, why don’t we begin with you to talk about the guidelines that the Treasury Department has released about how states and cities can use the stimulus funds provided by the American Rescue Plan Act

 

WHITE 

Sure, happy to and happy to be with you all today. So to dive right in, the American Rescue Plan Act, of course, was passed in March of this year. But until Treasury released its guidelines last month there was some uncertainty about how that the bill, and specifically the state and local fiscal recovery funds, which will be the focus of my remarks, would impact state budgets and locals as well.

 

But now that Treasury has released its interim final rule and related materials as of May 10, and continues to address questions that are asked by state and local officials as well. We’re getting more clarity on on what the state and local fiscal recovery funds program will mean for states. Now, just to get some high level points about the program, this aid will certainly help states and local governments meet the rising spending demands that have been caused by the pandemic, provide economic assistance to individuals and businesses, especially those hardest hit by the pandemic, and facilitate a more robust and less uneven recovery. It will also help those states and local governments that have been hard hit by pandemic-induced revenue losses. And to that end, and I’ll speak to this a bit now and can also touch on it more later. You know the pandemic has impacted all states, but to varying degrees. So how this aid will be used will likely vary state to state and locality to locality depending on the nature of how it has impacted them.

 

A couple other high level points just to highlight is you know, the state and local fiscal recovery funds remain available to obligate until December 31, 2024. So this is a much longer time horizon. Then the CARES Act Coronavirus Relief Fund, which was sort of the more flexible though not as flexible pot of money provided under the CARES Act to states and local governments. So this longer time horizon will all mean we’re going to see variation in—more variation in when states use these funds, which again will also relate to how they choose to use them.

 

But to dive right into some of the key points from the Treasury guidance. Overall, it does give states and other recipients considerable flexibility within the confines of the law to decide how to use these funds. Overall, it seems the guidance is intended to ensure the funds are used primarily to supplement existing activities and address critical needs. But the there are some provisions that allow for use for core government services as well related to revenue loss that I’ll get into a little bit more. But overall, the eligible uses that the guidance elaborates on as stated in the law are to support public health response efforts. So this can cover a broad range of needs, including COVID-19 mitigation, medical expenses, capital investments in public facilities, ventilation improvements. It can also be used to fund services to address behavioral health needs that have been exacerbated by the pandemic, and payroll expenses for public health/public safety employees, to the extent that they work on COVID-19 response is allowable under the guidance.

 

And then the next bucket is uses to really address the negative economic impacts of the pandemic, such as providing assistance to workers and families; providing small business assistance; supporting industries that were hardest hit by the pandemic namely the tourism, travel, and hospitality industries; rebuilding public sector capacity to pre-pandemic levels. And this includes—and we’ve seen already mentioned of some states planning to use some to replenish their unemployment insurance trust funds that were tapped during the pandemic.

 

And guidance also notes recipients can use these funds to build internal capacity to implement economic relief programs effectively. This includes investments in data analysis and evaluation. The next bucket of uses falls in the area of serving those hardest-hit communities and families and really addressing the equity concerns that have been exacerbated by this pandemic. So addressing health disparities, investing in housing and neighborhoods, addressing educational disparities, learning loss associated with the pandemic, promoting healthy childhood environments. And more broadly, Treasury is thinking through how in its reporting guidance, it can suggest methods for states to measure how they are spending in a way that is addressing some of these equity concerns. So we are watching for further guidance on that area as well.

 

Another bucket of uses for state local governments is providing premium pay for essential workers. This is spelled out in the in the law. But Treasury provides further guidance around that. And this includes—what it does note is that this is really especially meant for lower-income workers. So premium pay that increases worker pay above a certain threshold in relation to that the states or counties average will require special justification.

 

 Investing in water and sewer infrastructure is another bucket as well as investing in broadband infrastructure. So, there have been some questions about how flexible the funds may be used for other forms of infrastructure, but for now, water, sewer and broadband are really the areas that the guidance allows for unless the infrastructure spending is in connection to replacing revenue loss.

 

And that is that the last bucket I will mention, replacing revenue was associated with the pandemic. And the guidance that Treasury put out details this the methodology that states and local governments are to use to calculate their revenue loss it is the methodology does allow for comparing to sort of an alternative revenue growth model that might have been expected, absent the pandemic.

 

So happy to address questions on that in Q&A, but for now, I will leave it there in terms of describing the eligible uses of the funds. And just a quick note on some of the ineligible uses of funds to be mindful of as well. Treasury establishes a framework for determining the cost of any reduction of net tax revenue from a change in in law or regulation. And this is relates to the the the requirement in law that states and local governments may not use these funds to offset a tax cut. And so there’s a methodology spelled out as well for how to ensure that the funds are not being used for offsetting those. Also, the funds may not be used to make a deposit into states or local government pension fund. Other ineligible uses are debt service, legal settlements, deposits to rainy day funds, or, as I mentioned earlier, general infrastructure spending unless it is either water, sewer and broadband investments or an amount allocated for to cover revenue loss. So with that, I will stop and turn it back over to Irina.

 

FASKIANOS 

Thank you so much, Kathryn. And Janet, over to you. I mean, you have had experience as state treasurer. What considerations would you offer to elected officials keep in mind when they’re deciding how to use these funds to spur economic recovery?

 

COWELL 

Thank you for having me here today. And I will just say briefly, you know, so I was in the Treasury after the last crisis. And one unique thing about the North Carolina Treasury is you oversee all local government. So not only are you sort of managing the state bond rating, but you’re also helping facilitate local. And, you know, I certainly understand all the sort of cash assistance and emergency assistance that goes into the public health and education, which is happening now and happened then. I will say, as time wears on, there’s always the lament that more wasn’t done in the tangible sort of Work Progress Administration, and that you can see the infrastructure or you see the improvements. And so I guess, as an elected official, you know, the more tangible sort of lasting things always, you know, maybe, you know, get a little boost in my mind. When you think about how you’re extending the funds with the understanding that of course, you need to support your teachers and the public health. I will say that this is a lot of money coming at state and local governments. And so while that may seem like a great thing, of course, it does put a lot of pressure onto the local officials where you have to expend this money wisely. There will be audits, there will be scrutiny, there will be reporting. And so, just really taking advantage of the technical assistance of work, Kathryn’s presentation was fantastic. You know, there’s no one stop shop in your local government, you’ve got federal, you’ve got how your state is thinking about it. So just, you know, entering the space with a degree of caution, particularly as an elected official that you are doing things in a way that are not going to come back to bite you individually as an elected official or your city, or, you know, have greater consequence than the benefit of you know, the cash. I also think, you know, in North Carolina, there is certainly—because of the structure I just named—I do think there is more technical assistance, sometimes available, guidance.

 

You know, I was talking to Lee Lilly, who works with the governor on this in North Carolina. You know, there are thoughts of how you can incent certain activities. So, you know, being aware and whatever state you’re at, as to how your state is thinking about how could you get the biggest bang for your buck? This whole water/sewer that was a fabulous use of the funds back in ‘09 and ‘10. And I will say North Carolina, like many states, had a lot of factories, a lot of industry and then a shift to white collar services and a lot of stranded assets. So that was the number one reason why local governments were in distress. Using this money to facilitate something like water/sewer is probably one of the best things you could do. In North Carolina, there are—at least the thought that they want to incent folks to partner with other regional water systems, you know, and sort of try to address regionalization as part of this package. And you may get more of a state cost share or you know, assistance if you do things in a certain way. So, just making sure that you, even if you’re using it on something, that seems like a no brainer that you’re maximizing the dollars.

 

I also I was talking to the city manager, the ex-city manager of Raleigh. And, you know, he just said, it’s easy to get paralyzed as a city manager or an elected, right, because you have a lot of uncertainty at the federal level, a lot of uncertainty how the states are trying to shape this. And his advice was, you know, go ahead and put together a plan of how you would use money anyway, for five years, right. And then try to think about the guidelines, you know, Kathryn just gave, and what past programs and what the rules have been. And start just crafting that knowing as the details come out, and people get more clarity. Yeah, maybe it changes, and you can tweak it, but at least you’re planning and you will be ready for you know, when the full clarity. And he said, there’s also nothing wrong with letting other people be the first movers getting some best-case studies, getting some examples in your state. And then learning from those examples and coming in, especially if you’re a smaller unit that just doesn’t have, right, as much capacity to be a first mover.

 

And the final—this is as a past treasurer, which thinks about portfolio theory, you know—he’s saying, there’s a lot of money and there’s a long runway, so you’ve got more flexibility and, you know, do the really solid blocking and tackling things first. If you want to get more creative, and you want to go out and start building facilities, or doing economic development, or some of those more commercial things, you know, put that as your nice to have or your a little bit higher risk bucket. And do that maybe on the back end, after you’ve done the really sort of more plain vanilla approaches.

 

FASKIANOS 

Fantastic. So now we’re going to go to all of you for your questions. And again, we want to use this as a forum to share best practices. So if you have ideas that you want to share with your colleagues, please do so. So you can raise your hand. If you are on an iPad, click the More button and you can raise your hand—see the icon there. And you can also write your question in the Q&A box. So I’m going to just go right to the first written question, Andrew Grant, I don’t know the affiliation. But what are some examples of records needed to support the assessment that a business or business district was affected by negative economic impacts of the pandemic? So, Kathryn, do you want to take that?

 

WHITE 

Um, I, you know, I, I’m not sure that I’m, I’m able to get into that level of specificity based on my knowledge of the process, but it’s certainly something I can look into and get—see if I can get an answer back to CFR on.

 

FASKIANOS 

Okay, great. Let’s go next to sorry, ah. I think Catherine Sbarra has a raised hand. And if you can unmute yourself. Oh, actually, it’s written.

 

Q: 

Oh, sorry. Yeah, I sent it in written when I when I heard you know, that you said we could do that. So it’s fine. Can you hear me now?

 

FASKIANOS 

We can.

 

Q: 

Okay, thank you very much. Um, I just had some questions on the governing surrounding those that have been displaced because of the pandemic. So anything on housing? I just was wondering, is there any more clarification on funds that can be used towards that purpose?

 

WHITE 

Yeah, so um, I know that there is a guidance spelled out for how using the funds say for investing in housing and neighborhoods that states and local governments must demonstrate how they are directing those resources to low income areas, or generally to populations that are disproportionately affected by the pandemic. So thing along the lines of targeting funds to those in qualified census tracks, for example, um, but just to set expectations about my ability to dive too deeply into the guidances is limited at this point. It is also an interim final rule from Treasury. So I don’t want to give the impression that I can help interpret the guidance, because we are still, you know, awaiting further clarification on a number of items. And we have been mainly hearing, focusing on those concerns of our members, specifically, at the state budget office level.

 

FASKIANOS 

So, when will the final regulations be out? I mean, it’s interim now, but what is the timing on that? I mean, when is the next point, though, they’ll drop more guidance?

 

WHITE 

So, um, the comments are currently being accepted through July, I believe it’s mid-July. So there will be, you know, a time period after that. We don’t have a definitive timeframe for when that that will be finalized after but comments right now are being accepted through July 16.

 

COWELL 

Irina, there’s a couple questions that I could at least weigh in on.

 

FASKIANOS 

Yeah, great.

 

COWELL 

One was just, they said more examples of water, sewer, and broadband infrastructure. And I just want to make a point on the broadband because that’s another topic that came up in North Carolina, I will say there has—and this may be true in many states—a reluctance to let local government go out and create their own broadband networks. And that has been a long case in North Carolina. Even if the federal government is saying that you are eligible to use broadband, I would make sure that you understand, you know, your state assembly or, you know, whatever the governing body is. Because it’s like my understanding in North Carolina, is there really much more enthusiastic about the water/sewer, given the financial distress and some of this regionalization. And how appropriate is to solve that at a local level than they are broadband, which I think there’s a preference that that be more of a statewide integrated system. And so they don’t want to go see a bunch of small units, maybe get in over their head and start trying to create this stuff, even if the feds are allowing it within the rules. So and that was kind of goes to another question about, you know, should we be consulting legal counsel? I mean, I certainly think, you know, on issues like what sorts of—how much administrative burden, is there going to be on this if we do it? Can we, you know, provide the documentation? What are the hurdles? What are the legal risks? And you’re working with your county, you know, general counsel, city attorney. You know, I definitely would—I had a lot of lawyers surrounding me as treasurer. So I would certainly say that, you know, you’re going to want to work hand in glove with them.

 

FASKIANOS 

Thank you, and that we have a raised hand from Judge Paul Pape. If you can unmute yourself and identify yourself, that would be great.

 

Q: 

Yes, ma’am. Thank you. I’m a county judge down in Texas. And I wanted to ask more about helping with the disparity—the inequality in low to middle income neighborhoods. We’re exploring the possibilities of perhaps a recreation center in an area census block, that would certainly qualify as LMI. And we don’t want to get out there too far ahead of ourselves and expend a fair amount of this money without some assurance that it’s going to be a qualifying expense. So what do you think about the possibility of—it would be it would be a building would be a structure, a recreation center, a community center, some place that we could encourage healthier lifestyles, education about nutrition, maybe some reading programs, and some recreational programs as well. What do you think about that?

 

WHITE 

Um, so I think that, you know, within the bucket of addressing those hardest hit, um, it’s s sound, you know, it sounds like that would be the realm it may fall in. What I would recommend is, you know, reviewing all the frequently asked questions to date, as well as the full guidance to see if that type of example is already stated. But again, they’re also—Treasury is responding to is collecting comments and questions and in some cases addressing those questions not in necessarily in real time but pretty quickly, when they when they feel they are able to address them within the confines of the interim final rule. If it’s—if that if that’s example is not spelled out somewhere, though, you know, it may be something where it would need an additional clarification. But that would be my recommendation as to to getting more clarity on if that type, even though it’s infrastructure, if it would be eligible, given its target beneficiaries.

 

FASKIANOS 

Great. I’m going to take the next question from Bob Eckstrom, who’s in the office of the city auditor in New Bedford, Massachusetts. And he wrote it in although municipalities must just define their revenue loss calculation, is there any requirement to demonstrate that those funds are spent on governmental services that weren’t performed solely because of insufficient revenue during the pandemic? So in other words, as long as it’s not specifically ineligible, can we spend the funds on any governmental services even if they weren’t affected by the pandemic?

 

WHITE 

Sure. So the revenue loss provision, allows for spending—allows for using the funds to fund core government services. As long as—and the money the amount that a state or local locality allocates to cover revenue loss, therefore may be used outside of the other stated eligible uses. But with the caveat that the person asking the question also specified that it may not be used for anything explicitly ineligible. So I think the answer is is yes, if I heard that if I heard the question correctly. But that’s that is the way that the revenue loss provision is written.

 

FASKIANOS 

Great. Konstantine Anthony, has his hand raised. If you unmute yourself?

 

Q: 

Hello, sorry, I put it in the chat. I think it just kind of got skipped over. Can these can the funds be used to update our older infrastructure to comply with modern ADA standards?

 

WHITE 

I’m not able to say for sure on that I, you know, if it’s something where you might be able to tie it to one of the eligible uses such as helping those hardest hit if it’s specific, you know, neighborhoods that the funds are being used, potentially. But that’s not something I could say clarify for sure. Unfortunately.

 

FASKIANOS 

Alright. I’m going to go next to a Mayor Mike Wiza who’s the mayor of Stevens Point, Wisconsin, what might we need to show regarding how housing programs were affected by COVID? So, you know, how can we address homelessness that was increased but has increased because of COVID?

 

WHITE 

So we’re still waiting for guidance on reporting requirements around the usage of these funds. So I think the details about what will need to be reported in some of these areas is is still to come from Treasury.

 

FASKIANOS 

So Janet, in terms of the reporting, the reports that city and state officials have to do, I mean, given that they haven’t come out yet, this money is coming. How do you balance that? You know, trying to spend your money, put together your plan, spend it, but also keep an eye toward the fact that you have to actually report on it too?

 

COWELL 

Well, and I guess that goes to that plain vanilla, right. I mean, if water/sewer, I mean, it seems like that’s going to be a lot less documentation. And then particularly if you have incentives and some things and you’re trying to collaborate and join into different—I mean, that’s all going to be a little more of a smooth path. If you are trying to build a new, I don’t know, like commercial center to recruit businesses with a new ventilation system or so I mean, it just, it seems like that’s gonna be a lot harder to prove, right? I mean, you got the risk of that, for misuse of funds and proving that you’re not misusing funds. So, you know, to me, if you’re sticking to the named categories, and you can clearly document your populations, I think, you know, you should be pretty good, right? But once you start—starting to really stray out of those boxes, and you know, you’re gonna have to show a lot more paperwork.

 

FASKIANOS 

Right, and Kathryn, I don’t know, did you cover this? There’s a question from Emily Holmes, about schools funds, can they be used before, toward creating before or after school programs, especially those in public schools to get, you know, parents, caregivers back into the workforce? You know, a lot of people need childcare, and affordable childcare.

 

WHITE 

So I know, within the guidance, you know, there is mention of using the funds to address educational disparities. So, you know, if the program serves that purpose, and the state or local government  can, or school district, can demonstrate that, you know, it’s possible that it’s allowable. I would also call attention to in the American Rescue Plan, there are other dedicated funding sources for education, namely the ESSER. The emergency education, I’m going to get the acronym incorrect, but it’s the ESSER funds that—similar to those that were provided under the CARES act, and bolstered in the December bill as well. There are other pots of money. And then of course, there are pots, there’s a pot for childcare assistance as well, that’s separate. So I would just encourage states, you know, and local governments to be looking at all of the buckets of money available for different purposes, because they will have different requirements around them, and also different time horizons, to consider when determining and how these the fiscal recovery funds—which is the broadest, you know, pot of money for sure—how to allocate those in combination with these other more specific pots of money.

 

FASKIANOS 

And you’ve mentioned, there’s a question about where can people submit their comments and questions to the Treasury Department. Is there’s a certain location on the Treasury website? And we can circulate this after the fact to along with this webinar more information about that. But Kathryn, if you could give us that URL or point us in the right direction.

 

WHITE 

Yeah, I can get that information and put it in the chat. It’s spelled out, you know, in the interim final rule, the contact information for how to submit comments. And another more general point that I would just add, that speaks to some of the questions that have come up. Is, you know, what we’re hearing from states is also, you know, this money—as Janet said earlier—it’s a lot of money coming to just state and local governments to to allocate and determine how to use as effectively as possible, it is also one-time money. So that’s another item to just be aware of. When making decisions on how to spend the funds that they be used, to the extent practical, for one-time increases or in one-time investments that will not set the government up for a problem down the road when the funds do dry up. Although there is a longer time horizon for these.

 

FASKIANOS 

So essentially, in order to stand up new programs, programs, you need to figure out how you’re going to force fund them or source, you know, support them after the money is right is gone.

 

WHITE 

Right. Just to be mindful of that when deciding how to use these funds.

 

FASKIANOS 

Great. Okay, I’m going to go next to i, Susan Hariston, who is a council woman in Summit, New Jersey. Can our state, New Jersey, require that we use the ARC funds, municipalities to use the funds to first pay back debt service to cover revenue loss? That might be too state specific. But there might be general—Janet do you do you know, or how would somebody go about figuring that one out?

 

COWELL 

Well, I was actually just going through Kathryn, you mentioned specifically that you could not use it for debt service. Correct?

 

WHITE 

Right. I was just gonna mention that. So I’m not sure—how, you know, if, if there’s some type of work around imagine there, but yeah, that that that is identified in that guidance as an ineligible use of the funds.

 

COWELL 

Okay. Grant had asked, I mean, I’m just jumping a bit about, you know, if you’re not in a qualified census track or a poverty census tract, could you somehow show other documentation? I just think that gets into dangerous territory and a lot of work. And I, you know, I would probably not, that wouldn’t be my first project, if that was to the mayor of Cornelius, North Carolina.

 

FASKIANOS 

Great. And the person who asked the question about where to submit questions and comments, found the link and put it in the Q&A box, we can send it but indicated that the last day to submit is tomorrow. Does that sound accurate, Kathryn?

 

WHITE 

Um, it’s actually it should be July 16. I’ll leave or unless I have that incorrect, but I’ll, I’ll see if I can can verify that.

 

FASKIANOS 

Okay, great. Because obviously, that makes a big difference. I’m gonna take the next question from Betsy Beeman of CEI: small states may have limited capacity in their state government to quickly develop and manage new programs, resource flows. What lessons were learned after the Great Recession, about how smaller states quickly built their capacity to do so? And do you have any examples of partnerships forged with non state entry entities that we could learn from? That might be good question for Janet.

 

COWELL 

I’m sorry, I’m sorry, I was—could you repeat the—

 

FASKIANOS: 

You were looking at the other questions?

 

COWELL 

I was looking at the other questions I was looking at. So I’m reading and listening.

 

FASKIANOS 

I know it is challenging. Small states may have limited capacity in their state government to quickly develop and manage new programs. What lessons were learned after the Great Recession, about how smaller states quickly built their capacity to do so? Do you have any examples of partnerships forged with non-state entities that we can learn from?

 

COWELL 

Thank you for repeating that. You know, I think some of the best examples I saw for small entities were really, you know, partnerships with other governmental entities that were more local. So for example, we had an Edgecombe County in North Carolina, which is a lot of poverty, census tract and small towns that couldn’t afford police force partnering with the sheriff’s department at the county level, to help provide public safety. The water/sewer examples that I provided and anything that sort of, you know, where you can regionalize some of the back office support, the technical assistance. We actually even created in North Carolina program to train financial managers through the community college. So I would say that’s going to be very state specific, but hopefully, you know, if you can find some of those incentives or technical assistance programs, as a small unit. And then particularly if you’re falling into a census tract, where you know, there’s proof that this is a distressed area, you know, I would think there would be even more assistance.

 

So I would also just jump quickly on the city of Paducah who had asked about—and I’ve lived in Kentucky for a while. So love Paducah great quilt Museum, and that you talk about public safety. Another conversation I had in prepping for this was with a local congresswoman. And she was just mentioning on the earmarks that she was seeing a lack of request around public safety, particularly from Democrats, because they’re just sort of skittish of the whole police/public safety thing. And so she’s seen a lack of requests. I know earmarks is a much smaller pot of money. And that’s not really the subject of this. But I would just say if you’re in a Democratic area, you might want to talk to your local congressperson about what’s being left on the table for earmarks and there could be additional monies there.

 

FASKIANOS 

Great. Thank you. And Kathryn, you are correct. The deadline is July.

 

WHITE 

Yes. Great. Thank you for confirming.

 

FASKIANOS 

You have to unmute yourself for it. You got it.  So the person that found the link just went found the correct link and clarified. So that’s good. And we will send around the link for everybody to take a look at and to submit as needed. Okay, so let’s see. If anybody wants to raise your hand, please do. So. It’s always more fun to have people ask the questions themselves. And we do have a raised hand, Robin Stunteback and if you can tell us who you are.

 

Q: 

Alright, thank you. Um, this actually was a question to Janet. I’m a township supervisor in southeastern area of Pennsylvania. And we were lucky through Chrissy Houlahan is our congressional delegate, to be able to receive $2.4 million for a tremendous amount of infrastructure work that we’re doing. One things we’ve already decided is to segregate the funds for each of the different activities, whether it was sewer, or whether it was stormwater in particular, because of the unfunded mandate. But I was curious about your thoughts around what we should be looking for from a third party auditor to help us participate in that? Because we really want to make sure that the township is well aware that this isn’t funny money, it’s not going to be taken out for anything else other than the most important issues that we’re addressing right now.

 

COWELL 

No, I mean, I love that question. I mean, getting a third party audit or some arm’s length, I think, as an elected official is always a wise move, and obviously trying to do that in a cost efficient way. You know, and again, I think those providers are going to be somewhat local, but I don’t know what, you know, we have like a school of government at UNC North Carolina, you know, at Chapel Hill, we have a rural center. I mean, there’s there could be regional nonprofits that could help you find those auditors and make sure that you have, you know, kind of protected yourself against claims. And I also think there was another question about public records and, you know, trying to figure out how you’re going to be transparent on your use of these funds and show the public how you’ve used them, and some of those measures of success. You know, I think that’s one lesson I had of being an elected office is not putting enough time into the communications and, you know, kind of outward facing transparency. But yeah, I think it’s expanding a little bit of money on auditor’s and communications folks would be wise.

 

FASKIANOS 

Great, Melissa Derek had her hand raised. She also wrote her question, but I’d love for you just to ask it. Melissa, who’s the mayor Pro Tem of San Marcos, Texas.

 

COWELL 

Irina, now you’re on mute.

 

FASKIANOS 

Sorry. Thank you. I did see your hand raised, but now it’s gone. Um, she asked could this fund a grant right position for social service nonprofits that focused on homelessness?

 

Q: 

Okay, now, the host allowed me to unmute. You have a serious issue of increasing homelessness. We’re a small, but growing quickly city between Austin and San Antonio. And we have the need—I asked another question to build more shelter for our neighbors experiencing homelessness. And in addition, we really would like to hire a grant writer for like a two-year period to help our nonprofits work together and, you know, get joint grants and get grants that would be, you know, supported by the city, so that we can help them to solve the homeless issue, because we don’t have a social services department. And so we can’t afford to do all the things. So that’s basically what I’d like to ask about.

 

WHITE 

And, you know, I can start, again, I can’t tell you with any certainty as to what will would or would not be allowable, but I would point to the guidance specifically around building internal capacity to implement economic relief programs effectively. That is in the Treasury’s guidance. And, you know, you noted it would be for a two year position. So it could also fall, you know, that that covers the piece about, you know, how it would be funded with with these, you know, one-time funds. And, you know, again too there’s there’s also the area around investing in housing to serve those hardest hit. But I think that internal capacity piece that falls under would you know, addressing the negative economic impacts of the pandemic is where that might fit in. So, but cannot say for any—for certain what what would or would not be allowable.

 

FASKIANOS 

Great. Ty Wilson has asked, he’s a grant administrator for the city of Paducah. I know that the infrastructure seems to be focused on the three main areas, I believe, is also mentioned that the funding can be used for public safety as part of qualifying services. Is it possible to use the funding for improving infrastructure for 911, operations radio system, etc?

 

WHITE 

So, um, I think that when I mentioned use for public safety, it was specifically in reference to employees that work on COVID-19 response. So under the supporting public health response eligible use that that’s where that fell. So I’m not sure. I’m not sure about that that particular proposal or not.

 

FASKIANOS 

Okay. Great. Other questions, people want to raise their hand? Um, I think we’ve talked about there is an upvote. from Robert Alberty, can equipment purchases, be considered eligible expenses for governmental services after calculating the lost revenue? That again, might be too soon to tell.

 

WHITE 

Right, I think, if you want one thing, I would say more generally about how a state or local government uses its funds allocated for revenue loss that we’re hearing is how to—another thing to think through—is how governments are planning to keep track of the usage of the funds for revenue loss. So that they can prove that it was not used for an ineligible use. So equipment purchases, I don’t see a reason why that wouldn’t be eligible, you know, assuming it’s not one of the spelled out ineligible uses in the guidance or in the law. But just something more generally to keep in mind, for using funds for revenue loss, is thinking through how you will track how those funds are used in order to prove that they were not used for ineligible use, if that makes sense.

 

FASKIANOS 

Yeah, there’s been a lot of reporting on the labor shortage in the United States in different industries in different sectors and industries. Are there any provisions of what states and cities can do to use funds to encourage labor force participation? And to encourage more, you know, to help narrow the gap on those labor shortages?

 

WHITE 

Yeah, so I know that we’ve seen some states use federal funds. I’m not—they’re—I’m thinking really more under the CARES Act, I believe. There were some examples of using coronavirus relief funds to give one-time bonuses to people who are—unemployed individuals who find work. And we’re seeing some examples, you know, being in conjunction with—in some cases—in conjunction with states, discontinuing or planning to discontinue participation in the enhanced unemployment programs offered by the federal government. So I would just say that that is something we’ve seen in relation to other federal funds. I don’t know for sure whether any state or local government has yet said that they intend to use this pot of money for that purpose.

 

FASKIANOS 

Great. And if states and cities are facing budget shortfalls after 2020, can the funds be to cover those shortfalls? Or is that against the guidance? Shortfalls because of the pandemic and what was needed to put in place?

 

WHITE 

Right. So again, under the revenue replacing revenue loss eligible use a state or local government may use the funds in the state fiscal—state and local fiscal recovery funds program to replace that lost revenue. And the rule spells out the interim final rule spells out the methodology to be used by recipients to calculate that their reduction in revenue due to the pandemic. And they basically make the assumption that any revenue loss compared to a growth factor that’s specified in in the in the guidance they make. They assume that it is due to the pandemic, you don’t need to prove, you know, that the revenue loss was due to the pandemic and not something else. Any revenue—outside of course, the interaction with the provision about tax—actually making—passing a tax cut, you know that that’s where that that would need to be adjusted for in a city or state’s calculations. But yes, the funds are intended to be able to be used to help state and local governments cover a budget shortfall, as spelled out in the guidance, you know how they would measure that shortfall.

 

FASKIANOS 

Great. Next question is from Lester Smith in the finance department of Birmingham, Alabama. This is very technical can funding be used to pay lump-sum payments to government employees under Section 603? How restrictive are the requirements under the section which defines eligible workers to mean those workers needed to maintain continuity of operations of the central, critical infrastructure sectors and additional sectors as each governor of a state or territory each tribal government may designate as critical to protect the health and well being of the residents of their state, territory, or tribal government. Right.

 

WHITE 

Right, so I believe that is relates to using the funds to provide premium pay for essential workers. And as I mentioned, there is discussion in the Treasury guidance around—I can’t remember the exact threshold, it’s something like above 150% of the state or county average pay would require a special justification to use the funds to provide additional pay. So I would recommend, you know, looking at the details, as they’re spelled out in that section to get more clarity on those restrictions.

 

FASKIANOS 

Right. Um, so I’m Alfred Brock councilman with the city of Wayne in Michigan: we’ve got notice that communities under a population of 50,000 get less. We’re in the same congressional district as Detroit, which is getting about $1038 per capita and a city across the street from us population greater than 50,000 is getting over $340 per capita. So I guess the question is, you know, is this really a nationwide situation that how they’re allocating per capita?

 

WHITE 

Yeah, I’m not sure that I’m in a position to comment on how prevalent that that issue is. If this is in reference to the non-entitlement units of government, that there’s a special process in place for how states are to distribute those allocations down to the those any use— they’re referenced as. But those are spelled out by Treasury, in terms of you know how those allocations—and there’s very, very little discretion that would cause variation state to state. There are just a few instances in which states have some discretion in specific instances about how to allocate to to any use. So I’m not sure if that’s relevant.

 

COWELL 

I could just give you a data point, I, when I was talking to Lee Lily in North Carolina, the amount per capita of some of the cities we were talking about was about the same as what, you know, small towns—it sounds like Kathryn what you’re saying is—I mean, based on just a few data points true across Michigan and North Carolina.

 

FASKIANOS 

Great, thank you. So we’re almost at the end of our time, and I just wanted to give each of you a minute or two, just to wrap up on anything you’d like to leave the group with. So Kathryn why don’t we start with you. And then we’ll go to Janet.

 

WHITE 

Sure. I would say, you know, just encourage anyone who has questions or is concerned about anything they see, in reviewing the guidance from Treasury to submit comments, I know that staff there are very, very keen on collecting those. And I’m responding to them as fully and comprehensively as possible. So I would just encourage folks to take the time to do that before the deadline, which is July. And there may be some questions that Treasury would be able to clarify sooner than if they are able to outside of the rulemaking process.

 

FASKIANOS 

Great. Janet over to you.

 

COWELL 

I would just add the I know a lot of you go into public service, either elected or as civil servants, because you really care about people and you want to help and this is an opportunity for you to make a difference to a lot of people who’ve suffered. And so I laud that and I hope that you can, you know, deploy this. I would also encourage you like on the airplane to you know, put your oxygen mask on yourself too and and take care of yourself. I think those questions from our friend in Pennsylvania about you know, making sure your auditors you know that you have lawyers that you have transparency and that you don’t get yourself into hot water or, you know, accusations. I mean, it does nothing has to be true right in the public sector. And I know how difficult it is. So thank you for serving. And just make sure that you you know, in the process of doing this, also protect yourself and your unit.

 

FASKIANOS 

I think that’s a great place to end. Thank you very much to you both to Janet Cowell and Kathryn White for your expertise. We’ll send out a link to the webinar recording and transcript soon. And in the meantime, you can follow Janet on twitter @JanetCowell and the work of Kathryn’s organization NASBA @NASBO. And of course, you can follow State and Local Officials Initiative, our initiative on Twitter @CFR_Local. Please feel free to reach out to us with any questions or any other ways that we can support the important work that you’re doing. You can email us at [email protected] and thank you for all that you’re doing. Stay well and stay safe.