Coronavirus State and Local Fiscal Recovery Funds: GFOA Guiding Principles.

• Author: Haroon, Mehreen
• Position: FEDERAL UPDATE

A year and a half into the COVID-19 pandemic, the devastating public health and economic impact has been felt nationwide. While the CARES Act launched the Coronavirus Relief Fund (CRF) in early 2020 to provide immediate assistance for state and local governments in responding to the growing emergency, the American Rescue Plan Act of 2021 (the ARPA, passed in March 2021) contained the important Coronavirus State and Local Fiscal Recovery Fund (CSLFRF), which shifted the focus of the federal funds toward providing response and recovery efforts. GFOA has provided some guiding principles for recipients to consider in using the new CSLFRF funds.

It's temporary

While the covered period for using the CSLFRF funds goes far beyond the strict timeframe that had been set for the CRF, it's still a temporary measure. The funds are nonrecurring and would be best used for expenditures that are also primarily non-recurring and for areas that require urgent assistance because of the pandemic. Examples include stabilizing households and businesses or providing immediate assistance to hard-hit industries such as travel, tourism, and hospitality.

Recipients that are considering creating new programs or adding to existing programs that require an ongoing financial commitment need to determine in advance how the program will be funded when the CSLFRF expires. This doesn't mean, however, that governments shouldn't consider investments in long-term projects. Investments in critical infrastructure (as permitted within the eligible uses) should be given high priority because they would provide an ongoing benefit, especially when aligned with any pre-existing objectives. Recipients just need to keep the ongoing operating costs in mind.

You might want to find a partner

Communication at the state and local level is critical when applying federal funds toward services shared by residents. The glaring disconnect across different levels of governments stands as a crucial lesson to learn from as the public health emergency comes closer to the end, and partnership efforts can greatly assist in alleviating much of the existing burden.

The rollout of the CSLFRF is a new opportunity for finance officials to take advantage of the additional flexibility added to the program's eligible expenditures. Examples include a broad use of allowable spending on government service (to the extent of revenue loss) and planning for taking on larger infrastructure projects. Recipients have a...