The Road to Recovery: How Counties are Using ARPA to Pave the Way

While the COVID-19 public health emergency will end on May 11, 2023, many counties are still ramping up relief initiatives, transitioning from the initial disaster response to establishing an equitable and sustainable recovery. Management of the federally funded recovery projects is an onerous undertaking due to the breadth of expertise required to establish and manage these new initiatives and the complexity of the regulatory landscape.

Pandemic Recovery and Relief

Counties’ primary instrument for pandemic recovery is the American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds (SLFRF). Passed in March 2021, the first tranche of ARPA funds was released in May 2021. However, the US Treasury’s finalized guidelines on ARPA use and the second tranche funds were not released until March 2022. Consequently, ARPA funds only became a significant component of counties’ pandemic recovery at the close of the first fiscal quarter of 2022. As a result, counties now face two challenges. First, recipients must ensure that funds are used effectively and compliantly. Second, recipients must abide by Treasury’s utilization timeline- all funds must be obligated by December 31, 2024, and expended before the ARPA program sunsets on December 31, 2026. 

Below is a review of the US Treasury Quarterly Project and Expenditure Reports, covering fund allocations from January through September of 2022. This overview details how counties have utilized ARPA SLFRF funds thus far and examines future recovery and development priorities.

Revenue Replacement

Revenue replacement was the most common use of ARPA SLFRF funds. Counties used $12.7 billion to replace revenues lost due to the pandemic, an amount which is $11 billion greater than the next largest allocation type. Prioritization of revenue replacement is predictable. Revenue replacement funds can be used for the provision of general government services, so the policies and processes needed to expend these funds are already in place. This significantly reduces administrative complexity and facilitates the use of these funds by counties.

Mental Health

From 2019 to 2021, the average share of adults reporting symptoms of anxiety disorder and/or depressive disorder increased by 30%, and county governments are using ARPA funds to address this burgeoning health crisis. So far, county governments across the country have allocated $1.5 billion to provide residents with mental health services. Additionally, US Treasury guidance permits public health and mental health services to be available to the general public, eliminating the administrative burden of qualifying program participants.

Affordable Housing

The cost of rents surged between 2020 and 2022, increasing by over 30% nationally, and many counties have committed to addressing the national 7.3 million affordable housing unit shortfall. In the first nine months of 2022, counties allocated $1.3 billion to projects to increase access to affordable housing. In July of 2022, the US Treasury released additional guidance that expanded the presumptive eligibility framework for affordable housing and facilitated increased ARPA investments in affordable housing. The caveat is that completing construction and spending all allocated funds by December 31, 2026, may be difficult due to the complexity of affordable housing development.

Managing the ARPA Portfolio

As ARPA spending by counties accelerates, the introduction of monitoring and evaluation frameworks becomes more critical. Unobligated funds will be recouped after December 31, 2024, and unexpended funds after December 31, 2026. Counties and other units of government will need to objectively assess the probability that funds can be spent by the 2026 expenditure deadline and, if necessary, reprogram funds in time to meet the 2024 obligation deadline. Given the scrutiny that is being applied to pandemic relief programs by both federal auditors and elected officials, project monitoring must be rigorous. Auditors will examine the eligibility use, adherence to required US Treasury reporting, application of Uniform Guidance, and diligent monitoring of capital projects. Moreover, it is incumbent upon counties to verify that these taxpayer-funded projects are impactful, so counties should also deploy carefully designed and robust performance measurement practices. 

For more than 30 years, Bronner has supported public sector organizations in navigating complex regulatory environments and developing monitoring and evaluation frameworks to make accountability matter. Learn more about how Bronner has continued that tradition by supporting counties and cities as they develop, launch, monitor, and evaluate their ARPA programs.