Civilytics’ Comments on the State and Local Fiscal Recovery Funds Interim Final Rule

Treasury should publish the aid allocation estimates for non-entitlement units (NEUs). There are over 100 million people living in more than 27,000 NEUs across the U.S. We are some of them. We should be able to publicly look up approximately how much ARPA funding is coming to our communities.

Treasury published the aid allocations for metro cities but not the allocations or allocation estimates for NEUs. This leaves ordinary NEU residents in the dark unless their local government officials are exceptionally communicative and transparent.

Intergovernmental aid should be allocated using transparent, public data and formulas, with the results easily accessible. This is important on principle – for government transparency – but it’s also important for equity.

To “build back better” in an equitable way, there must be a targeted effort to inform communities – not just their mayors and town councils but community organizers and the residents who were most affected by the pandemic – about the amount of money and the rules around it.  Otherwise, in many communities, information is circulated internally, decisions are made behind closed doors, and residents find out about the funds too late, if at all.

We are very happy to see some communities holding listening sessions, conducting resident surveys, and seeking feedback on how to use funds. To encourage efforts to spend funding in an equitable way that truly gives communities a say in how to address their own needs, we ask Treasury to:

1. Publish the allocation estimates for NEUs so all residents of small cities, towns, and villages can see how much aid their community is likely to receive.
2. Require public documentation of how funds are spent so that the public, not just Treasury, can see how funds are spent.
3. Encourage communities to hold listening sessions or solicit residents’ feedback on how to use funds to help ensure that the funds contribute to “building back better” from residents’ perspective, not just politicians’.

Laudable commitments to transparency and equity need to be backed up by the implementation of this important program.

Treasury divided the $19.53 billion for “non-entitlement units of local government” (NEUs) among states based on each state’s share of the national non-metropolitan city population. But the non-metropolitan population does not equal the non-entitlement population in many states due to people living in unincorporated areas.

Distributing aid based on the non-metro population but instructing states to pass through funds based on NEU populations greatly distorts how much funding per resident NEUs in some states will receive.

In many states, including ours, NEUs are receiving about $104 per resident in ARPA aid. But, in other states, equivalent governments may receive much more – up to $1,300 per resident – because of the large share of residents living in unincorporated areas in these states. (This can be clearly documented using the state NEU funding amounts and NEU populations published by Treasury, as explained here: https://www.civilytics.com/posts/2021/arpa-data-methods/).

We urge Treasury and legislators to correct this disparity in some way given that the law’s intention did not seem to be to privilege NEUs in some states over others.

One option to partially address the disparity might be to recalculate each state’s NEU aid for the second tranche based on the state’s share of the national NEU population, a more appropriate denominator. Interpreting the “non-metropolitan” population to mean the NEU population would correct the distortion in funding and distribute funds more equitably. We recognize this may not be possible within the limits of Treasury’s rulemaking authority.

Alternatively, we urge Treasury to consider providing guidance that encourages states with large allocations per NEU resident to consider how a share of their funds could benefit unincorporated areas and their residents. We are aware that the legislation specifies funds go only to non-entitlement units but we encourage more creative thinking on this matter given the size of these disparities.

 At least 5 states (CA, FL, GA, TX, and VA) have more than 5 million residents living in unincorporated places, and a substantial number of states have more than half their “non-metro population” living outside NEUs. Under the current guidance, unincorporated places will receive $0 per resident and, in states with large shares of their population living in unincorporated places, NEUs will receive much more aid per resident than equivalent governments in other states. People living in unincorporated areas are still receiving and using services provided by local governments impacted by the COVID-19 health crisis. In many cases, their county may provide more services than would otherwise be needed if there was another local government in place. Perhaps aid that is intended for “non-metro” residents who do not live in “NEUs” would be more appropriately allocated to provide county services, rather than used to further increase some NEUs’ aid amounts.

Finally, the provisions of the NEU aid program mean that some funds will be returned to Treasury in the case that the allocation an NEU receives exceeds the 75% budget threshold. Treasury should provide a report on how much funding is returned under this provision and consider reallocating those funds to NEUs impacted by the disparities described above.

The 2019 Census population estimates that Treasury used count individuals who are incarcerated in the places where they are jailed, not in the communities they are from and will likely return to. Especially in rural areas, counting individuals who are incarcerated as part of the local population greatly inflates the population numbers. Despite this, individuals who are incarcerated are rarely thought of or treated as part of the community where they are incarcerated (see this story from Wisconsin for example: https://www.wuwm.com/podcast/lake-effect-segments/2020-02-25/how-prison-gerrymandering-in-wisconsin-will-impact-the-census).

Treasury should use the Census group quarters data to adjust the population numbers and remove incarcerated populations from the local government counts. This would ensure that the population counts more accurately reflect the number of people who will actually benefit from the ARPA aid in each community.

Alternatively, Treasury could direct communities to be sure that some of the aid they receive by virtue of incarcerating people goes to provide services to those people. We know that COVID was devastating for people who are incarcerated (see the Marshall Project’s reporting on this issue, for example: https://www.themarshallproject.org/2021/04/23/how-we-survived-covid-19-in-prison).

If population estimates are left as is, counting incarcerated people as part of the community where they are incarcerated, then money should go toward improving the conditions in jail/prison and after release of people who are currently incarcerated. After all, cities, counties, and NEUs are receiving between $100 – $1000 per resident, including per incarcerated resident. How can these funds benefit incarcerated residents and their futures too?

Treasury should specifically state that cities, counties, and NEUs, not just states, cannot use ARPA funds to pay for tax cuts. As Treasury notes, the Fiscal Recovery Funds are intended to meet pandemic response needs; rebuild a stronger, more equitable economy; and prevent austerity measures. Therefore, just as tax cuts by States and territories are antithetical to the legislative intent, so too are tax cuts by cities, counties, and NEUs.

Treasury should specify that ARPA funds cannot be used for this purpose by local governments. This is especially important because tax relief is perhaps the easiest-to-implement potential use of the funding.

We applaud Congress’s and Treasury’s focus on providing premium pay that “prioritize[s] compensation of [the] lower income eligible workers that perform essential work.”

We urge Treasury to maintain and enforce the rule that disallows premium pay that would increase a worker’s total pay above 150 percent of their residing state’s average annual wage for all occupations or their residing county’s average annual wage. There are many essential workers who make far too little. American Rescue Plan funds for premium pay should prioritized these workers.

We also urge Treasury to explicitly specify that police and corrections officers are not eligible for this funding when they primarily did their regular jobs during the pandemic. The CARES Act already provided funding for these workers while far too many essential workers were ineligible for that previous round of aid.