Treasury Expands Uses of COVID Relief for State and Local Governments

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State and local governments will have greater flexibility to spend $ 350 billion in federal COVID-19 aid under the new rules of President Joe Biden’s administration.

The revised rules mean that most cities and counties will be free to spend their entire allowance on all government services without having to prove they lost income during the pandemic. The rules also allow spending on more types of construction and a wider range of high-speed Internet projects, among others.

The final US Treasury Department rules come nearly 10 months after Biden signed the massive $ 1.9 trillion US bailout, which included aid to state, local and tribal governments. The money was intended to help consolidate their finances, pay the ongoing costs of fighting the virus and invest in longer-term projects to strengthen communities.

But some government officials had been hesitant to make spending decisions until they could get more certainty from federal officials on what was allowed. The new rules could ease that anxiety.

“I think we’re going to see in the next month or two a lot more spending, especially from small local governments who were kind of biding their time until this final rule is released,” Michael Wallace, legislative director for housing, community and economic development at the National League of Cities, said Friday.

Some local officials complained that the Treasury’s initial guidelines, released last May, were too vague in some ways and too rigid in others. In addition to pressuring the Treasury for changes, local government groups had also pressured Congress to step in with relaxed criteria.

The Treasury said it was responding to the comments by allowing “greater flexibility and simplicity in the program.”

“As the Delta and Omicron variants illustrated, pandemic response needs will continue to evolve,” Deputy Treasury Secretary Wally Adeyemo said in a statement Thursday when the agency released its rules. “These funds ensure that governments across the country have the flexibility they need to immunize their communities, keep schools open, support small businesses, prevent layoffs and ensure long-term recovery.”

One of the most significant changes will see state and local governments claim up to $ 10 million in lost revenue during the pandemic without having to prove it. Federal money used to replace lost revenue is given maximum flexibility, meaning it can be used for projects like repairing roads that would otherwise not be eligible. This $ 10 million threshold covers the full allocation for many small towns and for about 70 percent of counties.

“It really allows counties to be able to use the funding in a way that they know they can best support their communities and residents,” said Eryn Hurley, deputy director of government affairs for the National Association of Counties, on Friday.

Local authorities have also pushed for more flexibility in infrastructure spending, which is usually limited to water, sewage and high-speed internet.

The final rules allow funds to be used for repairing culverts along roadsides and for rehabilitating dams and reservoirs that provide potable water. Broadband funding can be used to improve cybersecurity and provide faster connections in areas already served, paving the way for more internet improvements in cities, rather than predominantly rural areas.

The original Treasury rules focused on areas that lack reliable cable or wired internet speeds of at least 25 megabits per second for uploading and 3 Mbps for uploading. The final rules encourage entities to focus on areas without 100 Mbps download speeds and 20 Mbps upload speeds.

The rules also state that the money can be used to build affordable housing, daycares, schools, hospitals and other projects. But some things are still generally off limits, including prisons, stadiums, and convention centers.

The rules also assume that an expanded set of households have been disproportionately affected by the pandemic, allowing them a greater range of services.

Governments will also be able to use federal aid to replenish their workforce to levels above their pre-pandemic workforce and may offer a wage premium to a larger proportion of workers.

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