Much like January rings in the new year, it also marks the start of state legislative sessions across the country. While specific legislative priorities vary from state to state, COVID-19 continues to lead policy agendas. Nearly a year ago, the American Rescue Plan Act of 2021 (ARPA) was signed into law to help fill the extraordinary demand for government services during the pandemic. The momentous $1.9 trillion relief package provides states and other political units with resources to alleviate various challenges caused or exacerbated by the public health emergency.
ARPA has received a lot of attention since its passage. However, two often underemphasized aspects of the plan are the use of Coronavirus Fiscal Recovery Funds (CFRF) by territories and the Capital Projects Fund.
Use of Coronavirus Fiscal Recovery Funds by Territories
States and the District of Columbia have utilized the CFRF to address the public health emergency, respond to negative economic impacts, promote workforce development, stabilize government services, make investments in water, sewer, or broadband infrastructure, and more. The $350 billion CFRF also reserves a total of $4.5 billion for territories. According to U.S Treasury’s allocation methodology, half of the funding amount for territories is distributed evenly, while the other half is allocated based on population size. Amounts territories are entitled to are:
- American Samoa: $479.1 million
- Guam: $553.5 million
- Northern Mariana Islands: $481.8 million
- Puerto Rico: $2.4 billion
- Virgin Islands: $515.3 million
Territories have already begun employing those funds. The table below provides examples of CFRF allocations by territory:
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American Samoa
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- $370 million for investments in healthcare.
- $78 million for economic development.
- $30 million to improve water and broadband infrastructure.
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Guam
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- $20 million to establish the Guam Small Business Pandemic Assistance Grant Program.
- $1.8 million for small business rent assistance grants.
- $5 million for its aquaculture, agriculture, and fishing industries to support small businesses and entrepreneurs.
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Northern Mariana Islands
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- $19.6 million to the tourism industry.
- $6 million for premium pay to essential workers.
- $75 million for the provision of government services to the extent of revenue reduction.
- $17.2 million for water and broadband infrastructure.
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Puerto Rico
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- $250 million for premium pay to essential workers.
- $276 million to repair damaged schools.
- $120 million to Puerto Rico’s tourism industry.
- $94 million for the University of Puerto Rico.
- $150 million for “return to work” bonuses.
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Virgin Islands
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- $81 million to tackle public health concerns with services such as vaccinations, substance abuse treatment, and payroll costs for public sector staff.
- $17 million to the tourism industry.
- $10 million for job training assistance.
- $5 million for rental assistance.
- $163 million for water and broadband infrastructure.
- $46 million for services to disproportionately affected communities.
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*Please note allocations are subject to change and expenditure data is not available at this time.
Capital Projects Fund
The Capital Projects Fund is a separate fund created under ARPA, which provides a total of $10 billion to eligible governments for “critical capital projects that directly enable work, education and health monitoring, in response to the public health emergency” (U.S. Department of the Treasury, 2021). According to Treasury’s Guidance for the Capital Projects Fund, eligible recipients include states, the District of Columbia, territories, the state of Hawaii (for Native Hawaiian programs), and tribal governments. Of the total funding amount, the general allocation of funds is as follows:
- $9.8 billion reserved for the states, the District of Columbia, and Puerto Rico.
- $100 million reserved for territories.
- $100 million reserved for tribal governments and the state of Hawaii (for Native Hawaiian programs).
While cities and counties are not eligible to apply for the Capital Projects Fund, “Treasury encourages direct recipients to engage with communities when planning for the use of grants” (U.S. Treasury Capital Projects Fund FAQ, 2021).
Allocation Methodology
The amount each eligible recipient can receive from the Capital Projects Fund depends on several factors. According to U.S. Treasury’s allocation methodology, each state, the District of Columbia, and Puerto Rico are entitled to a fixed amount of $100 million, totaling $5.2 billion. The remaining $4.6 billion is distributed based on population size, the amount of people living in rural areas, and the proportion of individuals with a household income below 150% of the poverty line. Exact allocation amounts for states, the District of Columbia, and Puerto Rico are detailed on Treasury’s allocation amounts list. The remaining $200 million reserved for the territories, the state of Hawaii (for Native Hawaiian Programs), and tribal governments is divided into two groups. The seven territories and freely associated states will be eligible to receive $100 million to be divided equally. The state of Hawaii (for Native Hawaiian Programs) and tribal governments, are eligible to receive payments totaling $100 million to be allocated in equal shares.
Use of Funds
Treasury’s Guidance for the Capital Projects Fund outlines eligible and ineligible uses of the fund. In general terms, eligible uses must meet the following requirements:
- The capital project must address a critical need that was caused or exacerbated by the pandemic.
- The project addresses a critical need of the community.
- The capital project must directly enable work, education, and health monitoring.
Eligible uses
Examples of presumably eligible uses of the fund include investments in broadband infrastructure, digital connectivity technology projects, and multi-purpose community facility projects. In addition to these presumably eligible uses, recipients may propose alternative projects. Alternative projects must still meet the requirements listed above and are subject to a case-by-case review.
Ineligible uses
Examples of ineligible uses of the Capital Projects Fund, as outlined by Treasury, include investments in general infrastructure such as highways, ports, and bridges. Construction or improvements of schools and hospitals are also presumed to be ineligible but may be allowed if they meet the project eligibility criteria.
Eligible governments must also submit an application and a grant plan not to exceed their allocation amount in order to receive funds. According to Treasury, the deadline to request funding was Dec. 27, 2021, and the deadline to submit grant plans is on Sept. 24, 2022. Moreover, all funds must be expended by Dec. 31, 2026.
Several states have already begun employing funds received from the Capital Projects Fund. The most common investment area is broadband development, such as Arizona's allocation of $100 million towards expanding broadband infrastructure, or Oregon’s allocation of $120 million into its Broadband Fund. Furthermore, Texas has allocated its full award of $500.5 million towards broadband infrastructure, and Louisiana has pledged $90 million to expand broadband in unserved municipalities.
Treasury’s recent release of the Guidance for the Capital Projects Fund coincides well with the ramping up of legislative sessions across the country. While this historic global health crisis presents numerous difficulties, both the Capital Projects Fund and the CFRF created under ARPA equip states and territories with yet another tool in their policymaking toolboxes to help mitigate negative impacts of the pandemic.
Leo Garcia is a policy analyst with NCSL's Fiscal Affairs Program. He covers fiscal policy and economic development issues for NCSL.