America Rescue Plan Act | Coronavirus State and Local Fiscal Recovery Funds
Congress allocated $350 billion in COVID-19 relief funds for state, local, Tribal, and territorial governments to use in providing “assistance to households, small businesses, and nonprofits, or to aid impacted industries” under the American Rescue Plan Act. The law allows those governments to use the Coronavirus State and Local Fiscal Recovery Fund monies to partner with nonprofits to provide services and programs in their communities, restore jobs and wages, and boost the economy.
Why It Matters
The Treasury Department makes clear that governments may use the Coronavirus State and Local Fiscal Recovery Fund to provide financial assistance to nonprofits through loans, grants, and in-kind assistance partner with nonprofits, bring unemployment trust funds back up to pre-pandemic levels, or pay off unemployment loans from the Labor Department. This is an important clarification because many states impose automatic unemployment tax increases on contributing employers when trust funds fall below certain levels. However, as federal advocacy showed throughout the pandemic, relief for charitable organizations cannot be assumed; it will take persistent advocacy at the state and local levels to ensure governments allocate funds to strengthen and expand the work of charitable organizations in communities.
Where We Stand
The State and Local Fiscal Recovery Funds are unique in the federal response to the COVID crisis because they empower state and local decisionmakers to partner with nonprofits and businesses to target and solve specific challenges in communities.
~National Council of Nonprofits Letter to Congressional Leadership, June 14, 2021
Status
Some U.S. Senators have called for blocking those funds from going out to state and local governments and instead using the money to pay for other spending plans, namely, infrastructure programs. Seeing this approach as shortsighted, the National Council of Nonprofits points out that the “recovery is not assured; many people, communities, and the organizations that support them continue to suffer from the pandemic’s aftermath.” The National Council of Nonprofits sent a letter letter to congressional leaders strongly opposing any proposal to claw back or reclaim State and Local Fiscal Recovery Funds allocated to governments from the American Rescue Plan Act. As explained in the letter, “The recovery is not assured; many people, communities, and the organizations that support them continue to suffer from the pandemic’s aftermath. The State and Local Fiscal Recovery Funds must be used for their intended purpose of securing a full and complete recovery.”
In sending this letter, the National Council of Nonprofits is standing with the National Association of Counties, National League of Cities, and U.S. Conference of Mayors, which recently sent their own letter expressing opposition to repurposing these funds. However, the concerns from the nonprofit perspective go further because the federal support for charitable organizations – while significant and appreciated - has been less robust compared to other segments of the economy. The State and Local Fiscal Recovery Funds are seen by nonprofits as “their best and likely last chance to achieve any degree of parity and fairness.”
Background
In May, the U.S. Treasury Department issued an Interim Final Rule and other materials providing details on the ways the $350 billion in State and Local Fiscal Recovery Funds authorized in the American Rescue Plan Act “can be used to respond to acute pandemic-response needs, fill revenue shortfalls among state and local governments, and support the communities and populations hardest-hit by the COVID-19 crisis.” The guidance answers questions about when a state’s tax cuts will violate the law’s prohibition against using these federal funds to “either directly or indirectly offset a reduction in the net tax revenue… or delay[] the imposition of any tax or tax increase.” More than a dozen state Attorneys General filed lawsuits earlier challenging the prohibition.
Resources
- State and Local Funds | American Rescue Plan Act, National Council of Nonprofits
- Strengthening State and Local Economies in Partnership with Nonprofits, Special Report, National Council of Nonprofits, June 2021
- American Rescue Plan Act, 117th Congress, March 11, 2021
- Interim Final Rule, U.S. Treasury, May 17, 2021
- Letter to Congressional Leadership, National Council of Nonprofits, June 14, 2021
- Letter to Congressional Leadership, The United States Conference of Mayors, National League of Cities, and National Association of Counties, May 27, 2021
