Coronavirus State and Local Fiscal Recovery Funds: Federal Funding Opportunities for Environmental Justice Solutions

As we enter the third year of the COVID-19 public health emergency and its associated negative economic effects, critical resources passed by Congress in March 2021 in the American Rescue Plan Act of 2021 (ARPA) continue to be released to address the range of crises exacerbated by the pandemic, from rising energy and housing insecurity to continued exposure to lead and other environmental contaminants.

Among many other initiatives, Congress created the Coronavirus State and Local Fiscal Recovery Funds (SLFRF): $350 billion provided by Congress directly to states, Territories, and local and Tribal governments for responses to the COVID-19 public health emergency. For environmental justice communities, these funds can mean investments in water infrastructure (including lead testing and service line replacement), provision of government services (including environmental cleanup), capital expenditures (including building affordable housing or community resilience hubs) and assistance to households (including home weatherization and rent or utility debt payments).

Last week, the U.S. Department of the Treasury released its Final Rule for the SLFRF, preceding the release of the second tranche of SLFRF payments, which is expected to be made on May 10, 2022. The Final Rule provides significant additional flexibility for states, Territories, and Tribal and local governments to use the funds for a broad variety of pandemic responses.

ARPA provides that Treasury can distribute the SLFRF in two portions or “tranches.” The first tranche of payments was made available on May 10, 2021, with Treasury disbursing over $240 billion to states, Territories, and local and Tribal governments. Congress required that payments to local governments be split into two equal tranches, twelve months apart; Treasury chose to split funding into two equal payments for all states except for the 21 states with an unemployment rate of 2.0 or more percentage points above pre-pandemic (February 2020) levels. 

State and Local Fiscal Recovery Funds: An Introduction

As established by Congress, there are four eligible use categories for the SLFRF:

1. Public Health and Negative Economic Impacts: public health measures like vaccination or testing sites and contact tracing; assistance to households, small businesses, nonprofits, or impacted industries like travel and hospitality
2. Premium Pay: for essential workers during the public health emergency
3. Revenue Loss: provision of government services to the extent revenue was reduced during the COVID-19 public health emergency 
4. Infrastructure Investments: necessary investments in water, sewer, or broadband infrastructure.

Payments from the SLFRF may only be used to cover costs incurred by the State, territory, Tribal government, or local government on or after March 3, 2021 and by December 31, 2024. Treasury has interpreted this requirement to mean that recipients must have obligated the funds by December 31, 2024.

As described in the Final Rule, Treasury presumes that households or populations that experienced unemployment or increased food/housing insecurity or are low- or moderate-income have experienced negative economic impacts from the pandemic. Low-income households, residents of Qualified Census Tracts (QCTs), and populations served by Tribal governments are presumed to be disproportionately impacted by the pandemic. SLFRF recipients may use SLFRF funding to provide services responding to these impacts.

The Final Rule provides “enumerated eligible uses,” specific examples of eligible uses of the funds. Uses beyond the enumerated eligible uses specified in the Final Rule may also be eligible. Separate and distinct standards for assessing the eligibility of a use apply to each of the four eligible use categories. The “Public Health and Negative Economic Impacts” category is further divided into five subcategories which each have their own eligibility standards: (1) public health; (2) assistance to households; (3) assistance to nonprofits; (4) aid to impacted industries; or (5) public sector capacity and workforce.

For environmental justice communities and advocates, highlights among the enumerated eligible uses discussed in the Final Rule include:

• Remediation of lead paint or other lead hazards
• Rent, mortgage, or utility arrears or bill assistance and housing stability services (including legal services for eviction defense)
• Home weatherization 
• Assistance accessing or applying for public benefits/services
• Affordable housing development to increase the supply of affordable and high-quality living units
• Services for the unbanked and underbanked (including “the development of public banking infrastructure than can support benefit delivery”)
• Workforce development programs (including capital expenditures for training centers)
• Creation of new community water systems

Many of these enumerated eligible uses may be complementary with each other as well as other federal assistance programs. For example, a city could commit some of its SLFRF allocation to building a community resilience hub which can host a food bank and childcare or early learning services, which can also be funded from SLFRF. Public benefits navigators may be sited at these hubs to help community members access utility bill assistance and weatherization services funded by SLFRF. These navigators could also help residents access other relief programs funded by ARPA, such as emergency rental assistance or the Low Income Home Energy Assistance Program.

State and Local Implementation

The release of the Final Rule provides clarity on how remaining SLFRF payments may be used by states, territories, and Tribal and local governments. Advocates seeking to influence government decisions on use of these funds should first determine if funds remain available for appropriation or reprogramming. Recipients are required to submit and publish a “Recovery Plan Performance Report,” as well as annual updates. These submissions are compiled and searchable on Treasury’s website here.

According to an analysis by the Center on Budget and Policy Priorities, as of November 15, 2021, four states (California, Indiana, Maine, and Montana) have already appropriated 100% of their allocations, but many other states have significant amounts that have not yet been appropriated. Likewise, budget processes and timelines for cities and counties vary widely; many local governments have not yet fully committed their second tranche payment and may be receptive to new proposals on how to use these funds.

At Just Solutions Collective, we are happy to assist BIPOC-frontline environmental justice groups in navigating these funding opportunities to develop justice-centered programs in your communities. Please feel free to reach out to me at sylvia@justsolutionscollective.org to discuss further.