When the federal government distributed 350 billion dollars to states and localities under a 2022 pandemic relief bill, the rules were clear: find ways to spend the money by the end of 2024, otherwise it would be clawed back by the federal government.
But the Biden administration quietly changed those rules in late 2023 to give state and local governments more time to spend American Rescue Plan Act (ARPA) funds. Critics say it’s a change that could turn an already costly and unnecessary bailout into an open-ended slush fund for these governments.
This change, which was announced in the Federal Register (which documents the activities of executive branch agencies) in November, but without much fanfare otherwise, will give state and local governments until the end of 2026 to decide how to spend their remaining ARPA bailout funds. Under the terms laid out by Congress in ARPA, these governments were required to “commit” these funds – in other words, direct them to a specific project – by the end of this year, although they had until in 2026 to actually spend the money.
Officially, the Treasury Department “modifies the definition of ‘obligation’ to provide additional flexibility to beneficiaries.” according to THE Federal Register. While state and local governments must still return unobligated funds by the end of this year, the new definition of the term “bond” provides several ways for recipients to hoard their federal bailout funds without committing them to projects specific.
“The result is staggering and deeply concerning,” a group of six Republican senators wrote in a statement. a letter to the Treasury Department in mid-December, formally objecting to the rule change. The “new definition – allowing recipients to enter into future agreements to spend (program) funds in 2025 and 2026 – extends the word ‘obligation’ outside of any simple English usage,” they added.
Unless the Treasury Department reverses the new rule, these six lawmakers—Sens. Mike Braun (R-Ind.), Ron Johnson (R-Wis.), Mike Lee (R-Utah), Roger Marshall (R-Kan.), Eric Schmitt (R-Mo.) and Rick Scott (R-Fla. ) – pledged to introduce a resolution invoking the Congressional Review Act to block the new rules.
The November extension came just a month after a Government Accountability Office (GAO) report found that states (including Washington, D.C.) had spent only 45 percent of the funding they received through the ‘ARPA, while local governments have spent only 38 percent of their COVID budget. rescue fund. As Reason reported at the timethis report seemed to highlight how useless the bailout was in the first place.
Other studies have reached a similar conclusion. In a National Economic Research Office draft published in June 2022, a trio of researchers found that pandemic aid distributed to state and local governments cost taxpayers about $855,000 per job saved. Stimulus spending had only “a modest impact on public employment and did not translate into detectable gains for private businesses or for states’ overall economic recovery,” they concluded.
Many projects already funded by ARPA appear to have little to do with fighting the pandemic. Some governments used the funds to give bonuses to civil servants. Iowa used $12.5 million of its cut to build a new baseball stadium next to Field of dreams movie set. Michigan spent $25 million on a travel marketing campaign.
According to a recent review ARPA spending by the Economic Policy Innovation Center (EPIC), a conservative group, state and local governments approved $185 million in bailout funds for golf courses, $400 million to upgrade swimming pools and 34 million dollars for tennis and pickleball courts. All essential post-pandemic recovery efforts, of course!
The rule change released in November means state and local governments will have “more time to pick out spoils and giveaways,” wrote David Ditch, fiscal policy analyst at the conservative Heritage Foundation. Citing EPIC’s research, Ditch says the rule change could end up costing “a staggering amount.” $1,200 per household“.
We must also remember that the federal government considers the pandemic to be over. The federal public health emergency related to COVID-19 ended in May. But why should this stop the federal gravy train from rolling?
