by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
A year ago, President Joe Biden signed the American Rescue Plan Act (ARPA), allocating $8.85 billion to North Carolina. More than $5 billion of this was sent to the state and allocated by the General Assembly in the latest budget. Roughly $3 billion was slated for local governments. The U.S. Treasury’s stated purpose for these funds is to provide local governments “with the resources needed to respond to the pandemic and its economic effects and to build a stronger, more equitable economy during the recovery.”
Fortunately, local leaders have options. According to the Treasury’s final rule, the money can be used in four broad ways:
The Treasury’s rule allows for government employment levels and revenue to be restored beyond pre-pandemic levels and unfortunately offers little accountability for governments to demonstrate proper expenditure. And even with state and local revenues well-exceeding expectations, the money may not be used to offset tax revenue or for a pension fund.
Even so, it is a testament to the importance of local governing that cities and counties are able to creatively distribute the funds according to their needs.
CASE STUDIES: Cities
The city of Raleigh has received more than $73 million. Raleigh allocated only 3% of the total thus far on five projects (see below). As I wrote: In Raleigh, some of the city spending projects “are amiable – $200,000 to fund a grant pool where small businesses may apply for financial aid, for example – others are worrisome” like the downtown improvements, new hires, and an economic development study.
The images below are from the Brookings Institution’s Local Government ARPA Investment Tracker which is updated frequently.
The city of Greensboro has allocated 1.5% of its $59 million ARPA allocation to offset lost revenue of its performing arts center. This revenue was notably lost, at least in part, by Gov. Roy Cooper’s State of Emergency declaration prohibiting large gatherings.
Durham spent 14% of its $52 million on retroactive salary bumps and premium bonuses to eligible public employees.
Many other cities remain in the community engagement phase to solicit community feedback before drafting proposals.
The Town of Apex, for example, has a public ARPA survey asking how to prioritize its $5.3 million. They offer six priorities including downtown improvements, sustainability and the environment, and support to nonprofits.
In cities like Burlington, the town council is still debating how to spend the funds.
CASE STUDIES: Counties
Buncombe County has allocated 1% of its ARPA funds for Covid vaccine implementation.
Wake County has allocated 24% of its ARPA funds. The majority of this will be spent on Covid testing, contact tracing and monitoring, PPE, and payroll for employees working on the Covid response.
Jackson County plans to spend about 14% of its ARPA funds on body cameras for police.
Nationally, these trends are similar. Cities and counties are spending ARPA funds on vaccine incentives, PPE, mobile vaccine clinics, business support, government revenue replacement, re-hiring government workers, childcare assistance, addressing education learning loss, crime prevention, housing, rental assistance, and broadband.
The Biden Administration pushed the $1.9 trillion bill through Congress to signal to the American people they were serious about sending help to the folks that were adversely affected by Covid. The absurd amount of money flowing through state and local governments is enough to give each American more than $1,000.
Most of the above may be worthy projects. But the reality is that this money was largely unnecessary. Local governments are struggling to find uses. Many have not found uses at all, in part due to all the strings attached.
Cities and counties were not in dire need of the Covid money now or when the bill was signed. But to the extent the money does end up being spent, it will add to already spiraling inflation, harming the poor and those adversely affected by Covid the most.