American Rescue Plan Final Rule key provisions: what local governments need to know

As the U.S. Treasury Department (Treasury) released the American Rescue Plan Act of 2021 (ARP) Final Rule on Jan. 6, now is the time for local governments to revise (or begin creating) their plan to utilize this potentially transformational funding source.

The Final Rule fills nearly 500 pages and makes numerous changes to the Interim Final Rule.  Government leaders should understand the Final Rule’s basics and key provisions to ensure compliance and optimize their community’s available ARP funds.

Understanding the basics

The ARP, signed into law on March 11, 2021, allocated $350 billion in pandemic-related aid to states, territories, tribes and local governments. This includes $130.2 billion in State and Local Fiscal Recovery Funds (SLFRF) to local governments. The SLFRF Interim Final Rule released by the Treasury in May 2021 was superseded by the Final Rule when it was distributed earlier this month.

The Final Rule preserves the Interim Rule’s focus on promoting a strong, equitable recovery by:

• Supporting COVID-19 response efforts
• Replacing lost public sector revenue
• Economically stabilizing impacted households and businesses
• Addressing systemic public health and economic challenges inequitably borne by certain populations

The Final Rule also generally maintains previously authorized eligible uses. However, it increases the flexibility with which the funds may be utilized and, in many cases, simplifies administration.

The Final Rule becomes effective on April 1, 2022. SLFRF obligations and expenditures incurred prior to that date should comply with either the Interim Final Rule or the Final Rule.  The Final Rule will govern all obligations and expenditures incurred after April 1, 2022.

ARP Final Rule key provisions

The most significant change in the Final Rule is a dramatic simplification to the lost revenue provision. To identify the general revenue amount lost due to the pandemic, recipients may now choose to do one of the following:

• Perform the revenue loss calculation provided in the Final Rule
• Assume a standard allowance of up to their entire award or $10 million, whichever is less