What Can ARPA Funds be Used For: A Guide for Local Government

The American Rescue Plan Act (ARPA) and technology: a guide for local government article | rocksolid.com

For over a year now, local government has played a critical role in helping communities through the pandemic. From the earliest stages of transitioning to remote government to the present distribution of vaccines and easing of lockdowns, local government leaders and staff stepped up to the plate in novel ways to serve their residents.  

But the recovery is ongoing. Unemployment is still high, which means community members still need support. Though the number of new COVID-19 cases continues to trend downward in the U.S., the CDC still reports over 15,000 cases each week (as of June 4, 2021). Throughout these challenging times, Coronavirus highlighted urgent gaps in local government’s ability to work and serve digitally.  

The American Rescue Plan Act, or ARPA, was designed to turn the tides on the pandemic via a substantial infusion of resources. City, county, Tribal, territorial, and state governments are receiving much-needed funding as part of the third round of pandemic economic stimulus to lay the foundation for a strong and equitable recovery.    

Here’s a breakdown of what local government needs to know about the ARPA, and what ARPA funds can be used for. We've compiled information about funding in the Act, how that applies to software investments, and examples of how your organization can get the ARPA funds needed to serve your community.  

What is the American Rescue Plan Act? 

ARPA, the American rescue plan.The American Rescue Plan Act (ARPA) is the third round of Coronavirus economic impact payments. It is intended to change the course of the COVID-19 pandemic, provide direct relief to Americans, and build a bridge to equitable economic recovery. The economic relief package of $1.9 trillion became law on March 11, 2021.  

For state, county, city, and tribal government, the ARPA established $130.2 billion in emergency funding. According to the U.S. Treasury, the objectives of this funding are to: 

  • “Support urgent COVID-19 response efforts to continue to decrease spread of the virus and bring the pandemic under control 
  • Replace lost revenue for eligible state, local, territorial, and Tribal governments to strengthen support for vital public services and help retain jobs 
  • Support immediate economic stabilization for households and businesses 
  • Address systemic public health and economic challenges that have contributed to the inequal [sic] impact of the pandemic” 

What’s the Difference Between CARES and ARPA? 

The CARES act was the first round of coronavirus economic relief payments, signed into law in March 2020.  

Though both contained economic relief for state and local government, CARES and ARPA have different funding allocations, requirements for spending, and fund usage deadlines. Some types of spending that may not be eligible for CARES Act funding may be valid under ARPA. 

Learn more about the CARES Act and its regulations around technology purchases >> 

Important Links for Local Government 

What can arpa funds be used for? 

On May 10, 2021, the U.S. Department of the Treasury released details on how local government can use ARPA funding. Along with allocations of funds by government entity, the eight-page fact sheet clarifies uses of funding. It’s a must-read if you want to understand how to use ARPA funds.  

In summary, local government can use ARPA funds to: 

  • Support Coronavirus public health expenditures, including mitigation efforts, medical expenses, and behavioral healthcare 
  • Address negative economic impacts caused by COVID-19, including rebuilding public sector capacity 
  • Serve the hardest-hit communities and families by addressing health, educational, economic, and other disparities 
  • Provide premium pay for essential workers in industries including medical, sanitation, transportation, childcare, education, and more 
  • Replace lost public sector revenue to avoid cuts to government services
  • Make necessary infrastructure investments in water, sewer, or broadband 

According to the Treasury, recipients of ARPA funds have “broad flexibility to decide how best to use this funding to meet the needs of their communities.”  

There are specific ineligible uses of ARPA funds. Funds used for the following ineligible purposes must be repaid to the Treasury: 

  • Funding may not directly or indirectly offset a reduction in net tax revenue due to a change in law 
  • Funding may not be deposited into a pension fund 

Important Links for Local Government 

How Much ARPA Funding Is Available for State and Local Government? 

Breakdown of what ARPA funds can be used for.The American Rescue Plan provides $350 billion in emergency funding for state, local, territorial, and Tribal governments to remedy the mismatch between rising costs and falling revenues. $130.2 billion of this money is designated for local government, titled Local Fiscal Recovery Funds 

  • Metropolitan cities will receive $45.57 billion, with funds allocated based on the existing HUD Community Development Block Grant formula. 
  • Cities with populations below 50,000 will receive $19.53 billion. Funds will be allocated based on population size, but cannot exceed 75% of that unit of government’s most recent budget.   
  • Counties will receive $65.1 billion, with funds allocated based on population size. 

ARPA funds will be distributed to local governments in two equal payments, with the first half of funding awarded beginning in May 2021 and the second half awarded approximately 12 months later. States with a net unemployment increase of over 2% are exempt from this rule, and will receive all funds in the first payment.  

Local governments have until December 31, 2024 to allocate their ARPA funds. The period of performance continues for an additional two years, through December 31, 2026.

Along with the funding guidelines, allocation methodologies and amounts for cities, counties, territories, and states were released on May 10, 2021. The Treasury did not release funding amounts for Tribal governments, as they will receive allocation information after submitting their funding applications. Links to specific funding amounts for each group are listed on the Treasury’s website. 

How to get your local government’s ARPA funds 

If your local government is eligible, you must request your funds through the Treasury’s submission portal. Jurisdictions must submit this request even if they have applied for other programs in the past.  

To complete the submission for Coronavirus State and Local Fiscal Recovery funds, you will need to provide the following information on behalf of your organization: 

  • Jurisdiction name, taxpayer ID number, DUNS Number, and address 
  • Authorized representative name, title, and email 
  • Contact person name, title, phone, and email 
  • Funds transfer information, including recipient’s financial institution, address, phone, and routing number and account number
  • Completed award terms and conditions (to be signed by the authorized representative) 

Though there is no application deadline as of the publication of this article, funding requests for those who have completed applications are already being fulfilled. As of May 20, 2021, the Treasury claims to have distributed over 30% of American Rescue Plan funding to state and local governments.  

Important Links for Local Government 

Can ARPA Funds Be Used for Technology? 

Yes, experts say you can use ARPA funds to purchase technology. While you must ensure the tech meets the guidelines as summarized above, the Treasury wrote the spending criteria broadly to allow local government to respond to the pandemic in ways that best address their unique situation. 

Of course, every entity receiving Coronavirus State and Local Fiscal Recovery funds will have its own requirements for eligibility. Check with your local finance entity or fund administrator for priorities or additional rules.  

Let’s dive into a few examples from the guidelines where technology may contribute to recovery: 

1. Supporting Public Health Response 

Software could help your organization address the negative effects of the public health emergency. As part of the list of “services and programs to contain and mitigate the spread of COVID-19” on page 3 of the Treasury’s guidelines, technology may support line items including: 

  • Services and programs to contain and mitigate the spread of COVID-19: Even as quarantine regulations ease, public services may still be safer with remote or online operations. This can include services like virtual public meetings, online or mobile payments, service requests and applications, work from home for staff, and more. 
    Some services that moved online during the pandemic are likely to remain for the foreseeable future. Take public meetings, for example. According to this article from Governing, Orange County, CA, is unlikely to end its online town halls.  
    Hybrid approaches to government services, accessible both in person and online, allow constituents to access services on their channel of choice. Just as with the public sector, residents expect to get what they need with a well-designed experience in more channels than ever before. Technology, from virtual meeting solutions to constituent relationship management platforms, lets local government provide better service to diverse community members at scale.  
  • Public communication efforts: Omnichannel communication is critical for getting prevention and vaccine information to diverse communities. Mass messaging platforms that allow government communication across multiple devices and language can expand the reach of communications, including to low-income community members who rely on smartphones for internet 
    This can also support other initiatives like the enforcement of public health orders and services or outreach to promote access to behavioral health and social services. 
  • Enhancement of public health data systems: From COVID tracking dashboards to vaccine distribution management, tech can boost your public health management capabilities for the present and future. 

2. Rebuilding Public Sector Capacity to Support Economic Recovery

“Recipients may also use this funding to build their internal capacity to successfully implement economic relief programs, with investments in data analysis, targeted outreach, technology infrastructure, and impact evaluations” 

- Coronavirus State and Local Fiscal Recovery Fund Fact Sheet, Page 4

Technology is highlighted as an area for spending to address the negative economic impacts of the pandemic. To enable the best possible assistance to individuals, households, small businesses, and industries, the Act gives government flexibility for how to best use ARPA funds. 

Let’s say, for example, that your city uses ARPA funds to set up a loan or grant program for local businesses. If your agency needs a tool to manage and process applications, ARPA funds could also purchase that solution. 

Software can also help meet the Treasury’s quarterly reporting requirements. A fund management platform can automate reporting for ARPA allocations, including timesheets, spend tracking, and more.  

See how a business process management tool built for government can drive efficiency quickly without long-term costs >> 

Ultimately, this section of the fact sheet suggests that any technology that can help your government support pandemic recovery may be eligible for ARPA funds. 

3. Supporting Services to the Hardest-Hit Communities and Families

Across the country, the pandemic has impacted low-income and vulnerable communities with disproportionate severity. The American Rescue Plan Act specifically calls for its funds to be used to support the public health and economic impacts of these communities.  

Services to address individuals experiencing homelessness is highlighted as an eligible service. If technology can support outreach, applications, placement, or other relevant services, it is likely valid for ARPA funding. These tools can accelerate aid to community members in the greatest need, and even increase the number of people able to be served through optimization.  

4. Replacing lost public sector revenue

Did your local government have a technology project postponed or cancelled because of pandemic-related budgetary concerns? If that project has benefit to the public, it may be eligible to come back into play with ARPA funding. 

Any budget shortfalls that led to the reduction of staff or projects can be covered. And “once a shortfall in revenue is identified, recipients will have broad latitude to use this funding to support government services, up to this amount of lost revenue.” A method for computing reduction of revenue is provided: 

“… Recipients will compute the extent of their reduction in revenue by comparing their actual revenue to an alternative representing what could have been expected to occur in the absence of the pandemic. Analysis of this expected trend begins with the last full fiscal year prior to the public health emergency and projects forward at either (a) the recipient’s average annual revenue growth over the three full fiscal years prior to the public health emergency or (b) 4.1%, the national average state and local revenue growth rate from 2015-18 (the latest available data).” 

- Coronavirus State and Local Fiscal Recovery Fund Fact Sheet, Page 6

Importantly, the Treasury allows recovery fund recipients to presume that any reduction of revenue during this time resulted from the COVID-19 pandemic. This removes the need to prove that the pandemic was the specific or only cause of cancelled initiatives. 

5. Investing in Broadband Infrastructure

The digital divide and broadband were hot topics throughout the pandemic. Access to internet became an important conversation in the equitable access of education, healthcare, and government services.  

The ARPA permits the use of its funds for select infrastructure projects: water, sewer, and broadband.  

Can ARPA Funds Be Used On Multi-Year Contracts? 

Nothing in the legislation forbids spending on multi-year contracts. The interim final rule states that though funds must be obligated by December 31, 2024, they can be used through the end of the reporting period on December 31, 2026.

"As set forth in the award terms, the period of performance will run until December 31, 2026, which will provide recipients a reasonable amount of time to complete projects funded with payments from the Fiscal Recovery Funds."

- Interim Final Rule, Page 26

How Can My Department Justify ARPA Funds for Technology? 

Because of the flexibility of these Coronavirus State and Local Fiscal Recovery Funds, it’s likely that different governments will take varied approaches for identifying areas of need and selecting the right projects for fund usage. Local government processes could range from: 

  • Basic, where your department reaches out to the group overseeing funds. No paperwork required, just a conversation.  
  • Intermediate, requiring a short amount of paperwork that explains your project and its relevant costs.  
  • Complex, where an application process with fully developed project plan with intense requirements will be required. 

Your technology project is more likely to be funded if you present a coherent plan. Show that you understand your problem, how your proposed solution solves your problem, and that you can implement and execute on your solution quickly. 

As a place to start, a basic set of questions for a technology project plan is below. You can also access these questions within this free ARPA proposal project plan word doc template. It’s already laid out--just fill in the blanks with your project information! Of course, check with your government’s financial or ARPA entity for any of their guidelines or recommendations first! 

  • Basic org description: What you do within your community.  
  • Statement of Need: How has the pandemic affected your department? What are your pandemic-related pain points, and how have those affected your ability to operate?   
  • Project Description: What are you doing, and how would a tech solution enable your org to address these pain points? Connect the dots between your technology needs and your project. 
  • Implementation Plan: How are you going to implement this project? Showing you already have a plan in place helps! 
  • Anticipated Project Benefits: Demonstrate who benefits from these activities and the benefits expected. 
  • Consider the Treasury’s guidelines. How do the benefits apply to the communities or needs highlighted in the Act? 
  • Don’t forget to highlight plans for future funding or sustainability: If there are long-term financial or sustainability benefits, this will improve your plan! 

Access the free ARPA proposal project plan template >> 

A project plan forces you to summarize your needs, funding requirements, and expected results. This is a helpful starting point for putting together a proposal for a technology project, but be sure to clarify expectations and processes with the organization that handles ARPA funds in your area.  

ARPA Funding for Technology: What’s Next? 

Distribution of the first round of American Rescue Plan Act payments to cities, counties, municipalities, and states is already underway.  

As local government agencies contemplate how to best use this funding, it’s important to bring any organizational needs to the forefront for consideration. Technology certainly supports your city or county’s pandemic recovery and creates sustainable, equitable government processes for the future.  

For more resources on ARPA for local government, we recommend the National League of Cities' COVID-19 Pandemic Response and Relief hub and the National Association of Counties' Overview of the State and Local Fiscal Recovery Funds.

We will continue to monitor the situation and provide updates if additional guidelines are implemented. 

Related Posts