The State of ARPA Flexible Funding

Michael P Tolan

doi:10.17918/00010524

As of July 15th , most states have received their first half of the total flexible funding offered by the American Rescue Plan (ARPA), with a small group of states having received their entire funding allotment already. The vast majority of states have either: (a) not allocated any funding from their flexible funds or (b) have allocated far less than half of their total funds. And despite the guidance from the U.S. Department of Treasury, many state legislatures and governors have expressed concern about whether their proposed projects will comply with that guidance. As states prepare to spend their funds in the upcoming months and years, they should look towards best practices emulated by other states—both in terms of what states fund and also the processes by which they allocate that funding. In these early stages, only a few states have transparently documented their appropriations. Moving forward, all states should adopt transparent methods of allocation for the benefit of local communities, relevant organizations, and other state policymakers deciding how to spend their own funding. Below is a cursory outline of approaches to-date. As more states allocate additional funding, it will be crucial to monitor their approaches to identify and share additional best practices. States have taken three distinct approaches to govern their allocations of flexible funding from ARPA. 1.) The vast majority of states—including those which have at least partially allocated funds and those which have yet to do so—have committed to allocating their funding through a regular budget process. In some of these states, the governor has submitted a proposal much like a traditional state operating budget. In others, the legislature, usually led by members of Appropriations Committees, has taken the lead in allocating funds. In both these scenarios, the process for allocating ARPA funds has, or will, resemble the traditional budget process (see the Timeline section for information on when states are allocating funding). Notably, this trend remains the case both in states with partisan trifectas and in states that have split-party governance. 2.) Six states have delegated spending authority of ARPA to a smaller advisory group, usually appointed by the governor, which includes the governor, leaders from state agencies, the legislature, and relevant industries. 3.) Only one state, Wisconsin, is using a unilateral funding allocation structure, in which the Governor has sole decision-making authority. Three states have so far not indicated who will be in charge of distributing funds, but it seems likely they will use the traditional budget process in a special session or future legislative session like the majority of states.

The State of ARPA Flexible Funding

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The State of ARPA Flexible Funding

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