December 31, 2024, was the deadline for state and local governments to obligate the State and Local Fiscal Recovery Funds (SLFRF) they received as part of 2021’s American Rescue Plan Act (ARPA). State and local governments had until the end of 2024 to commit ARPA funds to specific projects. EPI analysis of data released May 20 by the U.S. Department of the Treasury shows that state and local governments obligated 99% of the $350 billion they were allocated. This is a significant accomplishment that underscores the importance of providing timely, sufficient, and flexible aid to state and local governments during economic crises.
The COVID-19 pandemic had a devastating impact on state, city, county, tribal, and territorial governments. Close to 1.5 million state and local public employees lost their jobs in the first few months of the pandemic, severely limiting governments’ ability to effectively provide basic public services. After the Great Recession of 2008–2009, it took more than a decade for public-sector job numbers to return to their previous levels, in part because the federal government did not provide enough assistance to state and local governments. Austerity in public spending directly contributed to a much slower economic recovery in the 2010s. With ARPA, however, Congress and President Biden dedicated resources sufficient to tackle the scale of the problem, avoiding the missteps policymakers made in responding to the Great Recession.
State and local governments were given great latitude in how to spend the fiscal recovery funds they received, from supporting public health measures to recruiting and retaining public employees to infrastructure spending on water, sewer, and broadband. This meant that policymakers were able to make spending decisions in line with the needs of their communities. As EPI has documented, these funds were used to support transformative investments across the country and did much to improve the lives of working families.
While recipients have until the end of 2026 to spend their fiscal recovery funds, December 31, 2024, was the deadline to obligate the funds, meaning commit the funds to specific projects. Any funds not obligated by December 31 are to be refunded to the Treasury. The final quarter of 2024 saw a flurry of activity by recipients to meet the deadline. Of the 159,000 spending projects created by recipients between 2021 and the end of 2024, more than one in six, according to EPI analysis of Treasury data, were created or modified in just the last three months of 2024.
Forty-nine states and the District of Columbia succeeded in fully obligating their fiscal recovery funds. (Florida did not obligate $8.7 million, less than 0.1% of its total $8.8 billion allocation.) This is a welcome result and a considerable improvement from the data as of September 30, 2024, when only seven states had obligated their funds.
The overwhelming majority of the roughly 27,000 local governments receiving fiscal recovery funds also obligated 100% of their funds. There are exceptions to this trend, though. EPI analysis shows nearly 2,500 failed to report obligating any of their funds, and more than 4,000 more obligated less than 75% of their funds. Thirty-seven cities and counties were allocated more than $5 million yet reported no obligations. It is perhaps not a surprise that 23 of them (62%) come from the South, a region that has long disinvested in public services.
There is reason to believe, however, that these numbers may come down over time. A majority of the local governments that reported no obligations received fewer than $150,000 in fiscal recovery funds, supporting local reports and communications with policymakers and stakeholders that indicated smaller cities and counties were having a more difficult time navigating the reporting system. A Treasury email to local governments on May 21 extended a grace period for those that were unable to file their reports on time or that had errors in their reporting, and Treasury will not begin procedures to recoup unobligated funds until July.
ARPA fiscal recovery funds played an essential role in helping restore the economy and public services in the wake of the COVID-19 pandemic. Government spent at the scale of the problem, bolstering demand in the macroeconomy, providing critical services, and helping millions of workers and families weather the crisis. The success of the program is a valuable lesson that policymakers would do well to remember in the future, when the next recession hits.
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