When the federal government distributed $350 billion to states and localities as part of a 2022 pandemic relief bill, the rules were clear: tactics to exhaust the money until the end of 2024 or it would be recouped through the federal government.
But the Biden administration quietly replaced the regulations in late 2023 to give state and local governments more time to spend American Rescue Plan Act (ARPA) funds. Critics say it’s an upgrade that could turn an already costly bailout into an open-ended plan. slush fund for those governments.
The change, which was announced in the Federal Register (which documents the activities of executive branch agencies) in November but differently received little fanfare, will give state and local governments until the end of 2026 to finish the rest of the ARPA. Rescue budget. Under the terms laid out by Congress in ARPA, those governments had to “commit” that budget — in other words, allocate it to an express appropriation — until the end of this year, even though they had until 2026 to actually finish the money.
Officially, the Treasury Department is “changing the definition of ‘obligation’ to offer greater flexibility to recipients,” according to the Federal Register. While state and local governments still have to return uncommitted budget until later this year, the new definition of the “bond” concept offers several tactics for recipients to hoard their federal bailout budget without committing them to urgent projects.
“The result is staggering and deeply troubling,” an organization of six Republican senators wrote in a letter to the Treasury Department in mid-December, officially opposing the rule change. The “new definition, which allows recipients to engage in long-term agreements to spend [the program’s] budget in 2025 and 2026, extends the word ‘obligation’ out of any plain English usage,” they added.
Unless the Treasury Department rolls back the new rule, those six lawmakers—Sens. Mike Braun (R-Ind. ), Ron Johnson (R-Wis. ), Mike Lee (R-Utah), Roger Marshall (R-Kan. ), Eric Schmitt (R-Mo. ) and Rick Scott (R-Fla. ) pledged to introduce a solution by invoking the Congressional Review Act to block the new rules.
The November extension came just a month after a report from the Government Accountability Office (GAO) found that states (including Washington, D. C. ) had spent only 45 percent of the investment they got through ARPA, while local governments spent just 38 percent of their COVID budget. Rescue fund. As Reason reported at the time, this report is meant to underscore how unnecessary the bailout was.
Other studies have come to a similar conclusion. In a study by the National Bureau of Economic Research published in June 2022, a trio of researchers found that pandemic aid distributed to state and local governments charges taxpayers about $855,000 per task saved. Stimulus spending has had only “a modest effect on public employment and has not translated into detectable gains for individual corporations or for the overall economic recovery of states,” they concluded.
Many of the projects already funded through ARPA appear to have little to do with fighting the pandemic. Some Governments have used this budget to offer bonuses to civil servants. Iowa used $12. 5 million of its own to build a new baseball stadium near the Field of Dreams film set. Michigan spent $25 million on a tourism marketing campaign.
According to a recent review of ARPA spending through the conservative Center for Economic Policy Innovation (EPIC), state and local governments approved $185 million in rescue budgets for golf courses, $400 million for improving swimming pools, and $34 million for tennis and pickleball courts. All post-pandemic recovery efforts, of course!
The replacement of the rule published in November means that state and local governments will have “more time to cherry-pick messes and giveaways,” wrote David Ditch, a tax policy analyst at the conservative Heritage Foundation. Citing EPIC research, Ditch says replacing the standard could simply end up costing “a staggering $1,200 per household. “
It is also worth remembering that the federal government considers the pandemic to be over. The COVID-19-like federal public health emergency ended in May. But why does that prevent the federal salsa exercise from continuing to work?
Eric Boehm is a reporter for Reason.