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DEPARTMENT OF THE TREASURY over 32 million and killed over 575,000 COVID–19, including testing, contact Americans.1 The disease has impacted tracing, isolation and quarantine, public 31 CFR Part 35 every part of life: As social distancing communications, issuance and RIN 1505–AC77 became a necessity, businesses closed, enforcement of health orders, schools transitioned to remote expansions to health system capacity Coronavirus State and Local Fiscal education, travel was sharply reduced, like alternative care facilities, and in Recovery Funds and millions of Americans lost their recent months, a massive nationwide jobs. In 2020, the national mobilization around vaccinations. AGENCY: Department of the Treasury. unemployment rate reached its highest Governments also have supported major ACTION: Interim final rule. level in over seventy years following the efforts to prevent COVID–19 spread most severe month-over-month decline through safety measures in settings like SUMMARY: The Secretary of the Treasury in employment on record.2 As of April nursing homes, schools, congregate (Treasury) is issuing this interim final 2021, there were still 8.2 million fewer living settings, dense worksites, rule to implement the Coronavirus State jobs than before the pandemic.3 During incarceration settings, and public Fiscal Recovery Fund and the this time, a significant share of facilities. The pandemic’s impacts on Coronavirus Local Fiscal Recovery Fund households have faced food and behavioral health, including the toll of established under the American Rescue housing insecurity.4 Economic pandemic-related stress, have increased Plan Act. disruptions impaired the flow of credit the need for behavioral health resources. DATES: Effective date: The provisions in to households, State and local At the same time, State, local and this interim final rule are effective May governments, and businesses of all Tribal governments launched major 17, 2021. sizes.5 As businesses weathered efforts to address the economic impacts Comment date: Comments must be closures and sharp declines in revenue, of the pandemic. These efforts have received on or before 16, 2021. many were forced to shut down, been tailored to the needs of their ADDRESSES: Please submit comments especially small businesses.6 communities and have included electronically through the Federal Amid this once-in-a-century crisis, expanded assistance to unemployed eRulemaking Portal: http:// State, territorial, Tribal, and local workers; food assistance; rent, mortgage, www.regulations.gov. Comments can be governments (State, local, and Tribal and utility support; cash assistance; mailed to the Office of the governments) have been called on to internet access programs; expanded Undersecretary for Domestic Finance, respond at an immense scale. services to support individuals Department of the Treasury, 1500 Governments have faced myriad needs experiencing homelessness; support for Pennsylvania Avenue NW, Washington, to prevent and address the spread of individuals with disabilities and older DC 20220. Because postal mail may be adults; and assistance to small subject to processing delay, it is 1 Centers for Disease Control and Prevention, businesses facing closures or revenue recommended that comments be COVID Data Tracker, http://www.covid.cdc.gov/ loss or implementing new safety covid-data-tracker/#datatracker-home (last visited submitted electronically. All comments , 2021). measures. should be captions with ‘‘Coronavirus 2 U.S. Bureau of Labor Statistics, Unemployment In responding to the public health State and Local Fiscal Recovery Funds Rate [UNRATE], retrieved from FRED, Federal emergency and its negative economic Interim Final Rule Comments.’’ Please Reserve Bank of St. Louis; https:// impacts, State, local, and Tribal fred.stlouisfed.org/series/UNRATE, , 2021. governments have seen substantial include your name, organization U.S. Bureau of Labor Statistics, Employment Level affiliation, address, email address and [LNU02000000], retrieved from FRED, Federal increases in costs to provide these telephone number in your comment. Reserve Bank of St. Louis; https:// services, often amid substantial declines Where appropriate, a comment should fred.stlouisfed.org/series/LNU02000000, May 3, in revenue due to the economic 2021. downturn and changing economic include a short executive summary. 3 U.S. Bureau of Labor Statistics, All Employees, 7 In general, comments received will be Total Nonfarm [PAYEMS], retrieved from FRED, patterns during the pandemic. Facing posted on http://www.regulations.gov Federal Reserve Bank of St. Louis; https:// these budget challenges, many State, without change, including any business fred.stlouisfed.org/series/PAYEMS, , 2021. local, and Tribal governments have been or personal information provided. 4 Nirmita Panchal et al., The Implications of forced to make cuts to services or their Comments received, including COVID–19 for Mental Health and Substance Abuse workforces, or delay critical (Feb. 10, 2021), https://www.kff.org/coronavirus- attachments and other supporting covid-19/issue-brief/the-implications-of-covid-19- investments. From to May of materials, will be part of the public for-mental-health-and-substance-use/#:∼:text= 2020, State, local, and Tribal record and subject to public disclosure. Older%20adults%20are%20also%20 governments reduced their workforces Do not enclose any information in your more,prior%20to%20the%20current%20crisis; U.S. by more than 1.5 million jobs and, in Census Bureau, Household Pulse Survey: comment or supporting materials that Measuring Social and Economic Impacts during the April of 2021, State, local, and Tribal you consider confidential or Coronavirus Pandemic, https://www.census.gov/ government employment remained inappropriate for public disclosure. programs-surveys/household-pulse-survey.html nearly 1.3 million jobs below pre- (last visited Apr. 26, 2021); Rebecca T. Leeb et al., pandemic levels.8 These cuts to State, FOR FURTHER INFORMATION CONTACT: Mental Health-Related Emergency Department Katharine Richards, Senior Advisor, Visits Among Children Aged <18 Years During the local, and Tribal government workforces Office of Recovery Programs, COVID Pandemic—United States, 1— Department of the Treasury, (844) 529– 17, 2020, Morb. Mortal. Wkly. Rep. 7 Michael Leachman, House Budget Bill Provides 69(45):1675–80 (Nov. 13, 2020), https:// Needed Fiscal Aid for States, Localities, Tribal 9527. www.cdc.gov/mmwr/volumes/69/wr/ Nations, and Territories (Feb. 10, 2021), https:// SUPPLEMENTARY INFORMATION: mm6945a3.htm. www.cbpp.org/research/state-budget-and-tax/ 5 Board of Governors of the Federal Reserve house-budget-bill-provides-needed-fiscal-aid-for- I. Background Information System, Monetary Policy Report ( 12, 2020), states-localities. https://www.federalreserve.gov/monetarypolicy/ 8 U.S. Bureau of Labor Statistics, All Employees, A. Overview 2020-06-mpr-summary.htm. State Government [CES9092000001] and All Since the first case of coronavirus 6 Joseph R. Biden, Remarks by President Biden on Employees, Local Government [CES9093000001], Helping Small Businesses (Feb. 22, 2021), https:// retrieved from FRED, Federal Reserve Bank of St. disease 2019 (COVID–19) was www.whitehouse.gov/briefing-room/speeches- Louis, https://fred.stlouisfed.org/series/ discovered in the United States in remarks/2021/02/22/remarks-by-president-biden- CES9092000001 and https://fred.stlouisfed.org/ January 2020, the disease has infected on-helping-small-businesses/. series/CES9093000001 (last visited May 8, 2021).

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come at a time when demand for also has reversed many gains made by Through the Fiscal Recovery Funds, government services is high, with State, communities of color in the prior Congress provided State, local, and local, and Tribal governments on the economic expansion.15 Tribal governments with significant frontlines of fighting the pandemic. resources to respond to the COVID–19 B. The Statute and Interim Final Rule Furthermore, State, local, and Tribal public health emergency and its government austerity measures can On 11, 2021, the American economic impacts through four hamper overall economic growth, as Rescue Plan Act (ARPA) was signed into categories of eligible uses. Section 602 occurred in the recovery from the Great law by the President.16 Section 9901 of and section 603 contain the same Recession.9 ARPA amended Title VI of the Social eligible uses; the primary difference Finally, although the pandemic’s Security Act 17 (the Act) to add section between the two sections is that section impacts have been widespread, both the 602, which establishes the Coronavirus 602 establishes a fund for States, public health and economic impacts of State Fiscal Recovery Fund, and section territories, and Tribal governments and the pandemic have fallen most severely 603, which establishes the Coronavirus section 603 establishes a fund for on communities and populations Local Fiscal Recovery Fund (together, metropolitan cities, nonentitlement disadvantaged before it began. Low- the Fiscal Recovery Funds).18 The Fiscal units of local government, and counties. income communities, people of color, Recovery Funds are intended to provide Sections 602(c)(1) and 603(c)(1) provide and Tribal communities have faced support to State, local, and Tribal that funds may be used: higher rates of infection, hospitalization, governments (together, recipients) in (a) To respond to the public health and death,10 as well as higher rates of responding to the impact of COVID–19 emergency or its negative economic unemployment and lack of basic and in their efforts to contain COVID– impacts, including assistance to necessities like food and housing.11 Pre- 19 on their communities, residents, and households, small businesses, and existing social vulnerabilities magnified businesses. The Fiscal Recovery Funds nonprofits, or aid to impacted industries the pandemic in these communities, build on and expand the support such as tourism, travel, and hospitality; where a reduced ability to work from provided to these governments over the (b) To respond to workers performing home and, frequently, denser housing last year, including through the essential work during the COVID–19 amplified the risk of infection. Higher Coronavirus Relief Fund (CRF).19 public health emergency by providing rates of pre-existing health conditions premium pay to eligible workers; also may have contributed to more a lifetime (June 2020), https:// (c) For the provision of government severe COVID–19 health outcomes.12 webtest.childrensinstitute.net/sites/default/files/ services to the extent of the reduction in documents/COVID-19-and-student-learning-in-the- Similarly, communities or households United-States_FINAL.pdf; Andrew Bacher-Hicks et revenue due to the COVID–19 public facing economic insecurity before the al., Inequality in Household Adaptation to health emergency relative to revenues pandemic were less able to weather Schooling Shocks: Covid-Induced Online collected in the most recent full fiscal Engagement in Real Time, J. of Public Econ. Vol. year prior to the emergency; and business closures, job losses, or declines 193(C) (July 2020), available at https:// in earnings and were less able to www.nber.org/papers/w27555. (d) To make necessary investments in participate in remote work or education 15 See, e.g., Tyler Atkinson & Alex Richter, water, sewer, or broadband due to the inequities in access to Pandemic Disproportionately Affects Women, infrastructure. reliable and affordable broadband Minority Labor Force Participation, https:// In addition, Congress clarified two www.dallasfed.org/research/economics/2020/1110 13 types of uses which do not fall within infrastructure. Finally, though schools (last visited , 2021); Jared Bernstein & Janelle in all areas faced challenges, those in Jones, The Impact of the COVID19 Recession on the these four categories. Sections high poverty areas had fewer resources Jobs and Incomes of Persons of Color, https:// 602(c)(2)(B) and 603(c)(2) provide that to adapt to remote and hybrid learning www.cbpp.org/sites/default/files/atoms/files/6-2- these eligible uses do not include, and 20bud_0.pdf (last visited May 9, 2021). 14 thus funds may not be used for, models. Unfortunately, the pandemic 16 American Rescue Plan Act of 2021 (ARPA), sec. 9901, Public Law 117–2, codified at 42 U.S.C. 802 depositing funds into any pension fund. 9 Tracy Gordon, State and Local Budgets and the et seq. The term ‘‘state’’ as used in this Section 602(c)(2)(A) also provides, for Great Recession, Brookings Institution (Dec. 31, SUPPLEMENTARY INFORMATION and defined in section States and territories, that the eligible 2012), http://www.brookings.edu/articles/state-and- 602 of the Act means each of the 50 States and the uses do not include ‘‘directly or District of Columbia. The term ‘‘territory’’ as used local-budgets-and-the-great-recession. indirectly offset[ting] a reduction in the 10 Sebastian D. Romano et al., Trends in Racial in this SUPPLEMENTARY INFORMATION and defined in and Ethnic Disparities in COVID–19 section 602 of the Act means the Commonwealth net tax revenue of [the] State or territory Hospitalizations, by Region—United States, March– of Puerto Rico, the United States Virgin Islands, resulting from a change in law, 2020, MMWR Morb Mortal Wkly Rep , the Commonwealth of Northern Mariana , or administrative 2021, 70:560–565 (Apr. 16, 2021), https:// Islands, and American Samoa. Tribal government is www.cdc.gov/mmwr/volumes/70/wr/ defined in the Act and the interim final rule to interpretation.’’ mm7015e2.htm?s_cid=mm7015e2_w. mean ‘‘the recognized governing body of any Indian The ARPA provides a substantial 11 Center on Budget and Policy Priorities, or Alaska Native tribe, band, nation, pueblo, village, infusion of resources to meet pandemic Tracking the COVID–19 Recession’s Effects on community, component band, or component response needs and rebuild a stronger, Food, Housing, and Employment Hardships, reservation, individually identified (including https://www.cbpp.org/research/poverty-and- parenthetically) in the list published most recently more equitable economy as the country inequality/tracking-the-covid-19-recessions-effects- as of the date of enactment of the [American Rescue recovers. First, payments from the Fiscal on-housing-and (last visited , 2021). Plan Act] pursuant to section 104 of the Federally Recovery Funds help to ensure that 12 Lisa R. Fortuna et al., Inequity and the Recognized Indian Tribe List Act of 1994 (25 U.S.C. State, local, and Tribal governments Disproportionate Impact of COVID–19 on 5131).’’ See section 602(g)(7) of the Social Security Communities of Color in the United States: The Act, as added by the American Rescue Plan Act. On have the resources needed to continue Need for Trauma-Informed Social Justice Response, , 2021, the Bureau of Indian Affairs to take actions to decrease the spread of Psychological Trauma Vol. 12(5):443–45 (2020), published a current list of 574 Tribal entities. See COVID–19 and bring the pandemic available at https://psycnet.apa.org/fulltext/2020- 86 FR 7554, January 29, 2021. The term ‘‘local under control. Payments from the Fiscal 37320-001.pdf. governments’’ as used in this SUPPLEMENTARY 13 Emily Vogles et al., 53% of Americans Say the INFORMATION includes metropolitan cities, counties, Recovery Funds may also be used by internet Has Been Essential During the COVID–19 and nonentitlement units of local government. recipients to provide support for costs Outbreak (Apr. 30, 2020), https:// 17 42 U.S.C. 801 et seq. incurred in addressing public health www.pewresearch.org/internet/2020/04/30/53-of- 18 Sections 602, 603 of the Act. and economic challenges resulting from americans-say-the-internet-has-been-essential- 19 The CRF was established by the section 601 of the pandemic, including resources to during-the-covid-19-outbreak/. the Act as added by the Coronavirus Aid, Relief, 14 Emma Dorn et al., COVID–19 and student and Economic Security Act (CARES Act), Public offer premium pay to essential workers, learning in the United States: The hurt could last Law 116–136, 134 Stat. 281 (2020). in recognition of their sacrifices over the

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last year. Recipients may also use requirements, including by requiring The interim final rule implements payments from the Fiscal Recovery State, local, and Tribal governments to these provisions by identifying a non- Funds to replace State, local, and Tribal publish information regarding uses of exclusive list of programs or services government revenue lost due to COVID– Fiscal Recovery Funds payments in that may be funded as responding to 19, helping to ensure that governments their local jurisdiction. These reporting COVID–19 or the negative economic can continue to provide needed services requirements reflect the need for impacts of the COVID–19 public health and avoid cuts or layoffs. Finally, these transparency and accountability, while emergency, along with considerations resources lay the foundation for a recognizing and minimizing the burden, for evaluating other potential uses of the strong, equitable economic recovery, not particularly for smaller local Fiscal Recovery Funds not explicitly only by providing immediate economic governments. Treasury urges State, listed. The interim final rule also stabilization for households and territorial, Tribal, and local governments provides flexibility for recipients to use businesses, but also by addressing the to engage their constituents and payments from the Fiscal Recovery systemic public health and economic communities in developing plans to use Funds for programs or services that are challenges that may have contributed to these payments, given the scale of not identified on these non-exclusive more severe impacts of the pandemic funding and its potential to catalyze lists but that fall under the terms of among low-income communities and broader economic recovery and section 602(c)(1)(A) or 603(c)(1)(A) by people of color. rebuilding. responding to the COVID–19 public Within the eligible use categories health emergency or its negative outlined in the Fiscal Recovery Funds II. Eligible Uses economic impacts. As an example, in provisions of ARPA, State, local, and A. Public Health and Economic Impacts determining whether a program or Tribal governments have flexibility to service responds to the negative determine how best to use payments Sections 602(c)(1)(A) and 603(c)(1)(A) economic impacts of the COVID–19 from the Fiscal Recovery Funds to meet provide significant resources for State, public health emergency, the interim the needs of their communities and territorial, Tribal governments, and final rule provides that payments from populations. The interim final rule counties, metropolitan cities, and the Fiscal Recovery Funds should be facilitates swift and effective nonentitlement units of local designed to address an economic harm implementation by establishing a governments (each referred to as a resulting from or exacerbated by the framework for determining the types of recipient) to meet the wide range of public health emergency. Recipients programs and services that are eligible public health and economic impacts of should assess the connection between under the ARPA along with examples of the COVID–19 public health emergency. the negative economic harm and the uses that State, local, and Tribal These provisions authorize the use of COVID–19 public health emergency, the governments may consider. These uses payments from the Fiscal Recovery nature and extent of that harm, and how build on eligible expenditures under the Funds to respond to the public health the use of this funding would address CRF, including some expansions in emergency with respect to COVID–19 or such harm. eligible uses to respond to the public its negative economic impacts. Section As discussed, the pandemic and the health emergency, such as vaccination 602 and section 603 also describe necessary actions taken to control the campaigns. They also reflect changes in several types of uses that would be spread had a severe impact on the needs of communities, as evidenced responsive to the impacts of the COVID– households and small businesses, by, for example, nationwide data 19 public health emergency, including including in particular low-income demonstrating disproportionate impacts assistance to households, small workers and communities and people of of the COVID–19 public health businesses, and nonprofits and aid to color. While eligible uses under sections emergency on certain populations, impacted industries, such as tourism, 602(c)(1)(A) and 603(c)(1)(A) provide geographies, and economic sectors. The travel, and hospitality.20 flexibility to recipients to identify the interim final rule takes into most pressing local needs, Treasury consideration these disproportionate Accordingly, to assess whether a encourages recipients to provide impacts by recognizing a broad range of program or service is included in this assistance to those households, eligible uses to help States, local, and category of eligible uses, a recipient businesses, and non-profits in Tribal governments support the should consider whether and how the communities most disproportionately families, businesses, and communities use would respond to the COVID–19 impacted by the pandemic. hardest hit by the COVID–19 public public health emergency. Assessing 1. Responding to COVID–19 health emergency. whether a program or service ‘‘responds Implementation of the Fiscal to’’ the COVID–19 public health On , 2020, the Centers for Recovery Funds also reflect the emergency requires the recipient to, Disease Control and Prevention (CDC) importance of public input, first, identify a need or negative impact identified the first case of novel transparency, and accountability. of the COVID–19 public health coronavirus in the United States.21 By Treasury seeks comment on all aspects emergency and, second, identify how late March, the virus had spread to of the interim final rule and, to better the program, service, or other many States and the first wave was facilitate public comment, has included intervention addresses the identified growing rapidly, centered in the specific questions throughout this need or impact. While the COVID–19 northeast.22 This wave brought acute SUPPLEMENTARY INFORMATION. Treasury public health emergency affected many encourages State, local, and Tribal aspects of American life, eligible uses 21 Press Release, Centers for Disease Control and governments in particular to provide under this category must be in response Prevention, First Travel-related Case of 2019 Novel Coronavirus Detected in United States (Jan. 21, feedback and to engage with Treasury to the disease itself or the harmful 2020), https://www.cdc.gov/media/releases/2020/ regarding issues that may arise consequences of the economic p0121-novel-coronavirus-travel-case.html. regarding all aspects of this interim final disruptions resulting from or 22 Anne Schuchat et al., Public Health Response rule and Treasury’s work in exacerbated by the COVID–19 public to the Initiation and Spread of Pandemic COVID– health emergency. 19 in the United States, –, 2021, administering the Fiscal Recovery MMWR Morb Mortal Wkly Rep 2021, 69(18):551– Funds. In addition, the interim final 56 (May 8, 2021), https://www.cdc.gov/mmwr/ rule establishes certain regular reporting 20 Sections 602(c)(1)(A), 603(c)(1)(A) of the Act. volumes/69/wr/mm6918e2.htm.

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strain on health care and public health needs, such as physical plant services.29 Finally, some preventative systems: Hospitals and emergency improvements to public hospitals and public health measures like childhood medical services struggled to manage a health clinics or adaptations to public vaccinations have been deferred and major influx of patients; response buildings to implement COVID–19 potentially forgone.30 personnel faced shortages of personal mitigation tactics. In recent months, While the pandemic affected protective equipment; testing for the State, local, and Tribal governments communities across the country, it virus was scarce; and congregate living across the country have mobilized to disproportionately impacted some facilities like nursing homes and prisons support the national vaccination demographic groups and exacerbated saw rapid spread. State, local, and campaign, resulting in over 250 million health inequities along racial, ethnic, Tribal governments mobilized to doses administered to date.25 and socioeconomic lines.31 The CDC support the health care system, issue The need for public health measures has found that racial and ethnic public health orders to mitigate virus to respond to COVID–19 will continue minorities are at increased risk for spread, and communicate safety in the months and potentially years to infection, hospitalization, and death measures to the public. The United come. This includes the continuation of from COVID–19, with Hispanic or States has since faced at least two the vaccination campaign for the general Latino and Native American or Alaska additional COVID–19 waves that public and, if vaccinations are approved Native patients at highest risk.32 brought many similar challenges: The for children in the future, eventually for Similarly, low-income and socially second in the summer, centered in the youths. This also includes monitoring vulnerable communities have seen the south and southwest, and a wave the spread of COVID–19 variants, most severe health impacts. For throughout the fall and winter, in which understanding the impact of these example, counties with high poverty the virus reached a point of variants (especially on vaccination rates also have the highest rates of uncontrolled spread across the country efforts), developing approaches to infections and deaths, with 223 deaths and over 3,000 people died per day.23 respond to those variants, and per 100,000 compared to the U.S. By early May 2021, the United States monitoring global COVID–19 trends to average of 175 deaths per 100,000, as of has experienced over 32 million understand continued risks to the May 2021.33 Counties with high social confirmed COVID–19 cases and over United States. Finally, the long-term vulnerability, as measured by factors 575,000 deaths.24 health impacts of COVID–19 will such as poverty and educational Mitigating the impact of COVID–19, continue to require a public health attainment, have also fared more poorly including taking actions to control its response, including medical services for than the national average, with 211 spread and support hospitals and health individuals with ‘‘long COVID,’’ and deaths per 100,000 as of May 2021.34 care workers caring for the sick, research to understand how COVID–19 continues to require a major public impacts future health needs and raises 29 Megan L. Evans, et al., A Pandemic within a health response from State, local and risks for the millions of Americans who Pandemic—Intimate Partner Violence during Covid–19, N. Engl. J. Med. 383:2302–04 (Dec. 10, Tribal governments. New or heightened have been infected. 2020), available at https://www.nejm.org/doi/full/ public health needs include COVID–19 Other areas of public health have also 10.1056/NEJMp2024046. testing, major expansions in contact been negatively impacted by the 30 Jeanne M. Santoli et al., Effects of the tracing, support for individuals in COVID–19 pandemic. For example, in COVID–19 Pandemic on Routine Pediatric Vaccine Ordering and Administration—United States, Morb. isolation or quarantine, enforcement of one survey in January 2021, over 40 Mortal. Wkly. Rep. 69(19):591–93 (May 8, 2020), public health orders, new public percent of American adults reported https://www.cdc.gov/mmwr/volumes/69/wr/ communication efforts, public health symptoms of depression or anxiety, up mm6919e2.htm; Marisa Langdon-Embry et al., surveillance (e.g., monitoring case from 11 percent in the first half of Notes from the Field: Rebound in Routine 26, Childhood Vaccine Administration Following trends and genomic sequencing for 2019. The proportion of children’s Decline During the COVID–19 Pandemic—New variants), enhancement to health care emergency department visits related to York City, –, 2020, Morb. Mortal. capacity through alternative care mental health has also risen Wkly. Rep. 69(30):999–1001 (Jul. 31 2020), https:// noticeably.27 Similarly, rates of www.cdc.gov/mmwr/volumes/69/wr/ facilities, and enhancement of public mm6930a3.htm. health data systems to meet new substance misuse and overdose deaths 31 Office of the White House, National Strategy for demands or scaling needs. State, local, have spiked: Preliminary data from the the COVID–19 Response and Pandemic and Tribal governments have also CDC show a nearly 30 percent increase Preparedness (Jan. 21, 2021), https:// supported major efforts to prevent in drug overdose mortality from www.whitehouse.gov/wp-content/uploads/2021/01/ 28 National-Strategy-for-the-COVID-19-Response-and- COVID–19 spread through safety 2019 to September 2020. Pandemic-Preparedness.pdf. measures at key settings like nursing Stay-at-home orders and other 32 In a study of 13 states from October to homes, schools, congregate living pandemic responses may have also December 2020, the CDC found that Hispanic or settings, dense worksites, incarceration reduced the ability of individuals Latino and Native American or Alaska Native individuals were 1.7 times more likely to visit an settings, and in other public facilities. affected by domestic violence to access emergency room for COVID–19 than White This has included implementing individuals, and Black individuals were 1.4 times infection prevention measures or 25 Centers for Disease Control and Prevention, more likely to do so than White individuals. See making ventilation improvements in COVID Data Tracker: COVID–19 Vaccinations in the Romano, supra note 10. United States, https://covid.cdc.gov/covid-data- 33 Centers for Disease Control and Prevention, congregate settings, health care settings, tracker/#vaccinations (last visited May 8, 2021). COVID Data Tracker: Trends in COVID–19 Cases or other key locations. 26 Panchal, supra note 4; Mark E´ . Czeisler et al., and Deaths in the United States, by County-level Other response and adaptation costs Mental Health, Substance Abuse, and Suicidal Population Factors, https://covid.cdc.gov/covid- include capital investments in public Ideation During COVID–19 Pandemic– United data-tracker/#pop-factors_totaldeaths (last visited facilities to meet pandemic operational States, –30 2020, Morb. Mortal. Wkly. Rep. May 8, 2021). 69(32):1049–57 (Aug. 14, 2020), https:// 34 The CDC’s Social Vulnerability Index includes www.cdc.gov/mmwr/volumes/69/wr/ fifteen variables measuring social vulnerability, 23 Centers for Disease Control and Prevention, mm6932a1.htm. including unemployment, poverty, education COVID Data Tracker: Trends in Number of 27 Leeb, supra note 4. levels, single-parent households, disability status, COVID–19 Cases and Deaths in the US Reported to 28 Centers for Disease Prevention and Control, non-English speaking households, crowded CDC, by State/Territory, https://covid.cdc.gov/ National Center for Health Statistics, Provisional housing, and transportation access. covid-data-tracker/#trends_dailytrendscases (last Drug Overdose Death Counts, https://www.cdc.gov/ Centers for Disease Control and Prevention, visited May 8, 2021). nchs/nvss/vsrr/drug-overdose-data.htm (last visited COVID Data Tracker: Trends in COVID–19 Cases 24 Id. May 8, 2021). Continued

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Over the last year, Native Americans Eligible Public Health Uses. The congregate settings, health care settings, have experienced more than one and a Fiscal Recovery Funds provide or other key locations; enhancement of half times the rate of COVID–19 resources to meet and address these public health data systems; and other infections, more than triple the rate of emergent public health needs, including public health responses.41 They also hospitalizations, and more than double through measures to counter the spread include capital investments in public the death rate compared to White of COVID–19, through the provision of facilities to meet pandemic operational Americans.35 Low-income and minority care for those impacted by the virus, needs, such as physical plant communities also exhibit higher rates of and through programs or services that improvements to public hospitals and pre-existing conditions that may address disparities in public health that health clinics or adaptations to public contribute to an increased risk of have been exacerbated by the pandemic. buildings to implement COVID–19 COVID–19 mortality.36 To facilitate implementation and use of mitigation tactics. These COVID–19 In addition, individuals living in low- payments from the Fiscal Recovery prevention and mitigation programs and income communities may have had Funds, the interim final rule identifies services, among others, were eligible more limited ability to socially distance a non-exclusive list of eligible uses of expenditures under the CRF and are or to self-isolate when ill, resulting in funding to respond to the COVID–19 eligible uses under this category of faster spread of the virus, and were public health emergency. Eligible uses eligible uses for the Fiscal Recovery over-represented among essential listed under this section build and Funds.42 workers, who faced greater risk of expand upon permissible expenditures • Medical Expenses. The COVID–19 exposure.37 Social distancing measures under the CRF, while recognizing the public health emergency continues to in response to the pandemic may have differences between the ARPA and have devastating effects on public also exacerbated pre-existing public CARES Act, and recognizing that the health; the United States continues to health challenges. For example, for response to the COVID–19 public health average hundreds of deaths per day and children living in homes with lead emergency has changed and will the spread of new COVID–19 variants paint, spending substantially more time continue to change over time. To assess has raised new risks and genomic at home raises the risk of developing whether additional uses would be surveillance needs.43 Moreover, our elevated blood lead levels, while eligible under this category, recipients understanding of the potentially serious screenings for elevated blood lead levels should identify an effect of COVID–19 and long-term effects of the virus is 38 declined during the pandemic. The on public health, including either or growing, including the potential for combination of these underlying social both of immediate effects or effects that symptoms like shortness of breath to and health vulnerabilities may have may manifest over months or years, and continue for weeks or months, for multi- contributed to more severe public health assess how the use would respond to or organ impacts from COVID–19, or for outcomes of the pandemic within these address the identified need. post-intensive care syndrome.44 State communities, resulting in an The interim final rule identifies a and local governments may need to exacerbation of pre-existing disparities non-exclusive list of uses that address 39 continue to provide care and services to in health outcomes. the effects of the COVID–19 public address these near- and longer-term health emergency, including: needs.45 and Deaths in the United States, by Social • COVID–19 Mitigation and Vulnerability Index, https://covid.cdc.gov/covid- data-tracker/#pop-factors_totaldeaths (last visited Prevention. A broad range of services Strategy for K–12 Schools through Phased May 8, 2021). and programming are needed to contain Prevention, available at https://www.cdc.gov/ 35 Centers for Disease Control and Prevention, COVID–19. Mitigation and prevention coronavirus/2019-ncov/community/schools- Risk for COVID–19 Infection, Hospitalization, and efforts for COVID–19 include childcare/operation-strategy.html. Death By Race/Ethnicity, https://www.cdc.gov/ 41 Many of these expenses were also eligible in coronavirus/2019-ncov/covid-data/investigations- vaccination programs; medical care; the CRF. Generally, funding uses eligible under CRF discovery/hospitalization-death-by-race- testing; contact tracing; support for as a response to the direct public health impacts of ethnicity.html (last visited Apr. 26, 2021). isolation or quarantine; supports for COVID–19 will continue to be eligible under the 36 See, e.g., Centers for Disease Control and vulnerable populations to access ARPA, including those not explicitly listed here Prevention, Risk of Severe Illness or Death from medical or public health services; (e.g., telemedicine costs, costs to facilitate COVID–19 (Dec. 10, 2020), https://www.cdc.gov/ compliance with public health orders, disinfection coronavirus/2019-ncov/community/health-equity/ public health surveillance (e.g., of public areas, facilitating distance learning, racial-ethnic-disparities/disparities-illness.html monitoring case trends, genomic increased solid waste disposal needs related to PPE, (last visited Apr. 26, 2021). sequencing for variants); enforcement of paid sick and paid family and medical leave to 37 Milena Almagro et al., Racial Disparities in public health orders; public public employees to enable compliance with Frontline Workers and Housing Crowding During COVID–19 public health precautions), with the COVID–19: Evidence from Geolocation Data (Sept. communication efforts; enhancement to following two exceptions: (1) The standard for 22, 2020), NYU Stern School of Business health care capacity, including through eligibility of public health and safety payrolls has (forthcoming), available at https://papers.ssrn.com/ alternative care facilities; purchases of been updated (see section II.A of this sol3/papers.cfm?abstract_id=3695249; Grace personal protective equipment; support SUPPLEMENTARY INFORMATION) and (2) expenses McCormack et al., Economic Vulnerability of related to the issuance of tax-anticipation notes are Households with Essential Workers, JAMA for prevention, mitigation, or other no longer an eligible funding use (see discussion of 324(4):388–90 (2020), available at https:// services in congregate living facilities debt service in section II.B of this SUPPLEMENTARY jamanetwork.com/journals/jama/fullarticle/ (e.g., nursing homes, incarceration INFORMATION). 2767630. settings, homeless shelters, group living 42 Coronavirus Relief Fund for States, Tribal 38 See, e.g., Joseph G. Courtney et al., Decreases Governments, and Certain Eligible Local facilities) and other key settings like Governments, 86 FR 4182 (Jan. 15, 2021), available in Young Children Who Received Blood Lead Level 40 Testing During COVID–19—34 Jurisdictions, schools; ventilation improvements in at https://home.treasury.gov/system/files/136/CRF- _ January–May 2020, Morb. Mort. Wkly. Rep. Guidance-Federal-Register 2021-00827.pdf. 70(5):155–61 (Feb. 5, 2021), https://www.cdc.gov/ note 38; Nathaniel M. Lewis et al., Disparities in 43 Centers for Disease Control and Prevention, mmwr/volumes/70/wr/mm7005a2.htm; Emily A. COVID–19 Incidence, Hospitalizations, and Testing, supra note 24. Benfer & Lindsay F. Wiley, Health Justice Strategies by Area-Level Deprivation—Utah, –, 44 Centers for Disease Control and Prevention, to Combat COVID–19: Protecting Vulnerable 2020, Morb. Mortal. Wkly. Rep. 69(38):1369–73 Long-Term Effects (Apr. 8, 2021), https:// Communities During a Pandemic, Health Affairs (Sept. 25, 2020), https://www.cdc.gov/mmwr/ www.cdc.gov/coronavirus/2019-ncov/long-term- Blog (Mar. 19, 2020), https://www.healthaffairs.org/ volumes/69/wr/mm6938a4.htm. effects.html (last visited Apr. 26, 2021). do/10.1377/hblog20200319.757883/full/. 40 This includes implementing mitigation 45 Pursuant to 42 CFR 433.51 and 45 CFR 75.306, 39 See, e.g., Centers for Disease Control and strategies consistent with the Centers for Disease Fiscal Recovery Funds may not serve as a State or Prevention, supra note 34; Benfer & Wiley, supra Control and Prevention’s (CDC) Operational locality’s contribution of certain Federal funds.

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• Behavioral Health Care. In addition, the COVID–19 response. Recipients specific populations, households, or new or enhanced State, local, and Tribal need not routinely track staff hours. geographic areas to be served. government services may be needed to • Expenses to Improve the Design and Given the exacerbation of health meet behavioral health needs Execution of Health and Public Health disparities during the pandemic and the exacerbated by the pandemic and Programs. State, local, and Tribal role of pre-existing social vulnerabilities respond to other public health impacts. governments may use payments from in driving these disparate outcomes, These services include mental health the Fiscal Recovery Funds to engage in services to address health disparities are treatment, substance misuse treatment, planning and analysis in order to presumed to be responsive to the public other behavioral health services, improve programs addressing the health impacts of the pandemic. hotlines or warmlines, crisis COVID–19 pandemic, including through Specifically, recipients may use intervention, overdose prevention, use of targeted consumer outreach, payments from the Fiscal Recovery infectious disease prevention, and improvements to data or technology Funds to facilitate access to resources services or outreach to promote access infrastructure, impact evaluations, and that improve health outcomes, to physical or behavioral health primary data analysis. including services that connect care and preventative medicine. Eligible Uses to Address Disparities in residents with health care resources and • Public Health and Safety Staff. Public Health Outcomes. In addition, in public assistance programs and build Treasury recognizes that responding to recognition of the disproportionate healthier environments, such as: the public health and negative economic impacts of the COVID–19 pandemic on • Funding community health workers impacts of the pandemic, including health outcomes in low-income and to help community members access administering the services described Native American communities and the health services and services to address above, requires a substantial importance of mitigating these effects, the social determinants of health; 49 commitment of State, local, and Tribal the interim final rule identifies a • Funding public benefits navigators government human resources. As a broader range of services and programs to assist community members with result, the Fiscal Recovery Funds may that will be presumed to be responding navigating and applying for available be used for payroll and covered benefits to the public health emergency when Federal, State, and local public benefits expenses for public safety, public provided in these communities. or services; health, health care, human services, and Specifically, Treasury will presume that • Housing services to support healthy similar employees, to the extent that certain types of services, outlined living environments and neighborhoods their services are devoted to mitigating below, are eligible uses when provided conducive to mental and physical or responding to the COVID–19 public in a Qualified Census Tract (QCT),47 to wellness; health emergency.46 Accordingly, the families living in QCTs, or when these • Remediation of lead paint or other Fiscal Recovery Funds may be used to services are provided by Tribal lead hazards to reduce risk of elevated support the payroll and covered benefits governments.48 Recipients may also blood lead levels among children; and for the portion of the employee’s time provide these services to other • Evidence-based community that is dedicated to responding to the populations, households, or geographic violence intervention programs to COVID–19 public health emergency. For areas that are disproportionately prevent violence and mitigate the administrative convenience, the impacted by the pandemic. In increase in violence during the recipient may consider public health identifying these disproportionately- pandemic.50 and safety employees to be entirely impacted communities, recipients devoted to mitigating or responding to 2. Responding to Negative Economic should be able to support their Impacts the COVID–19 public health emergency, determination that the pandemic and therefore fully covered, if the resulted in disproportionate public Impacts on Households and employee, or his or her operating unit health or economic outcomes to the Individuals. The public health or division, is primarily dedicated to emergency, including the necessary responding to the COVID–19 public 47 Qualified Census Tracts are a common, readily- measures taken to protect public health, health emergency. Recipients may accessible, and geographically granular method of resulted in significant economic and consider other presumptions for identifying communities with a large proportion of financial hardship for many Americans. low-income residents. Using an existing measure As businesses closed, consumers stayed assessing the extent to which an may speed implementation and decrease employee, division, or operating unit is administrative burden, while identifying areas of home, schools shifted to remote engaged in activities that respond to the need at a highly-localized level. COVID–19 public health emergency, While QCTs are an effective tool generally, many 49 The social determinants of health are the social provided that the recipient reassesses tribal communities have households with a wide and environmental conditions that affect health range of income levels due in part to non-tribal outcomes, specifically economic stability, health periodically and maintains records to member, high income residents living in the care access, social context, neighborhoods and built support its assessment, such as payroll community. Mixed income communities, with a environment, and education access. See, e.g., U.S. records, attestations from supervisors or significant share of tribal members at the lowest Department of Health and Human Services, Office staff, or regular work product or levels of income, are often not included as eligible of Disease Prevention and Health Promotion, QCTs yet tribal residents are experiencing Healthy People 2030: Social Determinants of correspondence demonstrating work on disproportionate impacts due to the pandemic. Health, https://health.gov/healthypeople/objectives- Therefore, including all services provided by Tribal and-data/social-determinants-health (last visited 46 In general, if an employee’s wages and salaries governments is a more effective means of ensuring Apr. 26, 2021). are an eligible use of Fiscal Recovery Funds, that disproportionately impacted Tribal members 50 National Commission on COVID–19 and recipients may treat the employee’s covered can receive services. Criminal Justice, Impact Report: COVID–19 and benefits as an eligible use of Fiscal Recovery Funds. 48 U.S. Department of Housing and Urban Crime (Jan. 31, 2021), https:// For purposes of the Fiscal Recovery Funds, covered Development (HUD), Qualified Census Tracts and covid19.counciloncj.org/2021/01/31/impact-report- benefits include costs of all types of leave (vacation, Difficult Development Areas, https:// covid-19-and-crime-3/ (showing a spike in family-related, sick, military, bereavement, www.huduser.gov/portal/datasets/qct.html (last homicide and assaults); Brad Boesrup et al., sabbatical, jury duty), employee insurance (health, visited Apr. 26, 2021); U.S. Department of the Alarming Trends in US domestic violence during life, dental, vision), retirement (pensions, 401(k)), Interior, Bureau of Indian Affairs, Indian Lands of the COVID–19 pandemic, Am. J. of Emerg. Med. unemployment benefit plans (Federal and state), Federally Recognized Tribes of the United States 38(12): 2753–55 (Dec. 1, 2020), available at https:// workers compensation insurance, and Federal (June 2016), https://www.bia.gov/sites/bia.gov/files/ www.ajemjournal.com/article/S0735- Insurance Contributions Act (FICA) taxes (which assets/bia/ots/webteam/pdf/idc1-028635.pdf (last 6757(20)30307-7/fulltext (showing a spike in includes Social Security and Medicare taxes). visited Apr. 26, 2021). domestic violence).

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education, and travel declined inequities also manifested along gender These potential long-term economic precipitously, over 20 million jobs were lines, as schools closed to in-person consequences underscore the continued lost in March and April 2020.51 activities, leaving many working need for robust policy support. Although many have returned to work, families without child care during the Impacts on Businesses. The pandemic as of April 2021, the economy remains day.57 Women of color have been hit has also severely impacted many 8.2 million jobs below its pre-pandemic especially hard: The labor force businesses, with small businesses hit peak,52 and more than 3 million workers participation rate for Black women has especially hard. Small businesses make have dropped out of the labor market fallen by 3.2 percentage points 58 during up nearly half of U.S. private-sector altogether relative to February 2020.53 the pandemic as compared to 1.0 employment 64 and play a key role in Rates of unemployment are percentage points for Black men 59 and supporting the overall economic particularly severe among workers of 2.0 percentage points for White recovery as they are responsible for two- color and workers with lower levels of women.60 thirds of net new jobs.65 Since the educational attainment; for example, the As the economy recovers, the effects beginning of the pandemic, however, overall unemployment rate in the of the pandemic-related recession may 400,000 small businesses have closed, United States was 6.1 percent in April continue to impact households, with many more at risk.66 Sectors with 2021, but certain groups saw much including a risk of longer-term effects on a large share of small business higher rates: 9.7 percent for Black earnings and economic potential. For employment have been among those workers, 7.9 percent for Hispanic or example, unemployed workers, with the most drastic drops in Latino workers, and 9.3 percent for especially those who have experienced employment.67 The negative outlook for workers without a high school longer periods of unemployment, earn small businesses has continued: As of diploma.54 Job losses have also been lower wages over the long term once April 2021, approximately 70 percent of particularly steep among low wage rehired.61 In addition to the labor small businesses reported that the workers, with these workers remaining market consequences for unemployed pandemic has had a moderate or large furthest from recovery as of the end of workers, recessions can also cause negative effect on their business, and 2020.55 A severe recession—and its longer-term economic challenges over a third expect that it will take over concentrated impact among low-income through, among other factors, damaged 6 months for their business to return to workers—has amplified food and consumer credit scores 62 and reduced their normal level of operations.68 housing insecurity, with an estimated familial and childhood wellbeing.63 This negative outlook is likely the nearly 17 million adults living in result of many small businesses having households where there is sometimes or Food, Housing, and Employment Hardships, faced periods of closure and having seen often not enough food to eat and an https://www.cbpp.org/research/poverty-and- declining revenues as customers stayed inequality/tracking-the-covid-19-recessions-effects- 69 estimated 10.7 million adults living in on-food-housing-and (last visited May 8, 2021). home. In general, small businesses can households that were not current on 57 Women have carried a larger share of childcare face greater hurdles in accessing rent.56 Over the course of the pandemic, responsibilities than men during the COVID–19 credit,70 and many small businesses crisis. See, e.g., Gema Zamarro & Marı´a J. Prados, were already financially fragile at the Gender differences in couples’ division of 71 51 outset of the pandemic. Non-profits, U.S. Bureau of Labor Statistics, All Employees, childcare, work and mental health during COVID– Total Nonfarm (PAYEMS), retrieved from FRED, 19, Rev. Econ. Household 19:11–40 (2021), which provide vital services to Federal Reserve Bank of St. Louis; https:// available at https://link.springer.com/article/ communities, have similarly faced fred.stlouisfed.org/series/PAYEMS (last visited .1007/s11150-020-09534-7; Titan Alon et al., The 8, 2021). Impact of COVID–19 on Gender Equality, National Russell Sage Foundation (Aug. 2016), available at 52 Id. Bureau of Economic Research Working Paper 26947 53 https://www.russellsage.org/publications/children- U.S. Bureau of Labor Statistics, Civilian Labor (April 2020), available at https://www.nber.org/ great-recession. Force Level [CLF16OV], retrieved from FRED, papers/w26947. 64 Board of Governors of the Federal Reserve Federal Reserve Bank of St. Louis, https:// 58 U.S. Bureau of Labor Statistics, Labor Force System, supra note 5. fred.stlouisfed.org/series/CLF16OV (last visited May Participation Rate—20 Yrs. & Over, Black or African 65 U.S. Small Business Administration, Office of 8, 2021). American Women [LNS11300032], retrieved from Advocacy, Small Businesses Generate 44 Percent of 54 U.S. Bureau of Labor Statistics, Labor Force FRED, Federal Reserve Bank of St. Louis; https:// U.S. Economic Activity (Jan. 30, 2019), https:// Statistics from the Current Population Survey: fred.stlouisfed.org/series/LNS11300032 (last visited advocacy.sba.gov/2019/01/30/small-businesses- Employment status of the civilian population by sex May 8, 2021). generate-44-percent-of-u-s-economic-activity/. and age (May 8 2021), https://www.bls.gov/ 59 U.S. Bureau of Labor Statistics, Labor Force 66 Biden, supra note 6. news.release/empsit.t01.htm (last visited May 8, Participation Rate—20 Yrs. & Over, Black or African 67 2021); U.S. Bureau of Labor Statistics, Labor Force American Men [LNS11300031], retrieved from Daniel Wilmoth, U.S. Small Business Statistics from the Current Population Survey: FRED, Federal Reserve Bank of St. Louis; https:// Administration Office of Advocacy, The Effects of Employment status of the civilian noninstitutional fred.stlouisfed.org/series/LNS11300031 (last visited the COVID–19 Pandemic on Small Businesses, Issue population by race, Hispanic or Latino ethnicity, May 8, 2021). Brief No. 16 (Mar. 2021), available at https:// sex, and age (May 8, 2021), https://www.bls.gov/ 60 U.S. Bureau of Labor Statistics, Labor Force cdn.advocacy.sba.gov/wp-content/uploads/2021/ web/empsit/cpseea04.htm (last visited May 8, Participation Rate—20 Yrs. & Over, White Women 03/02112318/COVID-19-Impact-On-Small- 2021); U.S. Bureau of Labor Statistics, Labor Force [LNS11300029], retrieved from FRED, Federal Business.pdf. Statistics from the Current Population Survey: Reserve Bank of St. Louis; https:// 68 U.S. Census Bureau, Small Business Pulse Employment status of the civilian noninstitutional fred.stlouisfed.org/series/LNS11300029 (last visited Survey, https://portal.census.gov/pulse/data/ (last population 25 years and over by educational May 8, 2021). visited May 8, 2021). attainment (May 8, 2021), https://www.bls.gov/web/ 61 See, e.g., Michael Greenstone & Adam Looney, 69 Olivia S. Kim et al., Revenue Collapses and the empsit/cpseea05.htm (last visited May 8, 2021). Unemployment and Earnings Losses: A Look at Consumption of Small Business Owners in the 55 Elise Gould & Jori Kandra, Wages grew in 2020 Long-Term Impacts of the Great Recession on Early Stages of the COVID–19 Pandemic (Nov. because the bottom fell out of the low-wage labor American Workers, Brookings Institution (Nov. 4, 2020), https://www.nber.org/papers/w28151. market, Economic Policy Institute (Feb. 24, 2021), 2021), https://www.brookings.edu/blog/jobs/2011/ 70 See e.g., Board of Governors of the Federal https://files.epi.org/pdf/219418.pdf. See also, 11/04/unemployment-and-earnings-losses-a-look- Reserve System, Report to Congress on the Michael Dalton et al., The K-Shaped Recovery: at-long-term-impacts-of-the-great-recession-on- Availability of Credit to Small Businesses (Sept. Examining the Diverging Fortunes of Workers in the american-workers/. 2017), available at https://www.federalreserve.gov/ Recovery from the COVID–19 Pandemic using 62 Chi Chi Wu, Solving the Credit Conundrum: publications/2017-september-availability-of-credit- Business and Household Survey Microdata, U.S. Helping Consumers’ Credit Records Impaired by the to-small-businesses.htm. Bureau of Labor Statistics Working Paper Series Foreclosure Crisis and Great Recession (Dec. 2013), 71 Alexander W. Bartik et al., The Impact of (Feb. 2021), https://www.bls.gov/osmr/research- https://www.nclc.org/images/pdf/credit_reports/ COVID–19 on small business outcomes and papers/2021/pdf/ec210020.pdf. report-credit-conundrum-2013.pdf. expectations, PNAS 117(30): 17656–66 (, 56 Center on Budget and Policy Priorities, 63 Irwin Garfinkel, Sara McLanahan, Christopher 2020), available at https://www.pnas.org/content/ Tracking the COVID–19 Recession’s Effects on Wimer, eds., Children of the Great Recession, 117/30/17656.

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economic and financial challenges due neighborhoods more than doubling by effect that would substantially impact to the pandemic.72 2010–2014 relative to 2000.77 their long-term economic outcomes. Impacts to State, Local, and Tribal Concentrated poverty has a range of Increased economic strain or material Governments. State, local, and Tribal deleterious impacts, including hardship due to the pandemic could governments have felt substantial fiscal additional burdens on families and also have a long-term impact on health, pressures. As noted above, State, local, reduced economic potential and social educational, and economic outcomes of and Tribal governments have faced cohesion.78 Given the disproportionate young children.82 Evidence suggests significant revenue shortfalls and impact of COVID–19 on low-income that adverse conditions in early remain over 1 million jobs below their households discussed above, there is a childhood, including exposure to pre-pandemic staffing levels.73 These risk that the current pandemic-induced poverty, food insecurity, housing reductions in staffing may undermine recession could further increase insecurity, or other economic hardships, the ability to deliver services effectively, concentrated poverty and cause long- are particularly impactful.83 as well as add to the number of term damage to economic prospects in The pandemic’s disproportionate unemployed individuals in their neighborhoods of concentrated poverty. economic impacts are also seen in jurisdictions. The negative economic impacts of Tribal communities across the Exacerbation of Pre-existing COVID–19 also include significant country—for Tribal governments as well Disparities. The COVID–19 public impacts to children in as families and businesses on and off health emergency may have lasting disproportionately affected families and Tribal lands. In the early months of the negative effects on economic outcomes, include impacts to education, health, pandemic, Native American particularly in exacerbating disparities and welfare, all of which contribute to unemployment spiked to 26 percent that existed prior to the pandemic. long-term economic outcomes.79 Many and, while partially recovered, remains The negative economic impacts of the low-income and minority students, who at nearly 11 percent.84 Tribal enterprises COVID–19 pandemic are particularly were disproportionately served by are a significant source of revenue for pronounced in certain communities and remote or hybrid education during the Tribal governments to support the families. Low- and moderate-income pandemic, lacked the resources to provision of government services. These jobs make up a substantial portion of participate fully in remote schooling or enterprises, notably concentrated in both total pandemic job losses,74 and live in households without adults gaming, tourism, and hospitality, jobs that require in-person frontline available throughout the day to assist frequently closed, significantly reducing work, which are exposed to greater risk with online coursework.80 Given these both revenues to Tribal governments of contracting COVID–19.75 Both factors trends, the pandemic may widen and employment. As a result, Tribal compound pre-existing vulnerabilities educational disparities and worsen governments have reduced essential and the likelihood of food, housing, or outcomes for low-income students,81 an services to their citizens and other financial insecurity in low- and communities.85 moderate-income families and, given 77 Elizabeth Kneebone & Natalie Holmes, U.S. Eligible Uses. Sections 602(c)(1)(A) the concentration of low- and moderate- concentrated poverty in the wake of the Great and 603(c)(1)(A) permit use of payments Recession, Brookings Institution (Mar. 31, 2016), from the Fiscal Recovery Funds to income families within certain https://www.brookings.edu/research/u-s- communities,76 raise a substantial risk concentrated-poverty-in-the-wake-of-the-great- respond to the negative economic that the effects of the COVID–19 public recession/. impacts of the COVID–19 public health health emergency will be amplified 78 David Erickson et al., The Enduring Challenge emergency. Eligible uses that respond to of Concentrated Poverty in America: Case Studies the negative economic impacts of the within these communities. from Communities Across the U.S. (2008), available These compounding effect of at https://www.frbsf.org/community-development/ public health emergency must be recessions on concentrated poverty and files/cp_fullreport.pdf. designed to address an economic harm the long-lasting nature of this effect 79 Educational quality, as early as Kindergarten, resulting from or exacerbated by the were observed after the 2007–2009 has a long-term impact on children’s public health public health emergency. In considering and economic outcomes. See, e.g., Tyler W. Watts whether a program or service would be recession, including a large increase in et al., The Chicago School Readiness Project: concentrated poverty with the number Examining the long-term impacts of an early of people living in extremely poor childhood intervention, PLoS ONE 13(7) (2018), See Education Week, School Districts’ Reopening available at https://journals.plos.org/plosone/ Plans: A Snapshot (Jul. 15, 2020), https:// article?id=10.1371/journal.pone.0200144; www.edweek.org/leadership/school-districts- 72 Federal Reserve Bank of San Francisco, Impacts Opportunity Insights, How Can We Amplify reopening-plans-a-snapshot/2020/07 (last visited of COVID–19 on Nonprofits in the Western United Education as an Engine of Mobility? Using big data May 4, 2021). States (May 2020), https://www.frbsf.org/ to help children get the most from school, https:// 82 HHS, supra note 79. community-development/files/impact-of-covid- opportunityinsights.org/education/ (last visited 83 Hirokazu Yoshikawa, Effects of the Global nonprofits-serving-western-united-states.pdf. Apr. 26, 2021); U.S. Department of Health and Coronavirus Disease—2019 Pandemic on Early 73 Bureau of Labor Statistics, supra note 8; Elijah Human Services (HHS), Office of Disease Childhood Development: Short- and Long-Term Moreno & Heather Sobrepena, Tribal entities remain Prevention and Health Promotion, Early Childhood Risks and Mitigating Program and Policy Actions, resilient as COVID–19 batters their finances, Development and Education, https:// J. of Pediatrics Vol. 223:188–93 (Aug. 1, 2020), Federal Reserve Bank of Minneapolis (Nov. 10, www.healthypeople.gov/2020/topics-objectives/ available at https://www.jpeds.com/article/S0022- 2021), https://www.minneapolisfed.org/article/ topic/social-determinants-health/interventions- 3476(20)30606-5/abstract. 2020/tribal-entities-remain-resilient-as-covid-19- resources/early-childhood-development-and- 84 Based on calculations conducted by the batters-their-finances. education (last visited Apr. 26, 2021). Minneapolis Fed’s Center for Indian Country 74 Kim Parker et al., Economic Fallout from 80 See, e.g., Bacher-Hicks, supra note 14. Development using Flood et al. (2020)’s Current COVID–19 Continues to Hit Lower-Income 81 A Department of Education survey found that, Population Survey.’’ Sarah Flood, Miriam King, Americans the Hardest, Pew Research Center (Sept. as of February 2021, 42 percent of fourth grade Renae Rodgers, Steven Ruggles and J. Robert 24, 2020), https://www.pewresearch.org/social- students nationwide were offered only remote Warren. Integrated Public Use Microdata Series, trends/2020/09/24/economic-fallout-from-covid-19- education, compared to 48 percent of economically Current Population Survey: Version 8.0 [dataset]. continues-to-hit-lower-income-americans-the- disadvantaged students, 54 percent of Black Minneapolis, MN: IPUMS, 2020. https://doi.org/ hardest/; Gould, supra note 55. students and 57 percent of Hispanic students. Large 10.18128/D030.V8.0; see also Donna Feir & Charles 75 See infra Section II.B of this Supplementary districts often disproportionately serve low-income Golding, Native Employment During COVID–19: Information. students. See Institute of Education Sciences, Hard hit in April but Starting to Rebount? (Aug. 5, 76 Elizabeth Kneebone, The Changing geography Monthly School Survey Dashboard, https:// 2020), https://www.minneapolisfed.org/article/ of US poverty, Brookings Institution (Feb. 15, 2017), ies.ed.gov/schoolsurvey/ (last visited Apr. 26, 2021). 2020/native-employment-during-covid-19-hit-hard- https://www.brookings.edu/testimonies/the- In summer 2020, a review found that 74 percent of in-april-but-starting-to-rebound. changing-geography-of-us-poverty/. the largest 100 districts chose remote learning only. 85 Moreno & Sobrepena, supra note 73.

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eligible under this category, the and remain so due to the negative economic impacts resulting from the recipient should assess whether, and the economic impacts of the pandemic. pandemic. For example, a cash transfer extent to which, there has been an • State Unemployment Insurance program may focus on unemployed economic harm, such as loss of earnings Trust Funds. Consistent with the workers or low- and moderate-income or revenue, that resulted from the approach taken in the CRF, recipients families, which have faced COVID–19 public health emergency and may make deposits into the state disproportionate economic harms due to whether, and the extent to which, the account of the Unemployment Trust the pandemic. Cash transfers must be use would respond or address this Fund established under section 904 of reasonably proportional to the negative harm.86 A recipient should first the Social Security Act (42 U.S.C. 1104) economic impact they are intended to consider whether an economic harm up to the level needed to restore the pre- address. Cash transfers grossly in excess exists and whether this harm was pandemic balances of such account as of of the amount needed to address the caused or made worse by the COVID–19 , 2020 or to pay back negative economic impact identified by public health emergency. While advances received under Title XII of the the recipient would not be considered to economic impacts may either be Social Security Act (42 U.S.C. 1321) for be a response to the COVID–19 public immediate or delayed, assistance or aid the payment of benefits between January health emergency or its negative to individuals or businesses that did not 27, 2020 and May 17, 2021, given the impacts. In particular, when considering experience a negative economic impact close nexus between Unemployment the appropriate size of permissible cash from the public health emergency Trust Fund costs, solvency of transfers made in response to the would not be an eligible use under this Unemployment Trust Fund systems, COVID–19 public health emergency, category. and pandemic economic impacts. State, local and Tribal governments may In addition, the eligible use must Further, Unemployment Trust Fund consider and take guidance from the per ‘‘respond to’’ the identified negative deposits can decrease fiscal strain on person amounts previously provided by economic impact. Responses must be Unemployment Insurance systems the Federal Government in response to related and reasonably proportional to impacted by the pandemic. States facing the COVID–19 crisis. Cash transfers that the extent and type of harm a sharp increase in Unemployment are grossly in excess of such amounts experienced; uses that bear no relation Insurance claims during the pandemic would be outside the scope of eligible or are grossly disproportionate to the may have drawn down positive uses under sections 602(c)(1)(A) and type or extent of harm experienced Unemployment Trust Fund balances 603(c)(1)(A) and could be subject to would not be eligible uses. Where there and, after exhausting the balance, recoupment. In addition, a recipient has been a negative economic impact required advances to fund continuing could provide survivor’s benefits to resulting from the public health obligations to claimants. Because both surviving family members of COVID–19 emergency, States, local, and Tribal of these impacts were driven directly by victims, or cash assistance to widows, governments have broad latitude to the need for assistance to unemployed widowers, and dependents of eligible choose whether and how to use the workers during the pandemic, COVID–19 victims. • Fiscal Recovery Funds to respond to replenishing Unemployment Trust Expenses to Improve Efficacy of and address the negative economic Funds up to the pre-pandemic level Economic Relief Programs. State, local, impact. Sections 602(c)(1)(A) and responds to the pandemic’s negative and Tribal governments may use 603(c)(1)(A) describe several types of economic impacts on unemployed payments from the Fiscal Recovery workers. Funds to improve efficacy of programs uses that would be eligible under this • category, including assistance to Assistance to Households. addressing negative economic impacts, households, small businesses, and Assistance to households or populations including through use of data analysis, nonprofits and aid to impacted facing negative economic impacts due to targeted consumer outreach, industries such as tourism, travel, and COVID–19 is also an eligible use. This improvements to data or technology includes: Food assistance; rent, infrastructure, and impact evaluations. hospitality. • To facilitate implementation and use mortgage, or utility assistance; Small Businesses and Non-profits. of payments from the Fiscal Recovery counseling and legal aid to prevent As discussed above, small businesses Funds, the interim final rule identifies eviction or homelessness; cash and non-profits faced significant a non-exclusive list of eligible uses of assistance (discussed below); emergency challenges in covering payroll, funding that respond to the negative assistance for burials, home repairs, mortgages or rent, and other operating economic impacts of the public health weatherization, or other needs; internet costs as a result of the public health emergency. Consistent with the access or digital literacy assistance; or emergency and measures taken to discussion above, the eligible uses listed job training to address negative contain the spread of the virus. State, below would respond directly to the economic or public health impacts local, and Tribal governments may economic or financial harms resulting experienced due to a worker’s provide assistance to small businesses from and or exacerbated by the public occupation or level of training. As to adopt safer operating procedures, health emergency. discussed above, in considering whether weather periods of closure, or mitigate • Assistance to Unemployed Workers. a potential use is eligible under this financial hardship resulting from the This includes assistance to unemployed category, a recipient must consider COVID–19 public health emergency, whether, and the extent to which, the including: workers, including services like job Æ training to accelerate rehiring of household has experienced a negative Loans or grants to mitigate financial unemployed workers; these services economic impact from the pandemic. In hardship such as declines in revenues may extend to workers unemployed due assessing whether a household or or impacts of periods of business to the pandemic or the resulting population experienced economic harm closure, for example by supporting recession, or who were already as a result of the pandemic, a recipient payroll and benefits costs, costs to retain unemployed when the pandemic began may presume that a household or employees, mortgage, rent, or utilities population that experienced costs, and other operating costs; Æ 86 In some cases, a use may be permissible under unemployment or increased food or Loans, grants, or in-kind assistance another eligible use category even if it falls outside housing insecurity or is low- or to implement COVID–19 prevention or the scope of section (c)(1)(A) of the Act. moderate-income experienced negative mitigation tactics, such as physical

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plant changes to enable social pandemic on those and similarly tourism, travel, hospitality, and other distancing, enhanced cleaning efforts, impacted industries. For example, aid impacted industries, and its connection barriers or partitions, or COVID–19 may include assistance to implement to negative economic impacts of the vaccination, testing, or contact tracing COVID–19 mitigation and infection pandemic. Recipients also should programs; and prevention measures to enable safe maintain records to support their Æ Technical assistance, counseling, or resumption of tourism, travel, and assessment of how businesses or other services to assist with business hospitality services, for example, business districts receiving assistance planning needs. improvements to ventilation, physical were affected by the negative economic As discussed above, these services barriers or partitions, signage to impacts of the pandemic and how the should respond to the negative facilitate social distancing, provision of aid provided responds to these impacts. economic impacts of COVID–19. masks or personal protective equipment, As discussed above, economic Recipients may consider additional or consultation with infection disparities that existed prior to the criteria to target assistance to businesses prevention professionals to develop safe COVID–19 public health emergency in need, including small businesses. reopening plans. amplified the impact of the pandemic Such criteria may include businesses Aid may be considered responsive to among low-income and minority facing financial insecurity, substantial the negative economic impacts of the groups. These families were more likely declines in gross receipts (e.g., pandemic if it supports businesses, to face housing, food, and financial comparable to measures used to assess attractions, business districts, and Tribal insecurity; are over-represented among eligibility for the Paycheck Protection development districts operating prior to low-wage workers; and many have seen Program), or other economic harm due the pandemic and affected by required their livelihoods deteriorate further to the pandemic, as well as businesses closures and other efforts to contain the during the pandemic and economic with less capacity to weather financial pandemic. For example, a recipient may contraction. In recognition of the hardship, such as the smallest provide aid to support safe reopening of disproportionate negative economic businesses, those with less access to businesses in the tourism, travel, and impacts on certain communities and credit, or those serving disadvantaged hospitality industries and to business populations, the interim final rule districts that were closed during the communities. Recipients should identifies services and programs that COVID–19 public health emergency, as consider local economic conditions and will be presumed to be responding to well as aid for a planned expansion or business data when establishing such the negative economic impacts of the upgrade of tourism, travel, and criteria.87 COVID–19 public health emergency hospitality facilities delayed due to the • Rehiring State, Local, and Tribal when provided in these communities. Government Staff. State, local, and pandemic. When considering providing aid to Specifically, Treasury will presume Tribal governments continue to see industries other than tourism, travel, that certain types of services, outlined pandemic impacts in overall staffing and hospitality, recipients should below, are eligible uses when provided levels: State, local, and Tribal consider the extent of the economic in a QCT, to families and individuals government employment remains more impact as compared to tourism, travel, living in QCTs, or when these services than 1 million jobs lower in April 2021 90 and hospitality, the industries are provided by Tribal governments. than prior to the pandemic.88 enumerated in the statute. For example, Recipients may also provide these Employment losses decrease a state or on net, the leisure and hospitality services to other populations, local government’s ability to effectively industry has experienced an households, or geographic areas administer services. Thus, the interim approximately 24 percent decline in disproportionately impacted by the final rule includes as an eligible use revenue and approximately 17 percent pandemic. In identifying these payroll, covered benefits, and other decline in employment nationwide due disproportionately impacted costs associated with rehiring public to the COVID–19 public health communities, recipients should be able sector staff, up to the pre-pandemic emergency.89 Recipients should also to support their determination that the staffing level of the government. pandemic resulted in disproportionate • consider whether impacts were due to Aid to Impacted Industries. the COVID–19 pandemic, as opposed to public health or economic outcomes to Sections 602(c)(1)(A) and 603(c)(1)(A) longer-term economic or industrial the specific populations, households, or recognize that certain industries, such trends unrelated to the pandemic. geographic areas to be served. The as tourism, travel, and hospitality, were To facilitate transparency and interim final rule identifies a non- disproportionately and negatively accountability, the interim final rule exclusive list of uses that address the impacted by the COVID–19 public requires that State, local, and Tribal disproportionate negative economic health emergency. Aid provided to governments publicly report assistance effects of the COVID–19 public health tourism, travel, and hospitality provided to private-sector businesses emergency, including: industries should respond to the under this eligible use, including Æ Building Stronger Communities negative economic impacts of the through Investments in Housing and 89 From February 2020 to April 2021, Neighborhoods. The economic impacts 87 See Federal Reserve Bank of Cleveland, An employment in ‘‘Leisure and hospitality’’ has fallen Uphill Battle: COVID–19’s Outsized Toll on by approximately 17 percent. See U.S. Bureau of of COVID–19 have likely been most Minority-Owned Firms (Oct. 8, 2020), https:// Labor Statistics, All Employees, Leisure and acute in lower-income neighborhoods, www.clevelandfed.org/newsroom-and-events/ Hospitality, retrieved from FRED, Federal Reserve including concentrated areas of high publications/community-development-briefs/db- Bank of St. Louis, https://fred.stlouisfed.org/series/ unemployment, limited economic 20201008-misera-report.aspx (discussing the USLAH (last visited May 8, 2021). From 2019Q4 to 91 impact of COVID–19 on minority owned 2020Q4, gross output (e.g. revenue) in arts, opportunity, and housing insecurity. businesses). entertainment, recreation, accommodation, and 88 U.S. Bureau of Labor Statistics, All Employees, food services has fallen by approximately 24 90 HUD, supra note 48. State Government [CES9092000001] and All percent. See Bureau of Economic Analysis, News 91 Stuart M. Butler & Jonathan Grabinsky, Employees, Local Government [CES9093000001], Release: Gross Domestic Product (Third Estimate), Tackling the legacy of persistent urban inequality retrieved from FRED, Federal Reserve Bank of St. Corporate Profits, and GDP by Industry, Fourth and concentrated poverty, Brookings Institution Louis, https://fred.stlouisfed.org/series/ Quarter and Year 2020 (Mar. 25, 2021), Table 17, (Nov. 16, 2020), https://www.brookings.edu/blog/ CES9092000001 and https://fred.stlouisfed.org/ https://www.bea.gov/sites/default/files/2021-03/ up-front/2020/11/16/tackling-the-legacy-of- series/CES9093000001 (last visited May 8, 2021). gdp4q20_3rd.pdf. Continued

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Services in this category alleviate the extended learning and enrichment Uses Outside the Scope of this immediate economic impacts of the programs; and Category. Certain uses would not be COVID–19 pandemic on housing D Evidence-based practices to address within the scope of this eligible use insecurity, while addressing conditions the social, emotional, and mental health category, although may be eligible under that contributed to poor public health needs of students; other eligible use categories. A general and economic outcomes during the Æ Promoting Healthy Childhood infrastructure project, for example, pandemic, namely concentrated areas Environments. Children’s economic and typically would not be included unless with limited economic opportunity and family circumstances have a long-term the project responded to a specific inadequate or poor-quality housing.92 impact on their future economic pandemic public health need (e.g., Eligible services include: outcomes.94 Increases in economic investments in facilities for the delivery D Services to address homelessness hardship, material insecurity, and of vaccines) or a specific negative such as supportive housing, and to parental stress and behavioral health economic impact like those described improve access to stable, affordable challenges all raise the risk of long-term above (e.g., affordable housing in a housing among unhoused individuals; harms to today’s children due to the QCT). The ARPA explicitly includes D Affordable housing development to pandemic. Eligible services to address infrastructure if it is ‘‘necessary’’ and in increase supply of affordable and high- this challenge include: water, sewer, or broadband. See Section quality living units; and D New or expanded high-quality II.D of this SUPPLEMENTARY INFORMATION. D Housing vouchers, residential childcare to provide safe and supportive State, local, and Tribal governments also counseling, or housing navigation care for children; may use the Fiscal Recovery Funds assistance to facilitate household moves D Home visiting programs to provide under sections 602(c)(1)(C) or to neighborhoods with high levels of structured visits from health, parent 603(c)(1)(C) to provide ‘‘government economic opportunity and mobility for educators, and social service services’’ broadly to the extent of their low-income residents, to help residents professionals to pregnant women or reduction in revenue. See Section II.C of increase their economic opportunity families with young children to offer this SUPPLEMENTARY INFORMATION. and reduce concentrated areas of low education and assistance navigating This category of eligible uses also economic opportunity.93 resources for economic support, health would not include contributions to Æ Addressing Educational Disparities. rainy day funds, financial reserves, or As outlined above, school closures and needs, or child development; and D Enhanced services for child welfare- similar funds. Resources made available the transition to remote education raised under this eligible use category are particular challenges for lower-income involved families and foster youth to provide support and training on child intended to help meet pandemic students, potentially exacerbating response needs and provide relief for development, positive parenting, coping educational disparities, while increases households and businesses facing near- skills, or recovery for mental health and in economic hardship among families and long-term negative economic substance use challenges. could have long-lasting impacts on impacts. Contributions to rainy day State, local, and Tribal governments children’s educational and economic funds and similar financial reserves are encouraged to use payments from prospects. Services under this prong would not address these needs or the Fiscal Recovery Funds to respond to would enhance educational supports to respond to the COVID–19 public health the direct and immediate needs of the help mitigate impacts of the pandemic. emergency but would rather constitute pandemic and its negative economic Eligible services include: savings for future spending needs. D New, expanded, or enhanced early impacts and, in particular, the needs of Similarly, this eligible use category learning services, including pre- households and businesses that were would not include payment of interest kindergarten, Head Start, or disproportionately and negatively or principal on outstanding debt partnerships between pre-kindergarten impacted by the public health instruments, including, for example, programs and local education emergency. As highlighted above, low- short-term revenue or tax anticipation authorities, or administration of those income communities and workers and notes, or other debt service costs. As services; people of color have faced more severe discussed below, payments from the D Providing assistance to high-poverty health and economic outcomes during Fiscal Recovery Funds are intended to school districts to advance equitable the pandemic, with pre-existing social be used prospectively and the interim funding across districts and vulnerabilities like low-wage or final rule precludes use of these funds geographies; insecure employment, concentrated to cover the costs of debt incurred prior D Evidence-based educational neighborhoods with less economic to March 3, 2021. Fees or issuance costs services and practices to address the opportunity, and pre-existing health associated with the issuance of new academic needs of students, including disparities likely contributing to the debt would also not be covered using tutoring, summer, afterschool, and other magnified impact of the pandemic. The payments from the Fiscal Recovery Fiscal Recovery Funds provide Funds because such costs would not persistent-urban-inequality-and-concentrated- resources to not only respond to the themselves have been incurred to poverty/. immediate harms of the pandemic but address the needs of pandemic response 92 U.S. Department of Health and Human Services also to mitigate its longer-term impact in (HHS), Office of Disease Prevention and Health or its negative economic impacts. The Promotion, Quality of Housing, https:// compounding the systemic public purpose of the Fiscal Recovery Funds is www.healthypeople.gov/2020/topics-objectives/ health and economic challenges of to provide fiscal relief that will permit topic/social-determinants-health/interventions- disproportionately impacted State, local, and Tribal governments to resources/quality-of-housing#11 (last visited Apr. populations. Treasury encourages continue to respond to the COVID–19 26, 2021). recipients to consider funding uses that 93 The Opportunity Atlas, https:// public health emergency. www.opportunityatlas.org/ (last visited Apr. 26, foster a strong, inclusive, and equitable For the same reasons, this category of 2021); Raj Chetty & Nathaniel Hendren, The recovery, especially uses with long-term eligible uses would not include Impacts of Neighborhoods on Intergenerational benefits for health and economic satisfaction of any obligation arising Mobility I: Childhood Exposure Effects, Quarterly J. outcomes. of Econ. 133(3):1107–162 (2018), available at under or pursuant to a settlement https://opportunityinsights.org/paper/ agreement, judgment, consent decree, or neighborhoodsi/. 94 See supra notes 52 and 84. judicially confirmed debt restructuring

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plan in a judicial, administrative, or affected by the COVID–19 public health contracted or died of COVID–19.96 regulatory proceeding, except to the emergency? Several examples reflect the severity of extent the judgment or settlement Question 7: What are the advantages the health impacts for essential workers. requires the provision of services that and disadvantages of using Qualified Meat processing plants became would respond to the COVID–19 public Census Tracts and services provided by ‘‘hotspots’’ for transmission, with 700 health emergency. That is, satisfaction Tribal governments to delineate where a new cases reported at a single plant on of a settlement or judgment would not broader range of eligible uses are a single day in May 2020.97 In New York itself respond to COVID–19 with respect presumed to be responsive to the public City, 120 employees of the Metropolitan to the public health emergency or its health and economic impacts of Transit Authority were estimated to negative economic impacts, unless the COVID–19? What other measures might have died due to COVID–19 by mid-May settlement requires the provision of Treasury consider? Are there other 2020, with nearly 4,000 testing positive services or aid that did directly respond populations or geographic areas that for the virus.98 Furthermore, many to these needs, as described above. were disproportionately impacted by the essential workers are people of color or In addition, as described in Section pandemic that should be explicitly low-wage workers.99 These workers, in V.III of this SUPPLEMENTARY included? particular, have borne a INFORMATION, Treasury will establish Question 8: Are there other services or disproportionate share of the health and reporting and record keeping costs that Treasury should consider as economic impacts of the pandemic. requirements for uses within this eligible uses to respond to the Such workers include: category, including enhanced reporting disproportionate impacts of COVID–19 • Staff at nursing homes, hospitals, requirements for certain types of uses. on low-income populations and and home care settings; • Question 1: Are there other types of communities? Describe how these Workers at farms, food production services or costs that Treasury should respond to the COVID–19 public health facilities, grocery stores, and emergency or its negative economic restaurants; consider as eligible uses to respond to • the public health impacts of COVID–19? impacts, including its exacerbation of Janitors and sanitation workers; • Truck drivers, transit staff, and Describe how these respond to the pre-existing challenges in these areas. Question 9: The interim final rule warehouse workers; COVID–19 public health emergency. includes eligible uses to support • Public health and safety staff; Question 2: The interim final rule affordable housing and stronger • Childcare workers, educators, and permits coverage of payroll and benefits neighborhoods in disproportionately- other school staff; and costs of public health and safety staff impacted communities. Discuss the • Social service and human services primarily dedicated to COVID–19 advantages and disadvantages of staff. response, as well as rehiring of public explicitly including other uses to During the public health emergency, sector staff up to pre-pandemic levels. support affordable housing and stronger employers’ policies on COVID–19- For how long should these measures neighborhoods, including rehabilitation related hazard pay have varied widely, remain in place? What other measures of blighted properties or demolition of with many essential workers not yet or presumptions might Treasury abandoned or vacant properties. In compensated for the heightened risks consider to assess the extent to which what ways does, or does not, this they have faced and continue to face.100 public sector staff are engaged in potential use address public health or COVID–19 response, and therefore economic impacts of the pandemic? 96 See, e.g., Centers for Disease Control and Prevention, COVID Data Tracker: Cases & Death reimbursable, in an easily-administrable What considerations, if any, could manner? among Healthcare Personnel, https://covid.cdc.gov/ support use of Fiscal Recovery Funds in covid-data-tracker/#health-care-personnel (last Question 3: The interim final rule ways that do not result in resident visited May 4, 2021); Centers for Disease Control permits rehiring of public sector staff up displacement or loss of affordable and Prevention, COVID Data Tracker: Confirmed COVID–19 Cases and Deaths among Staff and Rate to the government’s pre-pandemic housing units? staffing level, which is measured based per 1,000 Resident-Weeks in Nursing Homes, by Week—United States, https://covid.cdc.gov/covid- on employment as of January 27, 2020. B. Premium Pay data-tracker/#nursing-home-staff (last visited May Does this approach adequately measure Fiscal Recovery Funds payments may 4, 2021). the pre-pandemic staffing level in a be used by recipients to provide 97 See, e.g., The Lancet, The plight of essential manner that is both accurate and easily workers during the COVID–19 pandemic, Vol. 395, premium pay to eligible workers Issue 10237:1587 (, 2020), available at administrable? Why or why not? performing essential work during the https://www.thelancet.com/journals/lancet/article/ Question 4: The interim final rule COVID–19 public health emergency or PIIS0140-6736%2820%2931200-9/fulltext. permits deposits to Unemployment to provide grants to third-party 98 Id. Insurance Trust Funds, or using funds employers with eligible workers 99 Joanna Gaitens et al., Covid–19 and essential to pay back advances, up to the pre- 95 workers: A narrative review of health outcomes and performing essential work. These are moral injury, Int’l J. of Envtl. Research and Pub. pandemic balance. What, if any, workers who have been and continue to Health 18(4):1446 (Feb. 4, 2021), available at conditions should be considered to be relied on to maintain continuity of https://pubmed.ncbi.nlm.nih.gov/33557075/; Tiana ensure that funds repair economic operations of essential critical N. Rogers et al., Racial Disparities in COVID–19 impacts of the pandemic and strengthen Mortality Among Essential Workers in the United infrastructure sectors, including those States, World Med. & Health policy 12(3):311–27 unemployment insurance systems? who are critical to protecting the health (Aug. 5, 2020), available at https:// Question 5: Are there other types of and wellbeing of their communities. onlinelibrary.wiley.com/doi/full/10.1002/wmh3.358 services or costs that Treasury should Since the start of the COVID–19 (finding that vulnerability to coronavirus exposure consider as eligible uses to respond to public health emergency in January was increased among non-Hispanic blacks, who disproportionately occupied the top nine essential the negative economic impacts of 2020, essential workers have put their occupations). COVID–19? Describe how these respond physical wellbeing at risk to meet the 100 Economic Policy Institute, Only 30% of those to the COVID–19 public health daily needs of their communities and to working outside their home are receiving hazard emergency. provide care for others. In the course of pay (, 2020), https://www.epi.org/press/only- 30-of-those-working-outside-their-home-are- Question 6: What other measures, this work, many essential workers have receiving-hazard-pay-black-and-hispanic-workers- presumptions, or considerations could are-most-concerned-about-bringing-the- be used to assess ‘‘impacted industries’’ 95 Sections 602(c)(1)(B), 603(c)(1)(B) of the Act. coronavirus-home/.

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Many of these workers earn lower wages as noted above. As provided under The threshold of 150 percent for on average and live in sections 602(g)(2) and 603(g)(2), the requiring additional written justification socioeconomically vulnerable chief executive of each recipient has is based on an analysis of the communities as compared to the general discretion to add additional sectors to distribution of labor income for a population.101 A recent study found that this list, so long as additional sectors are sample of 20 occupations that generally 25 percent of essential workers were deemed critical to protect the health and correspond to the essential workers as estimated to have low household well-being of residents. defined in the interim final rule.106 For income, with 13 percent in high-risk In providing premium pay to essential these occupations, labor income for the households.102 The low pay of many workers or grants to eligible employers, vast majority of workers was under 150 essential workers makes them less able a recipient must consider whether the percent of average annual labor income to cope with the financial consequences pay or grant would ‘‘respond to’’ to the across all occupations. Treasury of the pandemic or their work-related worker or workers performing essential anticipates that the threshold of 150 health risks, including working hours work. Premium pay or grants provided percent of the annual average wage will lost due to sickness or disruptions to under this section respond to workers be greater than the annual average wage childcare and other daily routines, or performing essential work if it addresses of the vast majority of eligible workers the likelihood of COVID–19 spread in the heightened risk to workers who performing essential work. These their households or communities. Thus, must be physically present at a jobsite enhanced reporting requirements help the threats and costs involved with and, for many of whom, the costs to ensure grants are directed to essential maintaining the ongoing operation of associated with illness were hardest to workers in critical infrastructure sectors vital facilities and services have been, bear financially. Many of the workers and responsive to the impacts of the and continue to be, borne by those that performing critical essential services are pandemic observed among essential are often the most vulnerable to the low- or moderate-income workers, such workers, namely the mis-alignment pandemic. The added health risk to as those described above. The ARPA between health risks and compensation. essential workers is one prominent way recognizes this by defining premium Enhanced reporting also provides in which the pandemic has amplified pay to mean an amount up to $13 per transparency to the public. Finally, pre-existing socioeconomic inequities. hour in addition to wages or using a localized measure reflects The Fiscal Recovery Funds will help remuneration the worker otherwise differences in wages and cost of living respond to the needs of essential receives and in an aggregate amount not across the country, making this standard workers by allowing recipients to to exceed $25,000 per eligible worker. administrable and reflective of essential remunerate essential workers for the To ensure the provision is implemented worker incomes across a diverse range elevated health risks they have faced in a manner that compensates these of geographic areas. and continue to face during the public workers, the interim final rule provides Furthermore, because premium pay is health emergency. To ensure that that any premium pay or grants intended to compensate essential premium pay is targeted to workers that provided using the Fiscal Recovery workers for heightened risk due to faced or face heightened risks due to the Funds should prioritize compensation COVID–19, it must be entirely additive character of their work, the interim final of those lower income eligible workers to a worker’s regular rate of wages and rule defines essential work as work that perform essential work. other remuneration and may not be used involving regular in-person interactions As such, providing premium pay to to reduce or substitute for a worker’s or regular physical handling of items eligible workers responds to such normal earnings. The definition of that were also handled by others. A workers by helping address the premium pay also clarifies that worker would not be engaged in disparity between the critical services premium pay may be provided essential work and, accordingly may not and risks taken by essential workers and retrospectively for work performed at receive premium pay, for telework the relatively low compensation they any time since the start of the COVID– performed from a residence. tend to receive in exchange. If premium 19 public health emergency, where Sections 602(g)(2) and 603(g)(2) pay would increase a worker’s total pay those workers have yet to be define eligible worker to mean ‘‘those above 150 percent of their residing compensated adequately for work workers needed to maintain continuity state’s average annual wage for all previously performed.107 Treasury of operations of essential critical occupations, as defined by the Bureau of encourages recipients to prioritize infrastructure sectors and additional Labor Statistics’ Occupational providing retrospective premium pay sectors as each Governor of a State or Employment and Wage Statistics, or where possible, recognizing that many territory, or each Tribal government, their residing county’s average annual essential workers have not yet received may designate as critical to protect the wage, as defined by the Bureau of Labor additional compensation for work health and well-being of the residents of Statistics’ Occupational Employment conducted over the course of many their State, territory, or Tribal and Wage Statistics, whichever is government.’’ 103 The rule incorporates higher, on an annual basis, the State, of Labor Statistics, May 2020 Metropolitan and this definition and provides a list of local, or Tribal government must Nonmetropolitan Area Estimates listed by county or industries recognized as essential provide Treasury and make publicly town, https://www.bls.gov/oes/current/county_ links.htm (last visited , 2021). critical infrastructure sectors.104 These available, whether for themselves or on 106 Treasury performed this analysis with data sectors include healthcare, public health behalf of a grantee, a written from the U.S. Census Bureau’s 2019 Annual Social and safety, childcare, education, justification of how the premium pay or and Economic Supplement. In determining which sanitation, transportation, and food grant is responsive to workers occupations to include in this analysis, Treasury production and services, among others excluded management and supervisory positions, as performing essential worker during the such positions may not necessarily involve regular 105 public health emergency. in-person interactions or physical handling of items 101 McCormack, supra note 37. to the same extent as non-managerial positions. 102 Id. 105 County median annual wage is taken to be that 107 However, such compensation must be ‘‘in 103 Sections 602(g)(2), 603(g)(2) of the Act. of the metropolitan or nonmetropolitan area that addition to’’ remuneration or wages already 104 The list of critical infrastructure sectors includes the county. See U.S. Bureau of Labor received. That is, employers may not reduce such provided in the interim final rule is based on the Statistics, State Occupational Employment and workers’ current pay and use Fiscal Recovery Funds list of essential workers under The Heroes Act, H.R. Wage Estimates, https://www.bls.gov/oes/current/ to compensate themselves for premium pay 6800, 116th Cong. (2020). oessrcst.htm (last visited May 1, 2021); U.S. Bureau previously provided to the worker.

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months. Essential workers who have period 2019.109 At the local level, nearly Sections 602(c)(1)(C) and 603(c)(1)(C) already earned premium pay for 90 percent of cities have reported being of the Act allow recipients facing budget essential work performed during the less able to meet the fiscal needs of their shortfalls to use payments from the COVID–19 public health emergency communities and, on average, cities Fiscal Recovery Funds to avoid cuts to remain eligible for additional payments, expect a double-digit decline in general government services and, thus, enable and an essential worker may receive fund revenues in their fiscal year State, local, and Tribal governments to both retrospective premium pay for 2021.110 Similarly, surveys of Tribal continue to provide valuable services prior work as well as prospective governments and Tribal enterprises and ensure that fiscal austerity measures premium pay for current or ongoing found majorities of respondents do not hamper the broader economic work. reporting substantial cost increases and recovery. The interim final rule To ensure any grants respond to the revenue decreases, with Tribal implements these provisions by needs of essential workers and are made governments reporting reductions in establishing a definition of ‘‘general in a fair and transparent manner, the healthcare, housing, social services, and revenue’’ for purposes of calculating a rule imposes some additional reporting economic development activities as a loss in revenue and by providing a requirements for grants to third-party result of reduced revenues.111 These methodology for calculating revenue employers, including the public budget shortfalls are particularly lost due to the COVID–19 public health disclosure of grants provided. See problematic in the current environment, emergency. Section VIII of this SUPPLEMENTARY as State, local, and Tribal governments General Revenue. The interim final INFORMATION, discussing reporting work to mitigate and contain the rule adopts a definition of ‘‘general requirements. In responding to the COVID–19 pandemic and help citizens revenue’’ based largely on the needs of essential workers, a grant to an weather the economic downturn. components reported under ‘‘General employer may provide premium pay to Further, State, local, and Tribal Revenue from Own Sources’’ in the eligible workers performing essential government budgets affect the broader Census Bureau’s Annual Survey of State work, as these terms are defined in the economic recovery. During the period and Local Government Finances, and for interim final rule and discussed above. following the 2007–2009 recession, purposes of this interim final rule, helps A grant provided to an employer may State and local government budget to ensure that the components of general also be for essential work performed by pressures led to fiscal austerity that was revenue would be calculated in a 115 eligible workers pursuant to a contract. a significant drag on the overall consistent manner. By relying on a For example, if a municipality contracts economic recovery.112 Inflation- methodology that is both familiar and with a third party to perform sanitation adjusted State and local government comprehensive, this approach work, the third-party contractor could revenue did not return to the previous minimizes burden to recipients and be eligible to receive a grant to provide peak until 2013,113 while State, local, provides consistency in the premium pay for these eligible workers. and Tribal government employment did measurement of general revenue across Question 10: Are there additional not recover to its prior peak for over a a diverse set of recipients. The interim final rule defines the term sectors beyond those listed in the decade, until 2019—just a few ‘‘general revenue’’ to include revenues interim final rule that should be months before the COVID–19 public collected by a recipient and generated considered essential critical health emergency began.114 infrastructure sectors? from its underlying economy and would capture a range of different types of tax Question 11: What, if any, additional 109 Major sources include personal income tax, criteria should Treasury consider to corporate income tax, sales tax, and property tax. revenues, as well as other types of ensure that premium pay responds to See Lucy Dadayan., States Reported Revenue revenue that are available to support essential workers? Growth in July–September Quarter, Reflecting government services.116 In calculating Revenue Shifts from the Prior Quarter, State Tax revenue, recipients should sum across Question 12: What consideration, if and Econ. Rev. (Q. 3, 2020), available at https:// any, should be given to the criteria on www.urban.org/sites/default/files/publication/ all revenue streams covered as general salary threshold, including measure and 103938/state-tax-and-economic-review-2020-q3_ revenue. This approach minimizes the level, for requiring written justification? 0.pdf. administrative burden for recipients, 110 National League of Cities, City Fiscal provides for greater consistency across C. Revenue Loss Conditions (2020), available at https://www.nlc.org/ wp-content/uploads/2020/08/City_Fiscal_ recipients, and presents a more accurate Recipients may use payments from Conditions_2020_FINAL.pdf. representation of the overall impact of the Fiscal Recovery Funds for the 111 Surveys conducted by the Center for Indian provision of government services to the Country Development at the Federal Reserve Bank retrieved from FRED, Federal Reserve Bank of St. extent of the reduction in revenue of Minneapolis in March, April, and September Louis, https://fred.stlouisfed.org/series/ 2020. See Moreno & Sobrepena, supra note 73. CES9092000001 and https://fred.stlouisfed.org/ experienced due to the COVID–19 112 108 See, e.g., Fitzpatrick, Haughwout & Setren, series/CES9093000001 (last visited Apr. 27, 2021). public health emergency. Pursuant to Fiscal Drag from the State and Local Sector?, 115 U.S. Census Bureau, Annual Survey of State sections 602(c)(1)(C) and 603(c)(1)(C) of Liberty Street Economics Blog, Federal Reserve and Local Government Finances, https:// the Act, a recipient’s reduction in Bank of New York (June 27, 2012), https:// www.census.gov/programs-surveys/gov- revenue is measured relative to the www.libertystreeteconomics.newyorkfed.org/2012/ finances.html (last visited Apr. 30, 2021). 06/fiscal-drag-from-the-state-and-local-sector.html; 116 revenue collected in the most recent full The interim final rule would define tax Jiri Jonas, Great Recession and Fiscal Squeeze at revenue in a manner consistent with the Census fiscal year prior to the emergency. U.S. Subnational Government Level, IMF Working Bureau’s definition of tax revenue, with certain Many State, local, and Tribal Paper 12/184, (July 2012), available at https:// changes (i.e., inclusion of revenue from liquor governments are experiencing www.imf.org/external/pubs/ft/wp/2012/ stores and certain intergovernmental transfers). significant budget shortfalls, which can wp12184.pdf; Gordon, supra note 9. Current charges are defined as ‘‘charges imposed for 113 State and local government general revenue providing current services or for the sale of have a devastating impact on from own sources, adjusted for inflation using the products in connection with general government communities. State government tax GDP price index. U.S. Census Bureau, Annual activities.’’ It includes revenues such as public revenue from major sources were down Survey of State Government Finances and U.S. education institution, public hospital, and toll 4.3 percent in the six months ended Bureau of Economic Analysis, National Income and revenues. Miscellaneous general revenue comprises Product Accounts. of all other general revenue of governments from September 2020, relative to the same 114 U.S. Bureau of Labor Statistics, All Employees, their own sources (i.e., other than liquor store, State Government [CES9092000001] and All utility, and insurance trust revenue), including 108 ARPA, supra note 16. Employees, Local Government [CES9093000001], rents, royalties, lottery proceeds, and fines.

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the COVID–19 public health emergency intergovernmental transfers. When reasons unrelated to the COVID–19 on a recipient’s revenue, rather than attributing revenue to a unit of public health emergency, to minimize relying on financial reporting prepared government, the Census Bureau’s the administrative burden on recipients by each recipient, which vary in methodology considers which unit of and taking into consideration the methodology used and which generally government imposes, collects, and devastating effects of the COVID–19 aggregates revenue by purpose rather retains the revenue and assigns the public health emergency, any than by source.117 revenue to the unit of government that diminution in actual revenues relative Consistent with the Census Bureau’s meets at least two of those three to the counterfactual pre-pandemic definition of ‘‘general revenue from own factors.119 For purposes of measuring trend would be presumed to have been sources,’’ the definition of general loss in general revenue due to the due to the COVID–19 public health revenue in the interim final rule would COVID–19 public health emergency and emergency. exclude refunds and other correcting to better allow continued provision of For purposes of measuring revenue transactions, proceeds from issuance of government services, the retention and growth in the counterfactual trend, debt or the sale of investments, and ability to use the revenue is a more recipients may use a growth adjustment agency or private trust transactions. The critical factor. Accordingly, and to better of either 4.1 percent per year or the definition of general revenue also would measure the funds available for the recipient’s average annual revenue exclude revenue generated by utilities provision of government services, the growth over the three full fiscal years and insurance trusts. In this way, the definition of general revenue would prior to the COVID–19 public health definition of general revenue focuses on include intergovernmental transfers emergency, whichever is higher. The sources that are generated from from States or local governments other option of 4.1 percent represents the economic activity and are available to than funds transferred pursuant to average annual growth across all State fund government services, rather than a ARPA, CRF, or another Federal and local government ‘‘General Revenue fund or administrative unit established program. This formulation recognizes from Own Sources’’ in the most recent to account for and control a particular the importance of State transfers for three years of available data.122 This activity.118 For example, public utilities local government revenue.120 approach provides recipients with a typically require financial support from Calculation of Loss. In general, standardized growth adjustment when the State, local, or Tribal government, recipients will compute the extent of the calculating the counterfactual revenue rather than providing revenue to such reduction in revenue by comparing trend and thus minimizes government, and any revenue that is actual revenue to a counterfactual trend administrative burden, while not generated by public utilities typically is representing what could have been disadvantaging recipients with revenue used to support the public utility’s expected to occur in the absence of the growth that exceeded the national continued operation, rather than being pandemic. This approach measures average prior to the COVID–19 public used as a source of revenue to support losses in revenue relative to the most health emergency by permitting these government services generally. recent fiscal year prior to the COVID–19 recipients to use their own revenue The definition of general revenue public health emergency by using the growth rate over the preceding three would include all revenue from Tribal most recent pre-pandemic fiscal year as years. enterprises, as this revenue is generated the starting point for estimates of Recipients should calculate the extent from economic activity and is available revenue growth absent the pandemic. In of the reduction in revenue as of four to fund government services. Tribes are other words, the counterfactual trend points in time: , 2020; not able to generate revenue through starts with the last full fiscal year prior December 31, 2021; December 31, 2022; taxes in the same manner as State and to the COVID–19 public health and December 31, 2023. To calculate the local governments and, as a result, emergency and then assumes growth at extent of the reduction in revenue at Tribal enterprises are critical sources of a constant rate in the subsequent years. each of these dates, recipients should revenue for Tribal governments that Because recipients can estimate the follow a four-step process: enable Tribal governments to provide a revenue shortfall at multiple points in • Step 1: Identify revenues collected range of services, including elder care, time throughout the covered period as in the most recent full fiscal year prior health clinics, wastewater management, revenue is collected, this approach to the public health emergency (i.e., last and forestry. accounts for variation across recipients full fiscal year before January 27, 2020), Finally, the term ‘‘general revenue’’ in the timing of pandemic impacts.121 called the base year revenue. includes intergovernmental transfers Although revenue may decline for • Step 2: Estimate counterfactual between State and local governments, revenue, which is equal to base year but excludes intergovernmental 119 U.S. Census Bureau, Government Finance and revenue * [(1 + growth adjustment) ∧ (n/ transfers from the Federal Government, Employment Classification Manual (Dec. 2000), 12)], where n is the number of months including Federal transfers made via a https://www2.census.gov/govs/class/classfull.pdf. elapsed since the end of the base year 120 For example, in 2018, state transfers to State to a local government pursuant to localities accounted for approximately 27 percent of to the calculation date, and growth the CRF or as part of the Fiscal Recovery local revenues. U.S. Census Bureau, Annual Survey adjustment is the greater of 4.1 percent Funds. States and local governments of State and Local Government Finances, Table 1 and the recipient’s average annual often share or collect revenue on behalf (2018), https://www.census.gov/data/datasets/2018/ revenue growth in the three full fiscal of one another, which results in econ/local/public-use-datasets.html. 121 For example, following the 2007–09 recession, local government property tax collections did not 122 Together with revenue from liquor stores from 117 Fund-oriented reporting, such as what is used begin to decline until 2011, suggesting that property 2015 to 2018. This estimate does not include any under the Governmental Accounting Standards tax collection declines can lag downturns. See U.S. intergovernmental transfers. A recipient using the Board (GASB), focuses on the types of uses and Bureau of Economic Analysis, Personal current three-year average to calculate their growth activities funded by the revenue, as opposed to the taxes: State and local: Property taxes adjustment must be based on the definition of economic activity from which the revenue is [S210401A027NBEA], retrieved from Federal general revenue, including treatment of sourced. See Governmental Accounting Standards Reserve Economic Data, Federal Reserve Bank of St. intergovernmental transfers. 2015–2018 represents Series, Statement No. 54 of the Governmental Louis, https://fred.stlouisfed.org/graph/?g=r3YI (last the most recent available data. See U.S. Census Accounting Standards Board: Fund Balance visited Apr. 22, 2021). Estimating the reduction in Bureau, State & Local Government Finance Reporting and Governmental Fund Type revenue at points throughout the covered period Historical Datasets and Tables (2018), https:// Definitions, No. 287–B (Feb. 2009). will allow for this type of lagged effect to be taken www.census.gov/programs-surveys/gov-finances/ 118 Supra note 116. into account during the covered period. data/datasets.html.

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years prior to the COVID–19 public revenue less actual revenue. If actual percent is greater than the recipient’s health emergency. revenue exceeds counterfactual revenue, average annual revenue growth in the • Step 3: Identify actual revenue, the extent of the reduction in revenue is three full fiscal years prior to the public which equals revenues collected over set to zero for that calculation date. health emergency. Furthermore, this the past twelve months as of the For illustration, consider a recipient’s base year ends . In calculation date. hypothetical recipient with base year this illustration, n (months elapsed) and • Step 4: The extent of the reduction revenue equal to 100. In Step 2, the counterfactual revenue would be equal in revenue is equal to counterfactual hypothetical recipient finds that 4.1 to:

As of: 12/31/2020 12/31/2021 12/31/2022 12/31/2023

n (months elapsed)...... 18 30 42 54 Counterfactual revenue: ...... 106.2 110.6 115.1 119.8

The overall methodology for calculating the reduction in revenue is illustrated in the figure below:

140 c::::::::J Base year revenue - Extent of reduction in revenue 130 -Actual revenue (last twelve months) - +- - Counterfactual revenue 120 ------110 ------100 ------

90

80 "Q) ~ ~'1, ~ l1 rlf1~" ,l1 0cJ ,:,-::f Q Q Q Q

Upon receiving Fiscal Recovery Fund borrowed money would not be not be considered provision of a payments, recipients may immediately considered the provision of government government service, since such calculate revenue loss for the period services, as these financing expenses do expenses do not directly relate to the ending December 31, 2020. not directly provide services or aid to provision of government services. Sections 602(c)(1)(C) and 603(c)(1)(C) citizens. Specifically, government Question 13: Are there sources of of the Act provide recipients with broad services would not include interest or revenue that either should or should not latitude to use the Fiscal Recovery principal on any outstanding debt be included in the interim final rule’s Funds for the provision of government instrument, including, for example, measure of ‘‘general revenue’’ for services. Government services can short-term revenue or tax anticipation recipients? If so, discuss why these include, but are not limited to, notes, or fees or issuance costs sources either should or should not be maintenance or pay-go funded associated with the issuance of new included. building 123 of infrastructure, including debt. For the same reasons, government Question 14: In the interim final rule, roads; modernization of cybersecurity, services would not include satisfaction recipients are expected to calculate the including hardware, software, and of any obligation arising under or reduction in revenue on an aggregate protection of critical infrastructure; pursuant to a settlement agreement, basis. Discuss the advantages and health services; environmental judgment, consent decree, or judicially disadvantages of, and any potential remediation; school or educational confirmed debt restructuring in a concerns with, this approach, including services; and the provision of police, judicial, administrative, or regulatory circumstances in which it could be proceeding, except if the judgment or fire, and other public safety services. necessary or appropriate to calculate settlement required the provision of However, expenses associated with the reduction in revenue by source. government services. That is, Question 15: Treasury is considering obligations under instruments satisfaction of a settlement or judgment whether to take into account other evidencing financial indebtedness for itself is not a government service, unless factors, including actions taken by the the settlement required the provision of recipient as well as the expiration of the 123 Pay-go infrastructure funding refers to the practice of funding capital projects with cash-on- government services. In addition, COVID–19 public health emergency, in hand from taxes, fees, grants, and other sources, replenishing financial reserves (e.g., determining whether to presume that rather than with borrowed sums. rainy day or other reserve funds) would revenue losses are ‘‘due to’’ the COVID–

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19 public health emergency. Discuss the ensure that water, sewer, and broadband Established by the 1987 advantages and disadvantages of this projects use strong labor standards, amendments 127 to the presumption, including when, if ever, including project labor agreements and (CWA),128 the CWSRF provides during the covered period it would be community benefits agreements that financial assistance for a wide range of appropriate to reevaluate the offer wages at or above the prevailing water infrastructure projects to improve presumption that all losses are rate and include local hire provisions, water quality and address water attributable to the COVID–19 public not only to promote effective and pollution in a way that enables each health emergency. efficient delivery of high-quality State to address and prioritize the needs Question 16: Do recipients anticipate infrastructure projects but also to of their populations. The types of lagged revenue effects of the public support the economic recovery through projects eligible for CWSRF assistance health emergency? If so, when would strong employment opportunities for include projects to construct, improve, these lagged effects be expected to workers. Using these practices in and repair wastewater treatment plants, occur, and what can Treasury to do construction projects may help to control non-point sources of pollution, support these recipients through its ensure a reliable supply of skilled labor improve resilience of infrastructure to implementation of the program? that would minimize disruptions, such severe weather events, create green Question 17: In the interim final rule, as those associated with labor disputes infrastructure, and protect waterbodies 129 paying interest or principal on or workplace injuries. from pollution. Each of the 51 State government debt is not considered programs established under the CWSRF To provide public transparency on provision of a government service. have the flexibility to direct funding to whether projects are using practices that Discuss the advantages and their particular environmental needs, promote on-time and on-budget disadvantages of this approach, and each State may also have its own delivery, Treasury will seek information including circumstances in which statutes, rules, and regulations that from recipients on their workforce plans 130 paying interest or principal on guide project eligibility. government debt could be considered and practices related to water, sewer, The DWSRF was modeled on the provision of a government service. and broadband projects undertaken with CWSRF and created as part of the 1996 Fiscal Recovery Funds. Treasury will amendments to the Safe Drinking Water D. Investments in Infrastructure provide additional guidance and Act (SDWA),131 with the principal To assist in meeting the critical need instructions on the reporting objective of helping public water for investments and improvements to requirements at a later date. systems obtain financing for improvements necessary to protect existing infrastructure in water, sewer, 1. Water and Sewer Infrastructure and broadband, the Fiscal Recovery public health and comply with drinking Funds provide funds to State, local, and The ARPA provides funds to State, water regulations.132 Like the CWSRF, Tribal governments to make necessary local, and Tribal governments to make investments in these sectors. The necessary investments in water and 127 Water Quality Act of 1987, Public Law 100– 4. 125 interim final rule outlines eligible uses sewer infrastructure. By permitting 128 Federal Water Pollution Control Act as within each category, allowing for a funds to be used for water and sewer amended, codified at 33 U.S.C. 1251 et seq., broad range of necessary investments in infrastructure needs, Congress common name (Clean Water Act). In 2009, the projects that improve access to clean recognized the critical role that clean American Recovery and Reinvestment Act created the Green Project Reserve, which increased the drinking water, improve wastewater and drinking water and services for the focus on green infrastructure, water and energy stormwater infrastructure systems, and collection and treatment of wastewater efficient, and environmentally innovative projects. provide access to high-quality and stormwater play in protecting Public Law 111–5. The CWA was amended by the broadband service. Necessary Water Resources Reform and Development Act of public health. Understanding that State, 2014 to further expand the CWSRF’s eligibilities. investments are designed to provide an local, and Tribal governments have a Public Law 113–121. The CWSRF’s eligibilities were adequate minimum level of service and broad range of water and sewer further expanded in 2018 by the America’s Water are unlikely to be made using private infrastructure needs, the interim final Infrastructure Act of 2018, Public Law 115–270. sources of funds. Necessary investments 129 See Environmental Protection Agency, The rule provides these governments with Drinking Water State Revolving Funds: Financing include projects that are required to wide latitude to identify investments in America’s Drinking Water, EPA–816–R–00–023 maintain a level of service that, at least, water and sewer infrastructure that are (Nov. 2000), https://nepis.epa.gov/Exe/ZyPDF.cgi/ meets applicable health-based of the highest priority for their own 200024WB.PDF?Dockey=200024WB.PDF; See also standards, taking into account resilience Environmental Protection Agency, Learn About the communities, which may include Clean Water State Revolving Fund, https:// to climate change, or establishes or projects on privately-owned www.epa.gov/cwsrf/learn-about-clean-water-state- improves broadband service to unserved infrastructure. The interim final rule revolving-fund-cwsrf (last visited Apr. 30, 2021). or underserved populations to reach an does this by aligning eligible uses of the 130 33 U.S.C. 1383(c). See also Environmental adequate level to permit a household to Protection Agency, Overview of Clean Water State Fiscal Recovery Funds with the wide Revolving Fund Eligibilities (May 2016), https:// work or attend school, and that are range of types or categories of projects www.epa.gov/sites/production/files/2016-07/ unlikely to be met with private sources that would be eligible to receive documents/overview_of_cwsrf_eligibilities_may_ of funds.124 financial assistance through the 2016.pdf; Claudia Copeland, Clean Water Act: A It is important that necessary Summary of the Law, Congressional Research Environmental Protection Agency’s Service (Oct. 18, 2016), https://fas.org/sgp/crs/misc/ investments in water, sewer, or (EPA) Clean Water State Revolving RL30030.pdf; Jonathan L Ramseur, Wastewater broadband infrastructure be carried out Fund (CWSRF) or Drinking Water State Infrastructure: Overview, Funding, and Legislative in ways that produce high-quality Revolving Fund (DWSRF).126 Developments, Congressional Research Service infrastructure, avert disruptive and (, 2018), https://fas.org/sgp/crs/misc/ R44963.pdf. costly delays, and promote efficiency. 125 Sections 602(c)(1)(D), 603(c)(1)(D) of the Act. 131 42 U.S.C. 300j–12. Treasury encourages recipients to 126 Environmental Protection Agency, Drinking 132 Environmental Protection Agency, Drinking Water State Revolving fund, https://www.epa.gov/ Water State Revolving Fund Eligibility Handbook, 124 Treasury notes that using funds to support or dwsrf (last visited Apr. 30, 2021); Environmental (June 2017), https://www.epa.gov/sites/production/ oppose collective bargaining would not be included Protection Agency, Clean Water State Revolving files/2017-06/documents/dwsrf_eligibility_ as part of ‘‘necessary investments in water, sewer, Fund, https://www.epa.gov/cwsrf (last visited Apr. handbook_june_13_2017_updated_508_version.pdf; or broadband infrastructure.’’ 30, 2021). Environmental Protection Agency, Drinking Water

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the DWSRF provides States with the In addition, responding to the support efforts to address climate flexibility to meet the needs of their immediate needs of the COVID–19 change. For example, by taking steps to populations.133 The primary use of public health emergency may have manage potential sources of pollution DWSRF funds is to assist communities diverted both personnel and financial and preventing these sources from in making water infrastructure capital resources from other State, local, and reaching sources of drinking water, improvements, including the Tribal priorities, including projects to projects eligible under the DWSRF and installation and replacement of failing ensure compliance with applicable the ARPA may reduce energy required treatment and distribution systems.134 water health and quality standards and to treat drinking water. Similarly, In administering these programs, States provide safe drinking and usable projects eligible under the CWSRF must give priority to projects that ensure water.137 Through sections 602(c)(1)(D) include measures to conserve and reuse compliance with applicable health and and 603(c)(1)(D), the ARPA provides water or reduce the energy consumption environmental safety requirements; resources to address these needs. of public water treatment facilities. address the most serious risks to human Moreover, using Fiscal Recovery Funds Treasury encourages recipients to health; and assist systems most in need in accordance with the priorities of the consider green infrastructure on a per household basis according to CWA and SWDA to ‘‘assist systems investments and projects to improve State affordability criteria.135 most in need on a per household basis resilience to the effects of climate By aligning use of Fiscal Recovery according to state affordability criteria’’ change. For example, more frequent and Funds with the categories or types of would also have the benefit of providing extreme precipitation events combined eligible projects under the existing EPA vulnerable populations with safe with construction and development state revolving fund programs, the drinking water that is critical to their trends have led to increased instances of interim final rule provides recipients health and, thus, their ability to work stormwater runoff, water pollution, and with the flexibility to respond to the and learn.138 flooding. Green infrastructure projects needs of their communities while Recipients may use Fiscal Recovery that support stormwater system ensuring that investments in water and Funds to invest in a broad range of resiliency could include rain gardens sewer infrastructure made using Fiscal projects that improve drinking water that provide water storage and filtration Recovery Funds are necessary. As infrastructure, such as building or benefits, and green streets, where discussed above, the CWSRF and upgrading facilities and transmission, vegetation, soil, and engineered systems DWSRF were designed to provide distribution, and storage systems, are combined to direct and filter funding for projects that protect public including replacement of lead service rainwater from impervious surfaces. In health and safety by ensuring lines. Given the lifelong impacts of lead cases of a natural disaster, recipients compliance with wastewater and exposure for children, and the may also use Fiscal Recovery Funds to drinking water health standards.136 The widespread nature of lead service lines, provide relief, such as interconnecting need to provide funding through the Treasury encourages recipients to water systems or rehabilitating existing state revolving funds suggests that these consider projects to replace lead service wells during an extended drought. Question 18: What are the advantages projects are less likely to be addressed lines. and disadvantages of aligning eligible with private sources of funding; for Fiscal Recovery Funds may also be uses with the eligible project type example, by remediating failing or used to support the consolidation or establishment of drinking water requirements of the DWSRF and inadequate infrastructure, much of CWSRF? What other water or sewer which is publicly owned, and by systems. With respect to wastewater infrastructure, recipients may use Fiscal project categories, if any, should addressing non-point sources of Treasury consider in addition to DWSRF pollution. This approach of aligning Recovery Funds to construct publicly owned treatment infrastructure, manage and CWSRF eligible projects? Should with the EPA state revolving fund Treasury consider a broader general programs also supports expedited and treat stormwater or subsurface drainage water, facilitate water reuse, category of water and sewer projects? project identification and investment so Question 19: What additional water that needed relief for the people and and secure publicly owned treatment works, among other uses. Finally, and sewer infrastructure categories, if communities most affected by the any, should Treasury consider to pandemic can deployed expeditiously consistent with the CWSRF and DWSRF, Fiscal Recovery Funds may be address and respond to the needs of and have a positive impact on their unserved, undeserved, or rural used for cybersecurity needs to protect health and wellbeing as soon as communities? How do these projects water or sewer infrastructure, such as possible. Further, the interim final rule differ from DWSFR and CWSRF eligible developing effective cybersecurity is intended to preserve flexibility for projects? award recipients to direct funding to practices and measures at drinking Question 20: What new categories of their own particular needs and priorities water systems and publicly owned water and sewer infrastructure, if any, and would not preclude recipients from treatment works. should Treasury consider to support Many of the types of projects eligible applying their own additional project State, local, and Tribal governments in under either the CWSRF or DWSRF also eligibility criteria. mitigating the negative impacts of climate change? Discuss emerging 137 House Committee on the Budget, State and Infrastructure Needs Survey and Assessment: Sixth Local Governments are in Dire Need of Federal technologies and processes that support Report to Congress (March 2018), https:// Relief (Aug. 19, 2020), https://budget.house.gov/ resiliency of water and sewer www.epa.gov/sites/production/files/2018-10/ _ _ _ _ publications/report/state-and-local-governments- infrastructure. Discuss any challenges documents/corrected sixth drinking water are-dire-need-federal-relief. infrastructure_needs_survey_and_assessment.pdf. faced by States and local governments 138 Environmental Protection Agency, Drinking 133 Id. Water State Revolving Fund (Nov. 2019), https:// when pursuing or implementing climate 134 Id. www.epa.gov/sites/production/files/2019-11/ resilient infrastructure projects. 135 42 U.S.C. 300j–12(b)(3)(A). documents/fact_sheet_-_dwsrf_overview_final_ Question 21: Infrastructure projects 136 Environmental Protection Agency, Learn 0.pdf; Environmental Protection Agency, National related to dams and reservoirs are About the Clean Water State Revolving Fund, Benefits Analysis for Drinking Water Regulations, https://www.epa.gov/cwsrf/learn-about-clean-water- https://www.epa.gov/sdwa/national-benefits- generally not eligible under the CWSRF state-revolving-fund-cwsrf (last visited Apr. 30, analysis-drinking-water-regulations (last visited and DWSRF categories. Should Treasury 2021); 42 U.S.C. 300j–12. Apr. 30, 2020). consider expanding eligible

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infrastructure under the interim final exists, broadband access may be out of a minimum of 100 Mbps symmetrical rule to include dam and reservoir reach for millions of Americans because for download and upload speeds.144 In projects? Discuss public health, it is unaffordable, as the United States setting these standards, Treasury environmental, climate, or equity has some of the highest broadband identified speeds necessary to ensure benefits and costs in expanding the prices in the Organisation for Economic that broadband infrastructure is eligibility to include these types of Co-operation and Development sufficient to enable users to generally projects. (OECD).141 There are disparities in meet household needs, including the availability as well; historically, ability to support the simultaneous use 2. Broadband Infrastructure Americans living in territories and of work, education, and health The COVID–19 public health Tribal lands as well as rural areas have applications, and also sufficiently emergency has underscored the disproportionately lacked sufficient robust to meet increasing household importance of universally available, broadband infrastructure.142 Moreover, demands for bandwidth. Treasury also high-speed, reliable, and affordable rapidly growing demand has, and will recognizes that different communities broadband coverage as millions of likely continue to, quickly outpace and their members may have a broad Americans rely on the internet to infrastructure capacity, a phenomenon range of internet needs and that those participate in, among critical activities, acknowledged by various states around needs may change over time. remote school, healthcare, and work. the country that have set scalability In considering the appropriate speed Recognizing the need for such requirements to account for this requirements for eligible projects, connectivity, the ARPA provides funds anticipated growth in demand.143 Treasury considered estimates of typical to State, territorial, local, and Tribal The interim final rule provides that households demands during the governments to make necessary eligible investments in broadband are pandemic. Using the Federal investments in broadband those that are designed to provide Communication Commission’s (FCC) infrastructure. services meeting adequate speeds and Broadband Speed Guide, for example, a The National Telecommunications are provided to unserved and household with two telecommuters and and Information Administration (NTIA) underserved households and two to three remote learners today are highlighted the growing necessity of businesses. Understanding that States, estimated to need 100 Mbps download broadband in daily lives through its territories, localities, and Tribal to work simultaneously.145 In analysis of NTIA Internet Use Survey governments have a wide range of households with more members, the data, noting that Americans turn to varied broadband infrastructure needs, demands may be greater, and in broadband internet access service for the interim final rule provides award households with fewer members, the every facet of daily life including work, recipients with flexibility to identify the demands may be less. study, and healthcare.139 With increased specific locations within their In considering the appropriate speed use of technology for daily activities and communities to be served and to requirements for eligible projects, the movement by many businesses and otherwise design the project. Treasury also considered data usage schools to operating remotely during the Under the interim final rule, eligible patterns and how bandwidth needs have pandemic, broadband has become even projects are expected to be designed to changed over time for U.S. households more critical for people across the deliver, upon project completion, and businesses as people’s use of country to carry out their daily lives. service that reliably meets or exceeds technology in their daily lives has By at least one measure, however, symmetrical upload and download evolved. In the few years preceding the tens of millions of Americans live in speeds of 100 Mbps. There may be pandemic, market research data showed areas where there is no broadband instances in which it would not be that average upload speeds in the infrastructure that provides download practicable for a project to deliver such United States surpassed over 10 Mbps speeds greater than 25 Mbps and upload service speeds because of the geography, in 2017 146 and continued to increase speeds of 3 Mbps.140 By contrast, as topography, or excessive costs significantly, with the average upload noted below, many households use associated with such a project. In these speed as of , 2019 increasing upload and download speeds of 100 instances, the affected project would be to 48.41 Mbps,147 attributable, in part to Mbps to meet their daily needs. Even in expected to be designed to deliver, upon a shift to using broadband and the areas where broadband infrastructure project completion, service that reliably internet by individuals and businesses meets or exceeds 100 Mbps download 139 See, e.g., https://www.ntia.gov/blog/2020/ and between at least 20 Mbps and 100 144 This scalability threshold is consistent with more-half-american-households-used-internet- Mbps upload speeds and be scalable to scalability requirements used in other jurisdictions. health-related-activities-2019-ntia-data-show; Id. 145 https://www.ntia.gov/blog/2020/nearly-third- 141 How Do U.S. Internet Costs Compare To The Federal Communications Commission, american-employees-worked-remotely-2019-ntia- Rest Of The World?, BroadbandSearch Blog Post, Broadband Speed Guide, https://www.fcc.gov/ data-show; and generally, https://www.ntia.gov/ available at https://www.broadbandsearch.net/blog/ consumers/guides/broadband-speed-guide (last data/digital-nation-data-explorer. internet-costs-compared-worldwide. visited Apr. 30, 2021). 146 140 As an example, data from the Federal 142 See, e.g., Federal Communications Letter from Lisa R. Youngers, President and Communications Commission shows that as of June Commission, Fourteenth Broadband Deployment CEO of Fiber Broadband Association to FCC, WC 2020, 9.07 percent of the U.S. population had no Report, available at https://docs.fcc.gov/public/ Docket No. 19–126 (filed Jan. 3, 2020), including an available cable or fiber broadband providers attachments/FCC-21-18A1.pdf. Appendix with research from RVA LLC, Data providing greater than 25 Mbps download speeds 143 See, e.g., Illinois Department of Commerce & Review Of The Importance of Upload Speeds (Jan. and 3 Mbps upload speeds. Availability was Economic Opportunity, Broadband Grants, h (last 2020), and Ookla speed test data, available at significantly less for rural versus urban populations, visited May 9, 2021), https://www2.illinois.gov/ https://ecfsapi.fcc.gov/file/101030085118517/ with 35.57 percent of the rural population lacking dceo/ConnectIllinois/Pages/BroadbandGrants.aspx; FCC%20RDOF%20Jan%203%20 such access, compared with 2.57 percent of the Kansas Office of Broadband Development, Ex%20Parte.pdf.Additional information on historic urban population. Availability was also Broadband Acceleration Grant, https:// growth in data usage is provided in Schools, Health significantly less for tribal versus non-tribal www.kansascommerce.gov/wp-content/uploads/ & Libraries Broadband Coalition, Common Sense populations, with 35.93 percent of the tribal 2020/11/Broadband-Acceleration-Grant.pdf (last Solutions for Closing the Digital Divide, Apr. 29, population lacking such access, compared with 8.74 visited May 9, 2021); New York State Association 2021. of the non-tribal population. Federal of Counties, Universal Broadband: Deploying High 147 Id. See also United States’s Mobile and Communications Commission, Fixed Broadband Speed Internet Access in NYS (Jul. 2017), https:// Broadband internet Speeds—Speedtest Global Deployment, https://broadbandmap.fcc.gov/#/ (last www.nysac.org/files/BroadbandUpdate Index, available at https://www.speedtest.net/ visited May 9, 2021). Report2017(1).pdf. global-index/united-states#fixed.

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to create and share content using video gigabytes.152 OpenVault also noted infrastructure to eligible service areas of sharing, video conferencing, and other significant increases in upstream usage the country also prioritizes projects applications.148 among the data users it observed, with designed to provide broadband service The increasing use of data accelerated upstream data usage growing 63 with a download speed of not less than markedly during the pandemic as percent—from 19 gigabytes to 31 100 Mbps and an upload speed of not gigabytes—between December, 2019 and less than 20 Mbps.157 households across the country became 153 increasingly reliant on tools and December, 2020. According to an The 100 Mbps upload and download speeds will support the increased and applications that require greater internet OECD Broadband statistic from June 2020, the largest percentage of U.S. growing needs of households and capacity, both to download data but also broadband subscribers have services businesses. Recognizing that, in some to upload data. Sending information providing speeds between 100 Mbps instances, 100 Mbps upload speed may became as important as receiving it. A and 1 Gbps.154 be impracticable due to geographical, video consultation with a healthcare Jurisdictions and Federal programs topographical, or financial constraints, provider or participation by a child in are increasingly responding to the the interim final rule permits upload a live classroom with a teacher and growing demands of their communities speeds of between at least 20 Mbps and fellow students requires video to be sent for both heightened download and 100 Mbps in such instances. To provide and received simultaneously.149 As an upload speeds. For example, Illinois for investments that will accommodate example, some video conferencing now requires 100 Mbps symmetrical technologies requiring symmetry in technology platforms indicate that service as the construction standard for download and upload speeds, as noted download and upload speeds should be its state broadband grant programs. This above, eligible projects that are not roughly equal to support two-way, standard is also consistent with speed 150 designed to deliver, upon project interactive video meetings. For both levels, particularly download speed completion, service that reliably meets work and school, client materials or levels, prioritized by other Federal or exceeds symmetrical speeds of 100 completed school assignments, which programs supporting broadband Mbps because it would be impracticable may be in the form of PDF files, videos, projects. Bids submitted as part of the to do so should be designed so that they or graphic files, also need to be shared FCC in its Rural Digital Opportunity can be scalable to such speeds. with others. This is often done by Fund (RDOF), established to support the Recipients are also encouraged to uploading materials to a collaboration construction of broadband networks in prioritize investments in fiber optic site, and the upload speed available to rural communities across the country, infrastructure where feasible, as such a user can have a significant impact on are given priority if they offer faster advanced technology enables the next the time it takes for the content to be service, with the service offerings of 100 generation of application solutions for 151 shared with others. These activities Mbps download and 20 Mbps upload all communities. require significant capacity from home being included in the ‘‘above baseline’’ Under the interim final rule, eligible internet connections to both download performance tier set by the FCC.155 The projects are expected to focus on and upload data, especially when there Broadband Infrastructure Program locations that are unserved or are multiple individuals in one (BBIP) 156 of the Department of underserved. The interim final rule household engaging in these activities Commerce, which provides Federal treats users as being unserved or simultaneously. funding to deploy broadband underserved if they lack access to a This need for increased broadband wireline connection capable of reliably capacity during the pandemic was 152 OVBI: Covid-19 Drove 15 percent Increase in delivering at least minimum speeds of Broadband Traffic in 2020, OpenVault, Quarterly 25 Mbps download and 3 Mbps upload reflected in increased usage patterns Advisory, (Feb. 10, 2021), available at https:// seen over the last year. As OpenVault openvault.com/ovbi-covid-19-drove-51-increase-in- as households and businesses lacking noted in recent advisories, the broadband-traffic-in-2020; See OpenVault’s data set this level of access are generally not pandemic significantly increased the incorporates information on usage by subscribers viewed as being able to originate and across multiple continents, including North receive high-quality voice, data, amount of data users consume. Among America and Europe. Additional data and detail on data users observed by OpenVault, per- increases in the amount of data users consume and graphics, and video subscriber average data usage for the the broadband speeds they are using is provided in telecommunications. This threshold is fourth quarter of 2020 was 482.6 OpenVault Broadband Insights Report Q4, consistent with the FCC’s benchmark for gigabytes per month, representing a 40 Quarterly Advisory (Feb. 10, 2021), available at an ‘‘advanced telecommunications https://openvault.com/complimentary-report-4q20/. capability.’’ 158 This threshold is also percent increase over the 344 gigabytes 153 OVBI Special Report: 202 Upstream Growth consumed in the fourth quarter of 2019 Nearly 4X of Pre-Pandemic Years, OpenVault, consistent with thresholds used in other and a 26 percent increase over the third Quarterly Advisory, (, 20201), available at Federal programs to identify eligible quarter 2020 average of 383.8 https://openvault.com/ovbi-special-report-2020- areas to be served by programs to upstream-growth-rate-nearly-4x-of-pre-pandemic- improve broadband services. For years/; Additional data is provided in OpenVault 148 Id. Broadband Insights Pandemic Impact on Upstream example, in the FCC’s RDOF program, 149 One high definition Zoom meeting or class Broadband Usage and Network Capacity, available eligible areas include those without requires approximately 3.8 Mbps/3.0 Mbps (up/ at https://openvault.com/upstream-whitepaper/. current (or already funded) access to down). 154 Organisation for Economic Co-operation and terrestrial broadband service providing 150 See, e.g., Zoom, System Requirements for Development, Fixed broadband subscriptions per 25 Mbps download and 3 Mbps upload Windows, macOS, and Linux, https:// 100 inhabitants, per speed tiers (June 2020), https:// 159 support.zoom.us/hc/en-us/articles/201362023- www.oecd.org/sti/broadband/5.1-FixedBB- speeds. The Department of System-requirements-for-Windows-macOS-and- SpeedTiers-2020-06.xls www.oecd.org/sti/ Commerce’s BBIP also considers Linux#h_d278c327-e03d-4896-b19a-96a8f3c0c69c broadband/broadband-statistics. households to be ‘‘unserved’’ generally (last visited May 8, 2021). 155 Rural Digital Opportunity Fund, Report and if they lack access to broadband service 151 By one estimate, to upload a one gigabit video Order, 35 FCC Rcd 686, 690, para. 9 (2020), file to YouTube would take 15 minutes at an upload available at https://www.fcc.gov/document/fcc- speed of 10 Mbps compared with 1 minute, 30 launches-20-billion-rural-digital-opportunity-fund- 157 Section 905(d)(4) of the Consolidated seconds at an upload speed of 100 Mbps, and 30 0. Appropriations Act, 2021. seconds at an upload speed of 300 Mbps. 156 The BIPP was authorized by the Consolidated 158 Deployment Report, supra note 142. Reviews.org: What is Symmetrical internet? (March Appropriations Act, 2021, Section 905, Public Law 159 Rural Digital Opportunity Fund, supra note 2020). 116–260, 134 Stat. 1182 (Dec. 27, 2020). 156.

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with a download speed of not less than Question 25: What are the advantages four eligible uses reflect Congress’s 25 Mbps download and 3 Mbps upload, and disadvantages of focusing these judgment that the Fiscal Recovery among other conditions. In selecting an investments on those without access to Funds should be expended in particular area to be served by a project, recipients a wireline connection that reliably ways that support recovery from the are encouraged to avoid investing in delivers 25 Mbps download by 3 Mbps COVID–19 public health emergency. locations that have existing agreements upload? Would another threshold be The further restrictions reflect to build reliable wireline service with appropriate and why? Congress’s judgment that tax cuts and minimum speeds of 100 Mbps Question 26: What are the advantages pension deposits do not fall within download and 20 Mbps upload by and disadvantages of setting any these eligible uses. The interim final December 31, 2024, in order to avoid particular threshold for identifying rule describes how Treasury will duplication of efforts and resources. unserved or underserved areas, identify when such uses have occurred Recipients are also encouraged to minimum speed standards or scalability and how it will recoup funds put consider ways to integrate affordability minimum? Are there other standards toward these impermissible uses and, as options into their program design. To that should be set (e.g., latency)? If so, discussed in Section VIII of this meet the immediate needs of unserved why and how? How can such threshold, SUPPLEMENTARY INFORMATION, establishes and underserved households and standards, or minimum be set in a way a reporting framework for monitoring businesses, recipients are encouraged to that balances the public’s interest in the use of Fiscal Recovery Funds for focus on projects that deliver a physical making sure that reliable broadband eligible uses. broadband connection by prioritizing services meeting the daily needs of all projects that achieve last mile- Americans are available throughout the A. Deposit Into Pension Funds connections. Treasury also encourages country with the providing recipients The statute provides that recipients recipients to prioritize support for flexibility to meet the varied needs of may not use Fiscal Recovery Funds for broadband networks owned, operated their communities? ‘‘deposit into any pension fund.’’ For by, or affiliated with local governments, the reasons discussed below, Treasury III. Restrictions on Use non-profits, and co-operatives— interprets ‘‘deposit’’ in this context to providers with less pressure to turn As discussed above, recipients have refer to an extraordinary payment into a profits and with a commitment to considerable flexibility to use Fiscal pension fund for the purpose of serving entire communities. Recovery Funds to address the diverse reducing an accrued, unfunded liability. Under sections 602(c)(1)(A) and needs of their communities. To ensure More specifically, the interim final rule 603(c)(1)(A), assistance to households that payments from the Fiscal Recovery does not permit this assistance to be facing negative economic impacts due to Funds are used for these congressionally used to make a payment into a pension COVID–19 is also an eligible use, permitted purposes, the ARPA includes fund if both: including internet access or digital two provisions that further define the 1. The payment reduces a liability literacy assistance. As discussed above, boundaries of the statute’s eligible uses. incurred prior to the start of the COVID– in considering whether a potential use Section 602(c)(2)(A) of the Act provides 19 public health emergency, and is eligible under this category, a that States and territories may not ‘‘use 2. the payment occurs outside the recipient must consider whether, and the funds . . . to either directly or recipient’s regular timing for making the extent to which, the household has indirectly offset a reduction in . . . net such payments. experienced a negative economic impact tax revenue . . . resulting from a change Under this interpretation, a ‘‘deposit’’ from the pandemic. in law, regulation, or administrative is distinct from a ‘‘payroll Question 22: What are the advantages interpretation during the covered period contribution,’’ which occurs when and disadvantages of setting minimum that reduces any tax . . . or delays the employers make payments into pension symmetrical download and upload imposition of any tax or tax increase.’’ funds on regular intervals, with speeds of 100 Mbps? What other In addition, sections 602(c)(2)(B) and contribution amounts based on a pre- minimum standards would be 603(c)(2) prohibit any recipient, determined percentage of employees’ appropriate and why? including cities, nonentitlement units of wages and salaries. Question 23: Would setting such a government, and counties, from using As discussed above, eligible uses for minimum be impractical for particular Fiscal Recovery Funds for deposit into premium pay and responding to the types of projects? If so, where and on any pension fund. These restrictions negative economic impacts of the what basis should those projects be support the use of funds for the COVID–19 public health emergency identified? How could such a standard congressionally permitted purposes include hiring and compensating public be set while also taking into account the described in Section II of this sector employees. Interpreting the scope practicality of using this standard in Supplementary Information by of ‘‘deposit’’ to exclude contributions particular types of projects? In addition providing a backstop against the use of that are part of payroll contributions is to topography, geography, and financial funds for purposes outside of the more consistent with these eligible uses factors, what other constraints, if any, eligible use categories. and would reduce administrative are relevant to considering whether an These provisions give force to burden for recipients. Accordingly, if an investment is impracticable? Congress’s clear intent that Fiscal employee’s wages and salaries are an Question 24: What are the advantages Recovery Funds be spent within the eligible use of Fiscal Recovery Funds, and disadvantages of setting a four eligible uses identified in the recipients may treat the employee’s minimum level of service at 100 Mbps statute—(1) to respond to the public covered benefits as an eligible use of download and 20 Mbps upload in health emergency and its negative Fiscal Recovery Funds. For purposes of projects where it is impracticable to set economic impacts, (2) to provide the Fiscal Recovery Funds, covered minimum symmetrical download and premium pay to essential workers, (3) to benefits include costs of all types of upload speeds of 100 Mbps? What are provide government services to the leave (vacation, family-related, sick, the advantages and disadvantages of extent of eligible governments’ revenue military, bereavement, sabbatical, jury setting a scalability requirement in these losses, and (4) to make necessary water, duty), employee insurance (health, life, cases? What other minimum standards sewer, and broadband infrastructure dental, vision), retirement (pensions, would be appropriate and why? investments—and not otherwise. These 401(k)), unemployment benefit plans

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(Federal and State), workers’ i.e., cover the cost of—any reduction in offsetting those reductions in compensation insurance, and Federal net tax revenue resulting from such constructing its budget over the covered Insurance Contributions Act taxes changes. A recipient government would period—the framework prevents efforts (which includes Social Security and only be considered to have used Fiscal to use Fiscal Recovery Funds to Medicare taxes). Recovery Funds to offset a reduction in indirectly offset reductions in net tax Treasury anticipates that this net tax revenue resulting from changes revenue for which the recipient approach to employees’ covered benefits in law, regulation, or interpretation if, government has not identified other will be comprehensive and, for and to the extent that, the recipient offsetting sources of funding. employees whose wage and salary costs government could not identify sufficient As discussed in greater detail below are eligible expenses, will allow all funds from sources other than the Fiscal in this preamble, the framework set covered benefits listed in the previous Recovery Funds to offset the reduction forth in the interim final rule establishes paragraph to be eligible under the Fiscal in net tax revenue. If sufficient funds a step-by-step process for determining Recovery Funds. Treasury expects that from other sources cannot be identified whether, and the extent to which, Fiscal this will minimize the administrative to cover the full cost of the reduction in Recovery Funds have been used to offset burden on recipients by treating all the net tax revenue resulting from changes a reduction in net tax revenue. Based on specified covered benefit types as in law, regulation, or interpretation, the information reported annually by the eligible expenses, for employees whose remaining amount not covered by these recipient government: wage and salary costs are eligible sources will be considered to have been • First, each year, each recipient expenses. offset by Fiscal Recovery Funds, in government will identify and value the Question 27: Beyond a ‘‘deposit’’ and contravention of the offset provision. changes in law, regulation, or a ‘‘payroll contribution,’’ are there other The interim final rule recognizes three interpretation that would result in a types of payments into a pension fund sources of funds that may offset a reduction in net tax revenue, as it would that Treasury should consider? reduction in net tax revenue other than in the ordinary course of its budgeting Fiscal Recovery Funds—organic growth, B. Offset a Reduction in Net Tax process. The sum of these values in the increases in revenue (e.g., an increase in Revenue year for which the government is a tax rate), and certain cuts in spending. reporting is the amount it needs to ‘‘pay For States and territories (recipient In order to reduce burden, the interim 160 for’’ with sources other than Fiscal governments ), section 602(c)(2)(A)— final rule’s approach also incorporates Recovery Funds (total value of revenue the offset provision—prohibits the use the types of information and modeling reducing changes). of Fiscal Recovery Funds to directly or already used by States and territories in • Second, the interim final rule indirectly offset a reduction in net tax their own fiscal and budgeting recognizes that it may be difficult to revenue resulting from a change in law, processes. By incorporating existing predict how a change would affect net regulation, or administrative budgeting processes and capabilities, tax revenue in future years and, interpretation 161 during the covered States and territories will be able to accordingly, provides that if the total period. If a State or territory uses Fiscal assess and evaluate the relationship of value of the changes in the year for Recovery Funds to offset a reduction in tax and budget decisions to uses of the which the recipient government is net tax revenue, the ARPA provides that Fiscal Recovery Funds based on reporting is below a de minimis level, the State or territory must repay to the information they likely have or can as discussed below, the recipient Treasury an amount equal to the lesser obtain. This approach ensures that government need not identify any of (i) the amount of the applicable recipient governments have the sources of funding to pay for revenue reduction attributable to the information they need to understand the reducing changes and will not be impermissible offset and (ii) the amount implications of their decisions regarding subject to recoupment. received by the State or territory under the use of the Fiscal Recovery Funds— • Third, a recipient government will the ARPA. See Section IV of this and, in particular, whether they are consider the amount of actual tax SUPPLEMENTARY INFORMATION. As using the funds to directly or indirectly revenue recorded in the year for which discussed below Section IV of this offset a reduction in net tax revenue, they are reporting. If the recipient SUPPLEMENTARY INFORMATION, a State or making them potentially subject to government’s actual tax revenue is territory that chooses to use Fiscal recoupment. greater than the amount of tax revenue Recovery Funds to offset a reduction in Reporting on both the eligible uses received by the recipient for the fiscal net tax revenue does not forfeit its entire and on a State’s or territory’s covered year ending 2019, adjusted annually for allocation of Fiscal Recovery Funds tax changes that would reduce tax inflation, the recipient government will (unless it misused the full allocation to revenue will enable identification of, not be considered to have violated the offset a reduction in net tax revenue) or and recoupment for, use of Fiscal offset provision because there will not any non-ARPA funding received. Recovery Funds to directly offset The interim final rule implements reductions in tax revenue resulting from have been a reduction in net tax tax relief. Moreover, this approach revenue. these conditions by establishing a • framework for States and territories to recognizes that, because money is Fourth, if the recipient determine the cost of changes in law, fungible, even if Fiscal Recovery Funds government’s actual tax revenue is less regulation, or interpretation that reduce are not explicitly or directly used to than the amount of tax revenue received tax revenue and to identify and value cover the costs of changes that reduce by the recipient government for the the sources of funds that will offset— net tax revenue, those funds may be fiscal year ending 2019, adjusted used in a manner inconsistent with the annually for inflation, in the reporting 160 In this sub-section, ‘‘recipient governments’’ statute by indirectly being used to year the recipient government will refers only to States and territories. In other substitute for the State’s or territory’s identify any sources of funds that have sections, ‘‘recipient governments’’ refers more funds that would otherwise have been been used to permissibly offset the total broadly to eligible governments receiving funding needed to cover the costs of the value of covered tax changes other than from the Fiscal Recovery Funds. reduction. By focusing on the cost of Fiscal Recovery Funds. These are: 161 For brevity, referred to as ‘‘changes in law, Æ regulation, or interpretation’’ for the remainder of changes that reduce net tax revenue— State or territory tax changes that this preamble. and how a recipient government is would increase any source of general

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fund revenue, such as a change that or rule where the phase-in or taking 19 public health emergency.164 This would increase a tax rate; and effect was not prescribed prior to the baseline year is consistent with the Æ Spending cuts in areas not being start of the covered period. Changed approach directed by the ARPA in replaced by Fiscal Recovery Funds. administrative interpretations would sections 602(c)(1)(C) and 603(c)(1)(C), The recipient government will not include corrections to replace prior which identify the ‘‘most recent full calculate the value of revenue reduction inaccurate interpretations; such fiscal year of the [State, territory, or remaining after applying these sources corrections would instead be treated as Tribal government] prior to the of offsetting funding to the total value of changes implementing legislation emergency’’ as the comparator for revenue reducing changes—that, is, how enacted or regulations issued prior to measuring revenue loss. U.S. gross much of the tax change has not been the covered period; the operative change domestic product is projected to paid for. The recipient government will in those circumstances is the underlying rebound to pre-pandemic levels in then compare that value to the legislation or regulation that occurred 2021,165 suggesting that an FY 2019 pre- difference between the baseline and prior to the covered period. Moreover, pandemic baseline is a reasonable actual tax revenue. A recipient only the changes within the control of comparator for future revenue levels. government will not be required to the State or territory are considered The FY 2019 baseline revenue will be repay to the Treasury an amount that is covered changes. Covered changes do adjusted annually for inflation to allow greater than the recipient government’s not include a change in rate that is for direct comparison of actual tax actual tax revenue shortfall relative to triggered automatically and based on revenue in each year (reported in the baseline (i.e., fiscal year 2019 tax statutory or regulatory criteria in effect nominal terms) to baseline revenue in revenue adjusted for inflation). This prior to the covered period. For common units of measurement; without ‘‘revenue reduction cap,’’ together with example, a state law that sets its earned inflation adjustment, each dollar of Step 3, ensures that recipient income tax credit (EITC) at a fixed reported actual tax revenue would be governments can use organic revenue percentage of the Federal EITC will see worth less than each dollar of baseline growth to offset the cost of revenue its EITC payments automatically revenue expressed in 2019 terms. reductions. Reporting year. The interim final rule • increase—and thus its tax revenue Finally, if there are any amounts reduced—because of the Federal defines ‘‘reporting year’’ as a single year that could be subject to recoupment, Government’s expansion of the EITC in within the covered period, aligned to Treasury will provide notice to the the ARPA.162 This would not be the current fiscal year of the recipient recipient government of such amounts. considered a covered change. In government during the covered period, This process is discussed in greater addition, the offset provision applies for which a recipient government detail in Section IV of this only to actions for which the change in reports the value of covered changes SUPPLEMENTARY INFORMATION. policy occurs during the covered period; and any sources of offsetting revenue Together, these steps allow Treasury it excludes regulations or other actions increases (‘‘in-year’’ value), regardless of to identify the amount of reduction in that implement a change or law when those changes were enacted. For net tax revenue that both is attributable substantively enacted prior to March 3, the fiscal years ending in 2021 or 2025 to covered changes and has been 2021. Finally, Treasury has determined (partial years), the term ‘‘reporting year’’ directly or indirectly offset with Fiscal and previously announced that income refers to the portion of the year falling Recovery Funds. This process ensures tax changes—even those made during within the covered period. For example, Fiscal Recovery Funds are used in a the covered period—that simply the reporting year for a fiscal year manner consistent with the statute’s conform with recent changes in Federal beginning July 2020 and ending June defined eligible uses and the offset law (including those to conform to 2021 would be from March 3, 2021 to provision’s limitation on these eligible recent changes in Federal taxation of July 2021. uses, while avoiding undue interference Tax revenue. The interim final rule’s unemployment insurance benefits and with State and territory decisions definition of ‘‘tax revenue’’ is based on taxation of loan forgiveness under the regarding tax and spending policies. the Census Bureau’s definition of taxes, Paycheck Protection Program) are The interim final rule also used for its Annual Survey of State permissible under the offset provision. implements a process for recouping 166 Baseline. For purposes of measuring a Government Finances. It provides a Fiscal Recovery Funds that were used to reduction in net tax revenue, the interim consistent, well-established definition offset reductions in net tax revenue, final rule measures actual changes in tax with which States and territories will be including the calculation of any revenue relative to a revenue baseline familiar and is consistent with the amounts that may be subject to (baseline). The baseline will be approach taken in Section II.C of this recoupment, a process for a recipient calculated as fiscal year 2019 (FY 2019) SUPPLEMENTARY INFORMATION describing government to respond to a notice of tax revenue indexed for inflation in the implementation of sections recoupment, and clarification regarding each year of the covered period, with 602(c)(1)(C) and 603(c)(1)(C) of the Act, amounts excluded from recoupment. inflation calculated using the Bureau of regarding revenue loss. Consistent with See Section IV of this SUPPLEMENTARY Economic Analysis’s Implicit Price the approach described in Section II.C INFORMATION. Deflator.163 of this SUPPLEMENTARY INFORMATION, tax The interim final rule includes several FY 2019 was chosen as the starting definitions that are applicable to the 164 year for the baseline because it is the Using Fiscal Year 2019 is consistent with implementation of the offset provision. section 602 as Congress provided for using that Covered change. The offset provision last full fiscal year prior to the COVID– baseline for determining the impact of revenue loss is triggered by a reduction in net tax affecting the provision of government services. See 162 See, e.g., Tax Policy Center, How do state section 602(c)(1)(C). revenue resulting from ‘‘a change in earned income tax credits work?, https:// 165 Congressional Budget Office, An Overview of law, regulation, or administrative www.taxpolicycenter.org/briefing-book/how-do- the Economic Outlook: 2021 to 2031 (, interpretation.’’ A covered change state-earned-income-tax-credits-work/ (last visited 2021), available at https://www.cbo.gov/ includes any final legislative or May 9, 2021). publication/56965. 163 U.S. Department of Commerce, Bureau of 166 U.S. Census Bureau, Annual Survey of State regulatory action, a new or changed Economic Analysis, GDP Price Deflator, https:// and Local Government Finances Glossary, https:// administrative interpretation, and the www.bea.gov/data/prices-inflation/gdp-price- www.census.gov/programs-surveys/state/about/ phase-in or taking effect of any statute deflator (last visited May 9, 2021). glossary.html (last visited Apr. 30, 2021).

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revenue does not include revenue taxed and territories already consider tax such funds are used to offset a reduction and collected by a different unit of changes.167 in net tax revenue. If net tax revenue has government (e.g., revenue from taxes (2) In excess of the de minimis. The not been reduced, this provision does levied by a local government and recipient government will next calculate not apply. In the event that actual tax transferred to a recipient government). the total value of all covered changes in revenue is above the baseline, the the reporting year resulting in revenue organic revenue growth that has Framework. The interim final rule reductions, identified in Step 1. If the occurred, plus any other revenue-raising provides a step-by-step framework, to be total value of the revenue reductions changes, by definition must have been used in each reporting year, to calculate resulting from these changes is below enough to offset the in-year costs of the whether the offset provision applies to the de minimis level, the recipient covered changes. a State’s or territory’s use of Fiscal government will be deemed not to have (4) Consideration of other sources of Recovery Funds: any revenue-reducing changes for the funding. Next, the recipient government (1) Covered changes that reduce tax purpose of determining the recognized will identify and calculate the total revenue. For each reporting year, a net reduction. If the total is above the de value of changes that could pay for recipient government will identify and minimis level, the recipient government revenue reduction due to covered value covered changes that the recipient must identify sources of in-year revenue changes and sum these items. This government predicts will have the effect to cover the full costs of changes that amount can be used to pay for up to the of reducing tax revenue in a given reduce tax revenue. total value of revenue-reducing changes in the reporting year. These changes reporting year, similar to the way it The de minimis level is calculated as consist of two categories: would in the ordinary course of its 1 percent of the reporting year’s baseline. Treasury recognizes that, (a) Tax and other increases in budgeting process. The value of these revenue. The recipient government must covered changes may be reported based pursuant to their taxing authority, States and territories may make many small identify and consider covered changes on estimated values produced by a in policy that the recipient government budget model, incorporating reasonable changes to alter the composition of their tax revenues or implement other predicts will have the effect of assumptions, that aligns with the policies with marginal effects on tax increasing general revenue in a given recipient government’s existing revenues. They may also make changes reporting year. As when identifying and approach for measuring the effects of based on projected revenue effects that valuing covered changes that reduce tax fiscal policies, and that measures turn out to differ from actual effects, revenue, the value of revenue-raising relative to a current law baseline. The unintentionally resulting in minor changes may be reported based on covered changes may also be reported revenue changes that are not fairly estimated values produced by a budget based on actual values using a statistical described as ‘‘resulting from’’ tax law model, incorporating reasonable assumptions, aligned with the recipient methodology to isolate the change in changes. The de minimis level government’s existing approach for year-over-year revenue attributable to recognizes the inherent challenges and measuring the effects of fiscal policies, the covered change(s), relative to the uncertainties that recipient governments and measured relative to a current law current law baseline prior to the face, and thus allows relatively small baseline, or based on actual values using change(s). Further, estimation reductions in tax revenue without a statistical methodology to isolate the approaches should not use dynamic consequence. Treasury determined the 1 change in year-over-year revenue methodologies that incorporate the percent level by assessing the historical attributable to the covered change(s). projected effects of macroeconomic effects of state-level tax policy changes Further, and as discussed above, growth because macroeconomic growth in state EITCs implemented to effect estimation approaches should not use is accounted for separately in the policy goals other than reducing net tax 168 dynamic scoring methodologies that framework. Relative to these dynamic revenues. The 1 percent de minimis incorporate the effects of scoring methodologies, scoring level reflects the historical reductions in macroeconomic growth because growth methodologies that do not incorporate revenue due to minor changes in state is accounted for separately under the projected effects of macroeconomic fiscal policies. interim final rule. In general and where growth rely on fewer assumptions and (3) Safe harbor. The recipient possible, reporting should be produced thus provide greater consistency among government will then compare the by the agency of the recipient States and territories. Dynamic scoring reporting year’s actual tax revenue to government responsible for estimating that incorporates macroeconomic the baseline. If actual tax revenue is the costs and effects of fiscal policy growth may also increase the likelihood greater than the baseline, Treasury will changes. This approach offers recipient of underestimation of the cost of a deem the recipient government not to governments the flexibility to determine reduction in tax revenue. have any recognized net reduction for their reporting methodology based on the reporting year, and therefore to be in In general and where possible, their existing budget scoring practices a safe harbor and outside the ambit of and capabilities. reporting should be produced by the the offset provision. This approach is agency of the recipient government (b) Covered spending cuts. A recipient consistent with the ARPA, which government also may cut spending in responsible for estimating the costs and contemplates recoupment of Fiscal certain areas to pay for covered changes effects of fiscal policy changes. This Recovery Funds only in the event that that reduce tax revenue, up to the approach offers recipient governments amount of the recipient government’s the flexibility to determine their 167 See, e.g., Megan Randall & Kim Rueben, Tax net reduction in total spending as Policy Center, Sustainable Budgeting in the States: reporting methodology based on their described below. These changes must be existing budget scoring practices and Evidence on State Budget Institutions and Practices (Nov. 2017), available at https:// reductions in government outlays not in capabilities. In addition, the approach of www.taxpolicycenter.org/sites/default/files/ an area where the recipient government using the projected value of changes in publication/149186/sustainable-budgeting-in-the- has spent Fiscal Recovery Funds. To states_1.pdf. law that enact fiscal policies to estimate better align with existing reporting and the net effect of such policies is 168 Data provided by the Urban-Brookings Tax Policy Center for state-level EITC changes for 2004– accounting, the interim final rule consistent with the way many States 2017. considers the department, agency, or

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authority from which spending has been offset for a reduction in net tax approach for permitting organic revenue cut and whether the recipient revenue—aims to prevent recipient growth to cover the cost of tax cuts. government has spent Fiscal Recovery governments from using Fiscal Recovery Finally, as discussed further in Funds on that same department, agency, Funds to supplant State or territory Section IV of this SUPPLEMENTARY or authority. This approach was selected funding in the eligible use areas, and INFORMATION, a recipient government to allow recipient governments to report then use those State or territory funds to may request reconsideration of any how Fiscal Recovery Funds have been offset tax cuts. Such an approach helps amounts identified as subject to spent using reporting units already ensure that Fiscal Recovery Funds are recoupment under this framework. This incorporated into their budgeting not used to ‘‘indirectly’’ offset revenue process ensures that all relevant facts process. If they have not spent Fiscal reductions due to covered changes. and circumstances, including Recovery Funds in a department, In order to help ensure recipient information regarding planned spending agency, or authority, the full amount of governments use Fiscal Recovery Funds cuts and budgeting assumptions, are the reduction in spending counts as a in a manner consistent with the considered prior to a determination that covered spending cut, up to the prescribed eligible uses and do not use an amount must be repaid. Amounts recipient government’s net reduction in Fiscal Recovery Funds to indirectly subject to recoupment are calculated on total spending. If they have, the Fiscal offset a reduction in net tax revenue an annual basis; amounts recouped in Recovery Funds generally would be resulting from a covered change, one year cannot be returned if the State deemed to have replaced the amount of Treasury will monitor changes in or territory subsequently reports an spending cut and only reductions in spending throughout the covered increase in net tax revenue. spending above the amount of Fiscal period. If, over the course of the covered To facilitate the implementation of Recovery Funds spent on the period, a spending cut is subsequently the framework above, and in addition to department, agency, or authority would replaced with Fiscal Recovery Funds reporting required on eligible uses, in count. and used to indirectly offset a reduction each year of the reporting period, each To calculate the amount of spending State and territory will report to cuts that are available to offset a in net tax revenue resulting from a covered change, Treasury may consider Treasury the following items: reduction in tax revenue, the recipient • Actual net tax revenue for the such change to be an evasion of the government must first consider whether reporting year; there has been a reduction in total net restrictions of the offset provision and • Each revenue-reducing change spending, excluding Fiscal Recovery seek recoupment of such amounts. made to date during the covered period Funds (net reduction in total spending). (5) Identification of amounts subject and the in-year value of each change; This approach ensures that reported to recoupment. If a recipient • Each revenue-raising change made spending cuts actually create fiscal government (i) reports covered changes to date during the covered period and space, rather than simply offsetting that reduce tax revenue (Step 1); (ii) to the in-year value of each change; other spending increases. A net a degree greater than the de minimis • Each covered spending cut made to reduction in total spending is measured (Step 2); (iii) has experienced a date during the covered period, the in- as the difference between total spending reduction in net tax revenue (Step 3); year value of each cut, and in each reporting year, excluding Fiscal and (iv) lacks sufficient revenue from documentation demonstrating that each Recovery Funds spent, relative to total other, permissible sources to pay for the spending cut is covered as prescribed spending for the recipient’s fiscal year entirety of the reduction (Step 4), then under the interim final rule; ending in 2019, adjusted for inflation. the recipient government will be Treasury will provide additional Measuring reductions in spending considered to have used Fiscal Recovery guidance and instructions the reporting relative to 2019 reflects the fact that the Funds to offset a reduction in net tax requirements at a later date. fiscal space created by a spending cut revenue, up to the amount that revenue Question 28: Does the interim final persists so long as spending remains has actually declined. That is, the rule’s definition of tax revenue accord below its original level, even if it does maximum value of reduction in revenue with existing State and territorial not decline further, relative to the same due to covered changes which a practice and, if not, are there other amount of revenue. Measuring spending recipient government must cover is definitions or elements Treasury should cuts from year to year would, by capped at the difference between the consider? Discuss why or why not. contrast, not recognize any available baseline and actual tax revenue.169 In Question 29: The interim final rule funds to offset revenue reductions the event that the baseline is above permits certain spending cuts to cover unless spending continued to decline, actual tax revenue and the difference the costs of reductions in tax revenue, failing to reflect the actual availability of between them is less than the sum of including cuts in a department, agency, funds created by a persistent change and revenue reducing changes that are not or authority in which the recipient limiting the discretion of States and paid for with other, permissible sources, government is not using Fiscal Recovery territories. In general and where organic revenue growth has implicitly Funds. How should Treasury and possible, reporting should be produced offset a portion of the reduction. For recipient governments consider the by the agency of the recipient example, if a recipient government scope of a department, agency, or government responsible for estimating reduces tax revenue by $1 billion, authority for the use of funds to ensure the costs and effects of fiscal policy makes no other changes, and spending cuts are not being substituted changes. Treasury chose this approach experiences revenue growth driven by with Fiscal Recovery Funds while also because while many recipient organic economic growth worth $500 avoiding an overbroad definition of that governments may score budget million, it need only pay for the captures spending that is, in fact, legislation using projections, spending remaining $500 million with sources distinct? cuts are readily observable using actual other than Fiscal Recovery Funds. The Question 30: Discuss the budget values. revenue reduction cap implements this scoring methodologies currently used by This approach—allowing only States and territories. How should the spending reductions in areas where the 169 This cap is applied in § 35.8(c) of the interim interim final rule take into recipient government has not spent final rule, calculating the amount of funds used in consideration differences in Fiscal Recovery Funds to be used as an violation of the tax offset provision. approaches? Please discuss the use of

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practices including but not limited to definition of ‘‘incurred’’ does not have grants to eligible employers, and to macrodynamic scoring, microdynamic a clear meaning. With respect to the make necessary investments in water, scoring, and length of budget windows. CARES Act, on the understanding that sewer, or broadband infrastructure, Question 31: If a recipient government the CRF was intended to be used to which all relate to prospective uses. In has a balanced budget requirement, how meet relatively short-term needs, addition, sections 602(c)(1)(C) and will that requirement impact its use of Treasury interpreted this requirement to 603(c)(1)(C) permit recipients to use Fiscal Recovery Funds and ability to mean that, for a cost to be considered to Fiscal Recovery Funds for the provision implement this framework? have been incurred, performance of the of government services. This clause Question 32: To implement the service or delivery of the goods acquired provides that the amount of funds that framework described above, the interim must occur by December 31, 2021. In may be used for this purpose is final rule establishes certain reporting contrast, the ARPA, passed at a different measured by reference to the reduction requirements. To what extent do stage of the COVID–19 public health in revenue due to the public health recipient governments already produce emergency, was intended to provide emergency relative to revenues collected this information and on what timeline? more general fiscal relief over a broader in the most recent full fiscal year, but Discuss ways that Treasury and timeline. In addition, the ARPA this reference does not relate to the recipient governments may better rely expressly permits the use of Fiscal period during which recipients may use on information already produced, while Recovery Funds for improvements to the funds, which instead refers to ensuring a consistent application of the water, sewer, and broadband prospective uses, consistent with the framework. infrastructure, which entail a longer other eligible uses. Question 33: Discuss States’ and timeframe. In recognition of this, Although as discussed above the territories’ ability to produce the figures Treasury is interpreting the requirement eligible uses of payments from the and numbers required for reporting in section 602 and section 603 that costs Fiscal Recovery Funds are all under the interim final rule. What be incurred by December 31, 2024, to prospective in nature, Treasury additional reporting tools, such as a require only that recipients have considers the beginning of the covered standardized template, would facilitate obligated the Fiscal Recovery Funds by period for purposes of determining States’ and territories’ ability to such date. The interim final rule adopts compliance with section 602(c)(2)(A) to complete the reporting required under a definition of ‘‘obligation’’ that is based be the relevant reference point for this the interim final rule? on the definition used for purposes of purpose. The interim final rule thus permits funds to be used to cover costs C. Other Restrictions on Use the Uniform Guidance, which will allow for uniform administration of this incurred beginning on March 3, 2021. Payments from the Fiscal Recovery requirement and is a definition with This aligns the period for use of Fiscal Funds are also subject to pre-existing which most recipients will be familiar. Recovery Funds with the period during limitations provided in other Federal Payments from the Fiscal Recovery which these funds may not be used to statutes and regulations and may not be Funds are grants provided to recipients offset reductions in net tax revenue. used as non-Federal match for other to mitigate the fiscal effects of the Permitting Fiscal Recovery Funds to be Federal programs whose statute or COVID–19 public health emergency and used to cover costs incurred beginning regulations bar the use of Federal funds to respond to the public health on this date will also mean that to meet matching requirements. For emergency, consistent with the eligible recipients that began incurring costs in example, payments from the Fiscal uses enumerated in sections 602(c)(1) the anticipation of enactment of the Recovery Funds may not be used to and 603(c)(1).172 As such, these funds ARPA and in advance of the issuance of satisfy the State share of Medicaid.170 are intended to provide economic this rule and receipt of payment from As provided for in the award terms, stimulus in areas still recovering from the Fiscal Recovery Funds would be payments from the Fiscal Recovery the economic effects of the pandemic. In able to cover them using these Funds as a general matter will be subject implementing and interpreting these payments.173 to the provisions of the Uniform provisions, including what it means to As set forth in the award terms, the Administrative Requirements, Cost ‘‘respond to’’ the COVID–19 public period of performance will run until Principles, and Audit Requirements for health emergency, Treasury takes into December 31, 2026, which will provide Federal Awards (2 CFR part 200) (the consideration pre-pandemic facts and recipients a reasonable amount of time Uniform Guidance), including the cost circumstances (e.g., average revenue to complete projects funded with principles and restrictions on general growth prior to the pandemic) as well as payments from the Fiscal Recovery provisions for selected items of cost. impact of the pandemic that predate the Funds. D. Timeline for Use of Fiscal Recovery enactment of the ARPA (e.g., IV. Recoupment Process Funds replenishing Unemployment Trust balances drawn during the pandemic). Under the ARPA, failure to comply Section 602(c)(1) and section 603(c)(1) While assessing the effects of the with the restrictions on use contained in require that payments from the Fiscal sections 602(c) and 603(c) of the Act COVID–19 public health emergency 174 Recovery Funds be used only to cover necessarily takes into consideration the may result in recoupment of funds. costs incurred by the State, territory, facts and circumstances that predate the The interim final rule implements these Tribal government, or local government ARPA, use of Fiscal Recovery Funds is provisions by establishing a process for by December 31, 2024. Similarly, the forward looking. recoupment. CARES Act provided that payments As discussed above, recipients are Identification and Notice of from the CRF be used to cover costs permitted to use payments from the Violations. Failure to comply with the 171 incurred by December 31, 2021. The Fiscal Recovery Funds to respond to the restrictions on use will be identified based on reporting provided by the public health emergency, to respond to 170 See 42 CFR 433.51 and 45 CFR 75.306. workers performing essential work by 171 Section 1001 of Division N of the Consolidated 173 Given the nature of this program, recipients Appropriations Act, 2021 amended section providing premium pay or providing will not be permitted to use funds to cover pre- 601(d)(3) of the Act by extending the end of the award costs, i.e., those incurred prior to March 3, covered period for CRF expenditures from 172 Sections 602(a), 603(a), 602(c)(1) and 603(c)(1) 2021. , 2020 to December 31, 2021. of the Act. 174 Sections 602(e) and 603(e) of the Act.

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recipient. As discussed further in issues and considerations raised in the Splitting payments to States into two Sections III.B and VIII of this request for reconsideration taking into tranches will help encourage recipients SUPPLEMENTARY INFORMATION, Treasury account the information and arguments to adapt, as necessary, to new will collect information regarding presented by the recipient along with developments that could arise over the eligible uses on a quarterly basis and on any other relevant information. coming twelve months, including the tax offset provision on an annual Repayment. Finally, the interim final potential changes to the nature of the basis. Treasury also may consider other rule provides that any amounts subject public health emergency and its information in identifying a violation, to recoupment must be repaid within negative economic impacts. While the such as information provided by 120 calendar days of receipt of any final U.S. economy has been recovering and members of the public. If Treasury notice of recoupment or, if the recipient adding jobs in aggregate, there is still identifies a violation, it will provide has not requested reconsideration, considerable uncertainty in the written notice to the recipient along within 120 calendar days of the initial economic outlook and the interaction with an explanation of such amounts. notice provided by the Secretary. between the pandemic and the Request for Reconsideration. Under Question 34: Discuss the timeline for economy.177 For these reasons, Treasury the interim final rule, a recipient may requesting reconsideration under the believes it will be appropriate for a submit a request for reconsideration of interim final rule. What, if any, majority of recipients to adapt their any amounts identified in the notice challenges does this timeline present? plans as the recovery evolves. For provided by Treasury. This example, a faster-than-expected reconsideration process provides a V. Payments in Tranches to Local economic recovery in 2021 could lead a recipient the opportunity to submit Governments and Certain States recipient to dedicate more Fiscal additional information it believes Section 603 of the Act provides that Recovery Funds to longer-term supports its request in light of the notice the Secretary will make payments to investments starting in 2022. In of recoupment, including, for example, local governments in two tranches, with contrast, a slower-than-expected additional information regarding the the second tranche being paid twelve economic recovery in 2021 could lead a recipient’s use of Fiscal Recovery Funds months after the first payment. In recipient to use additional funds for or its tax revenues. The process also addition, section 602(b)(6)(A)(ii) near-term stimulus in 2022. provides the Secretary with an provides that the Secretary may At the same time, the statute opportunity to consider all information withhold payment of up to 50 percent contemplates the possibility that relevant to whether a violation has of the amount allocated to each State elevated unemployment in certain occurred, and if so, the appropriate and territory for a period of up to twelve States could justify a single payment. amount for recoupment. months from the date on which the Elevated unemployment is indicative of The interim final rule also establishes State or territory provides its a greater need to assist unemployed requirements for the timing of a request certification to the Secretary. Any such workers and stimulate a faster economic for reconsideration. Specifically, if a withholding for a State or territory is recovery. For this reason, the interim recipient wishes to request required to be based on the final rule provides that States and reconsideration of any amounts unemployment rate in the State or territories with an increase in their identified in the notice, the recipient territory as of the date of the unemployment rate over a specified must submit a written request for certification. threshold may receive a single payment, reconsideration to the Secretary within The Secretary has determined to with the expectation that a single 60 calendar days of receipt of such provide in this interim final rule for tranche will better enable these States notice. The request must include an withholding of 50 percent of the amount and territories to take additional explanation of why the recipient of Fiscal Recovery Funds allocated to all immediate action to aid the unemployed believes that the finding of a violation States (and the District of Columbia) and strengthen their economies. or recoupable amount identified in the other than those with an unemployment Following the initial pandemic- notice of recoupment should be rate that is 2.0 percentage points or related spike in unemployment in 2020, reconsidered. To facilitate the more above its pre-pandemic (i.e., States’ unemployment rates have been Secretary’s review of a recipient’s February 2020) level. The Secretary will trending back towards pre-pandemic request for reconsideration, the request refer to the latest available monthly data levels. However, some States’ labor should identify all supporting reasons from the Bureau of Labor Statistics as of markets are healing more slowly than for the request. Within 60 calendar days the date the certification is provided. others. Moreover, States varied widely of receipt of the recipient’s request for Based on data available at the time of in their pre-pandemic levels of reconsideration, the recipient will be public release of this interim final rule, unemployment, and some States remain notified of the Secretary’s decision to this threshold would result in a majority substantially further from their pre- affirm, withdraw, or modify the notice of States being paid in two tranches. of recoupment. Such notification will Splitting payments for the majority of of the CMIA and Treasury’s implementing include an explanation of the decision, regulations at 31 CFR part 205 will not apply to States is consistent with the payments from the Fiscal Recovery Funds. including responses to the recipient’s requirement in section 603 of the Act to Providing funding in two tranches to the majority supporting reasons and consideration of make payments from the Coronavirus of States reflects, to the maximum extent permitted additional information provided. Local Fiscal Recovery Fund to local by section 602 of the Act, the general principles of The process and timeline established Federal cash management and stewardship of governments in two tranches.176 by the interim final rule are intended to Federal funding, yet will be much less restrictive than the usual requirements to which States are provide the recipient with an adequate 176 With respect to Federal financial assistance subject. opportunity to fully present any issues more generally, States are subject to the 177 The potential course of the virus, and its or arguments in response to the notice requirements of the Cash Management impact on the economy, has contributed to a of recoupment.175 This process will Improvement Act (CMIA), under which Federal heightened degree of uncertainty relative to prior funds are drawn upon only on an as needed basis periods. See, e.g., Dave Altig et al., Economic allow the Secretary to respond to the and States are required to remit interest on unused uncertainty before and during the COVID–19 balances to Treasury. Given the statutory pandemic, J. of Public Econ. (Nov. 2020), available 175 The interim final rule also provides that requirement for Treasury to make payments to at https://www.sciencedirect.com/science/article/ Treasury may extend any deadlines. States within a certain period, these requirements abs/pii/S0047272720301389.

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pandemic starting point. Consequently, cities, and nonentitlement units of local regulatory requirements and the terms Treasury is delineating States with government are collectively referred to and conditions of the award. Recipients significant remaining elevation in the as ‘‘local governments’’) to transfer also remain responsible for reporting to unemployment rate, based on the net amounts paid from the Fiscal Recovery Treasury on their subrecipients’ use of difference to pre-pandemic levels. Funds to a number of specified entities. payments from the Fiscal Recovery Treasury has established that By permitting these transfers, Congress Funds for the duration of the award. significant remaining elevation in the recognized the importance of providing Transfers under sections 602(c)(3) and unemployment rate is a net change in flexibility to governments seeking to 603(c)(3) must qualify as an eligible use the unemployment rate of 2.0 achieve the greatest impact with their of Fiscal Recovery Funds by the percentage points or more relative to funds, including by working with other transferor. Once Fiscal Recovery Funds pre-pandemic levels. In the four levels or units of government or private are received, the transferee must abide previous recessions going back to the entities to assist recipient governments by the restrictions on use applicable to early 1980s, the national unemployment in carrying out their programs. This the transferor under the ARPA and other rate rose by 3.6, 2.3, 2.0, and 5.0 includes special-purpose districts that applicable law and program guidance. percentage points, as measured from the perform specific functions in the For example, if a county transferred start of the recession to the eventual community, such as fire, water, sewer, Fiscal Recovery Funds to a town within peak during or immediately following or mosquito abatement districts. its borders to respond to the COVID–19 the recession.178 Each of these increases Specifically, under section 602(c)(3), a public health emergency, the town can therefore represent a recession’s State, territory, or Tribal government would be bound by the eligible use impact on unemployment. To identify may transfer funds to a ‘‘private requirements applicable to the county in States with significant remaining nonprofit organization . . . a Tribal carrying out the county’s goal. This also elevation in unemployment, Treasury organization . . . a public benefit means that county A may not transfer took the lowest of these four increases, corporation involved in the Fiscal Recovery Funds to county B for 2.0 percentage points, to indicate states transportation of passengers or cargo, or use in county B because such a transfer where, despite improvement in the a special-purpose unit of State or local would not, from the perspective of the unemployment rate, current labor government.’’ 180 Similarly, section transferor (county A), be an eligible use market conditions are consistent still 603(c)(3) authorizes a local government in county A. with a historical benchmark for a to transfer funds to the same entities Section 603(c)(4) separately provides recession. (other than Tribal organizations). for transfers by a local government to its No U.S. territory will be subject to The interim final rule clarifies that the State or territory. A transfer under withholding of its payment from the lists of transferees in sections 602(c)(3) section 603(c)(4) will not make the State Fiscal Recovery Funds. For Puerto Rico, and 603(c)(3) are not exclusive. The a subrecipient of the local government, the Secretary has determined that the interim final rule permits State, and such Fiscal Recovery Funds may be current level of the unemployment rate territorial, and Tribal governments to used by the State for any purpose (8.8 percent, as of March 2021 179) is transfer Fiscal Recovery Funds to other permitted under section 602(c). A sufficiently high such that Treasury constituent units of government or transfer under section 603(c)(4) will should not withhold any portion of its private entities beyond those specified result in a cancellation or termination of payment from the Fiscal Recovery in the statute. Similarly, local the award on the part of the transferor Funds regardless of its change in governments are authorized to transfer local government and a modification of unemployment rate relative to its pre- Fiscal Recovery Funds to other the award to the transferee State or pandemic level. For U.S. territories that constituent units of government (e.g., a territory. The transferor must provide are not included in the Bureau of Labor county is able to transfer Fiscal notice of the transfer to Treasury in a Statistics’ monthly unemployment rate Recovery Funds to a city, town, or format specified by Treasury. If the local data, the Secretary will not exercise the school district within it) or to private government does not provide such authority to withhold amounts from the entities. This approach is intended to notice, it will remain legally obligated to Fiscal Recovery Funds. help provide funding to local Treasury under the award and remain governments with needs that may responsible for ensuring that the VI. Transfer exceed the allocation provided under awarded Fiscal Recovery Funds are The statute authorizes State, the statutory formula. being used in accordance with the territorial, and Tribal governments; State, local, territorial, and Tribal statute and program guidance and for counties; metropolitan cities; and governments that receive a Federal reporting on such uses to Treasury. A nonentitlement units of local award directly from a Federal awarding State that receives a transfer from a local government (counties, metropolitan agency, such as Treasury, are government under section 603(c)(4) will ‘‘recipients.’’ A transferee receiving a be bound by all of the use restrictions 178 Includes the period during and immediately transfer from a recipient under sections set forth in section 602(c) with respect following recessions, as defined by the National 602(c)(3) and 603(c)(3) will be a to the use of those Fiscal Recovery Bureau of Economic Research. National Bureau of subrecipient. Subrecipients are entities Funds, including the prohibitions on Economic Research, US Business Cycle Expansions that receive a subaward from a recipient and Contractions, https://www.nber.org/research/ use of such Fiscal Recovery Funds to data/us-business-cycle-expansions-and- to carry out a program or project on offset certain reductions in taxes or to contractions (last visited Apr. 27, 2021). Based on behalf of the recipient with the make deposits into pension funds. data from U.S. Bureau of Labor Statistics, recipient’s Federal award funding. The Question 35: What are the advantages Unemployment Rate [UNRATE], retrieved from recipient remains responsible for and disadvantages of treating the list of FRED, Federal Reserve Bank of St. Louis, https:// fred.stlouisfed.org/series/UNRATE (last visited Apr. monitoring and overseeing the transferees in sections 602(c)(3) and 27, 2021). subrecipient’s use of Fiscal Recovery 603(c)(3) as nonexclusive, allowing 179 U.S. Bureau of Labor Statistics, Economic Funds and other activities related to the States and localities to transfer funds to News Release—Table 1. Civilian labor force and award to ensure that the subrecipient entities outside of the list? unemployment by state and selected area, seasonally adjusted, https://www.bls.gov/ complies with the statutory and Question 36: Are there alternative news.release/laus.t01.htm (last visited Apr. 30, ways of defining ‘‘special-purpose unit 2021). 180 Section 602(c)(3) of the Act. of State or local government’’ and

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‘‘public benefit corporation’’ that would complying with the Fiscal Recovery government, as disbursing these funds better further the aims of the Funds? Funds statutory requirement that itself is a response to the public health distributions to NEUs not exceed 75 emergency and its negative economic VII. Nonentitlement Units of percent of the NEU’s most recent impacts. If a State or territory requires Government budget. The most recent budget is more time to disburse Fiscal Recovery The Fiscal Recovery Funds provides defined as the NEU’s most recent annual Funds to NEUs than the allotted 30 for $19.53 billion in payments to be total operating budget, including its days, Treasury will grant extensions of made to States and territories which general fund and other funds, as of not more than 30 days for States and will distribute the funds to January 27, 2020. Amounts in excess of territories that submit a certification in nonentitlement units of local such cap and therefore not distributed writing in accordance with section government (NEUs); local governments to the NEU must be returned to Treasury 603(b)(2)(C)(ii)(I). Additional extensions which generally have populations below by the State or territory. States and may be granted at the discretion of the 50,000. These local governments have territories may rely for this Secretary. not yet received direct fiscal relief from determination on a certified top-line Question 37: What are alternative the Federal Government during the budget total from the NEU. ways for States and territories to enforce COVID–19 public health emergency, Under the interim final rule, the total the 75 percent cap while reducing the making Fiscal Recovery Funds allocation and distribution to an NEU, administrative burden on them? payments an important source of including the sum of both the first and Question 38: What criteria should support for their public health and second tranches of funding, cannot Treasury consider in assessing requests economic responses. Section 603 exceed the 75 percent cap. States and for extensions for further time to requires Treasury to allocate and pay territories must permit NEUs without distribute NEU payments? Fiscal Recovery Funds to the States and formal budgets as of January 27, 2020 to VIII. Reporting territories and requires the States and self-certify their most recent annual territories to distribute Fiscal Recovery expenditures as of January 27, 2020 for States (defined to include the District Funds to NEUs based on population the purpose of calculating the cap. This of Columbia), territories, metropolitan within 30 days of receipt unless an approach will provide an administrable cities, counties, and Tribal governments extension is granted by the Secretary. means to implement the cap for small will be required to submit one interim The interim final rule clarifies certain local governments that do not adopt a report and thereafter quarterly Project aspects regarding the distribution of formal budget. and Expenditure reports through the Fiscal Recovery by States and territories Section 603(b)(3) of the Social end of the award period on December to NEUs, as well as requirements around Security Act provides for Treasury to 31, 2026. The interim report will timely payments from the Fiscal make payments to counties but provides include a recipient’s expenditures by Recovery Funds. that, in the case of an amount to be paid category at the summary level from the The ARPA requires that States and to a county that is not a unit of general date of award to , 2021 and, for territories allocate funding to NEUs in local government, the amount shall States and territories, information an amount that bears the same instead be paid to the State in which related to distributions to proportion as the population of the NEU such county is located, and such State nonentitlement units. Recipients must bears to the total population of all NEUs shall distribute such amount to each submit their interim report to Treasury in the State or territory, subject to a cap unit of general local government within by , 2021. Nonentitlement (described below). Because the statute such county in an amount that bears the units of local government are not requires States and territories to make same proportion to the amount to be required to submit an interim report. distributions based on population, paid to such county as the population The quarterly Project and Expenditure States and territories may not place of such units of general local reports will include financial data, additional conditions or requirements government bears to the total population information on contracts and subawards on distributions to NEUs, beyond those of such county. As with NEUs, States over $50,000, types of projects funded, required by the ARPA and Treasury’s may not place additional conditions or and other information regarding a implementing regulations and guidance. requirements on distributions to such recipient’s utilization of the award For example, a State may not impose units of general local government, funds. The reports will include the same stricter limitations than permitted by beyond those required by the ARPA and general data (e.g., on obligations, statute or Treasury regulations or Treasury’s implementing regulations expenditures, contracts, grants, and sub- guidance on an NEU’s use of Fiscal and guidance. awards) as those submitted by recipients Recovery Funds based on the NEU’s In the case of consolidated of the CRF, with some modifications. proposed spending plan or other governments, section 603(b)(4) allows Modifications will include updates to policies. States and territories are also consolidated governments (e.g., a city- the expenditure categories and the not permitted to offset any debt owed by county consolidated government) to addition of data elements related to the NEU against the NEU’s distribution. receive payments under each allocation specific eligible uses, including some of Further, States and territories may not based on the respective formulas. In the the reporting elements described in provide funding on a reimbursement case of a consolidated government, sections above. The initial quarterly basis—e.g., requiring NEUs to pay for Treasury interprets the budget cap to Project and Expenditure report will project costs up front before being apply to the consolidated government’s cover two calendar quarters from the reimbursed with Fiscal Recovery Funds NEU allocation under section 603(b)(2) date of award to , 2021, payments—because this funding model but not to the consolidated and must be submitted to Treasury by would not comport with the statutory government’s county allocation under , 2021. The subsequent requirement that States and territories section 603(b)(3). quarterly reports will cover one make distributions to NEUs within the If necessary, States and territories may calendar quarter and must be submitted statutory timeframe. use the Fiscal Recovery Funds under to Treasury within 30 days after the end Similarly, States and territories section 602(c)(1)(A) to fund expenses of each calendar quarter. distributing Fiscal Recovery Funds related to administering payments to Nonentitlement units of local payments to NEUs are responsible for NEUs and units of general local government will be required to submit

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annual Project and Expenditure reports discussed below, the requirements of action as an action likely to result in a until the end of the award period on advance notice and public comment do rule that may: December 31, 2026. The initial annual not apply ‘‘to the extent that there is (1) Have an annual effect on the Project and Expenditure report for involved . . . a matter relating to agency economy of $100 million or more, or nonentitlement units of local . . . grants.’’ 181 The interim final rule adversely affect a sector of the economy; government will cover activity from the implements statutory conditions on the productivity; competition; jobs; the date of award to September 30, 2021 eligible uses of the Fiscal Recovery environment; public health or safety; or and must be submitted to Treasury by Funds grants, and addresses the State, local, or Tribal governments or October 31, 2021. The subsequent payment of those funds, the reporting communities in a material way (also annual reports must be submitted to on uses of funds, and potential referred to as ‘‘economically significant’’ Treasury by October 31 each year. consequences of ineligible uses. In regulations); States, territories, metropolitan cities, addition and as discussed below, the (2) Create a serious inconsistency or and counties with a population that Administrative Procedure Act also otherwise interfere with an action taken exceeds 250,000 residents will also be provides an exception to ordinary or planned by another agency; required to submit an annual Recovery notice-and-comment procedures ‘‘when (3) Materially alter the budgetary Plan Performance report to Treasury. the agency for good cause finds (and impacts of entitlements, grants, user The Recovery Plan Performance report incorporates the finding and a brief fees, or loan programs or the rights and will provide the public and Treasury statement of reasons therefor in the obligations of recipients thereof; or information on the projects that rules issued) that notice and public (4) Raise novel legal or policy issues recipients are undertaking with program procedure thereon are impracticable, arising out of legal mandates, the funding and how they are planning to unnecessary, or contrary to the public President’s priorities, or the principles ensure project outcomes are achieved in interest.’’ 182 This good cause stated in the . an effective, efficient, and equitable justification also supports waiver of the This regulatory action is an manner. Each jurisdiction will have 60-day delayed effective date for major economically significant regulatory some flexibility in terms of the form and rules under the Congressional Review action subject to review by OMB under content of the Recovery Plan Act at 5 U.S.C. 808(2). Although this section 3(f) of Executive Order 12866. Performance report, as long as it interim final rule is effective Treasury has also reviewed these includes the minimum information immediately, comments are solicited regulations under Executive Order required by Treasury. The Recovery from interested members of the public Plan Performance report will include 13563, which supplements and and from recipient governments on all explicitly reaffirms the principles, key performance indicators identified aspects of the interim final rule. by the recipient and some mandatory structures, and definitions governing indicators identified by Treasury, as These comments must be submitted regulatory review established in well as programmatic data in specific on or before , 2021. Executive Order 12866. To the extent permitted by law, section 1(b) of eligible use categories and the specific X. Regulatory Analyses reporting requirements described in the Executive Order 13563 requires that an sections above. The initial Recovery Executive Orders 12866 and 13563 agency: Plan Performance report will cover the (1) Propose or adopt regulations only This interim final rule is upon a reasoned determination that period from the date of award to July 31, economically significant for the 2021 and must be submitted to Treasury their benefits justify their costs purposes of Executive Orders 12866 and (recognizing that some benefits and by August 31, 2021. Thereafter, 13563. Treasury, however, is proceeding Recovery Plan Performance reports will costs are difficult to quantify); under the emergency provision at (2) Tailor its regulations to impose the cover a 12-month period, and recipients Executive Order 12866 section 6(a)(3)(D) will be required to submit the report to least burden on society, consistent with based on the need to act expeditiously obtaining regulatory objectives taking Treasury within 30 days after the end of to mitigate the current economic the 12-month period. The second into account, among other things, and to conditions arising from the COVID–19 the extent practicable, the costs of Recovery Plan Performance report will public health emergency. The rule has cover the period from , 2021 to cumulative regulations; been reviewed by the Office of (3) Select, in choosing among June 30, 2022, and must be submitted to Management and Budget (OMB) in Treasury by July 31, 2022. Each annual alternative regulatory approaches, those accordance with Executive Order 12866. approaches that maximize net benefits Recovery Plan Performance report must This rule is necessary to implement the be posted on the public-facing website (including potential economic, ARPA in order to provide economic environmental, public health and safety, of the recipient. Local governments with relief to State, local, and Tribal fewer than 250,000 residents, Tribal and other advantages; distributive governments adversely impacted by the impacts; and equity); governments, and nonentitlement units COVID–19 public health emergency. of local government are not required to (4) To the extent feasible, specify Under Executive Order 12866, OMB develop a Recovery Plan Performance performance objectives, rather than the must determine whether this regulatory report. behavior or manner of compliance a Treasury will provide additional action is ‘‘significant’’ and, therefore, regulated entity must adopt; and guidance and instructions on the subject to the requirements of the (5) Identify and assess available reporting requirements outlined above Executive Order and subject to review alternatives to direct regulation, for the Fiscal Recovery Funds at a later by OMB. Section 3(f) of Executive Order including providing economic date. 12866 defines a significant regulatory incentives—such as user fees or marketable permits—to encourage the IX. Comments and Effective Date 181 5 U.S.C. 553(a)(2). desired behavior, or providing This interim final rule is being issued 182 5 U.S.C. 553(b)(3)(B); see also 5 U.S.C. information that enables the public to 553(d)(3) (creating an exception to the requirement without advance notice and public of a 30-day delay before the effective date of a rule make choices. comment to allow for immediate ‘‘for good cause found and published with the Executive Order 13563 also requires implementation of this program. As rule’’). an agency ‘‘to use the best available

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techniques to quantify anticipated to local needs; and limiting These benefits are achieved in the present and future benefits and costs as administrative burdens. interim final rule through a broadly accurately as possible.’’ OMB’s Office of Analysis of Benefits. Relative to a pre- flexible approach that sets clear Information and Regulatory Affairs statutory baseline, the Fiscal Recovery guidelines on eligible uses of Fiscal (OIRA) has emphasized that these Funds provide a combined $350 billion Recovery Funds and provides State, techniques may include ‘‘identifying to State, local, and Tribal governments local, and Tribal government officials changing future compliance costs that for fiscal relief and support for costs discretion within those eligible uses to might result from technological incurred responding to the COVID–19 direct Fiscal Recovery Funds to areas of innovation or anticipated behavioral pandemic. Treasury believes that this greatest need within their jurisdiction. changes.’’ transfer will generate substantial While preserving recipients’ overall Treasury has assessed the potential additional economic activity, although flexibility, the interim final rule costs and benefits, both quantitative and given the flexibility accorded to includes several provisions that qualitative, of this regulatory action, and recipients in the use of funds, it is not implement statutory requirements and is issuing this interim final rule only on possible to precisely estimate the extent will help support use of Fiscal Recovery a reasoned determination that the to which this will occur and the timing Funds to achieve the intended benefits. benefits exceed the costs. In choosing with which it will occur. Economic The remainder of this section clarifies among alternative regulatory research has demonstrated that state how Treasury’s approach to key approaches, Treasury selected those fiscal relief is an efficient and effective provisions in the interim final rule will approaches that would maximize net way to mitigate declines in jobs and contribute to greater realization of benefits. Based on the analysis that output during an economic benefits from the program. follows and the reasons stated downturn.183 Absent such fiscal relief, • Revenue Loss: Recipients will elsewhere in this document, Treasury fiscal austerity among State, local, and compute the extent of reduction in believes that this interim final rule is Tribal governments could exert a revenue by comparing actual revenue to consistent with the principles set forth prolonged drag on the overall economic a counterfactual trend representing what in Executive Order 13563. recovery, as occurred following the could have plausibly been expected to Treasury also has determined that this 2007–09 recession.184 occur in the absence of the pandemic. regulatory action does not unduly This interim final rule provides The counterfactual trend begins with interfere with States, territories, Tribal benefits across several areas by the last full fiscal year prior to the governments, and localities in the implementing the four eligible funding public health emergency (as required by exercise of their governmental uses, as defined in statute: statute) and projects forward with an functions. Strengthening the response to the annualized growth adjustment. This Regulatory Impact Analysis COVID–19 public health emergency and Treasury’s decision to incorporate a discusses the need for regulatory action, its economic impacts; easing fiscal growth adjustment into the calculation the potential benefits, and the potential pressure on State, local, and Tribal of revenue loss ensures that the formula costs. governments that might otherwise lead more fully captures revenue shortfalls Need for Regulatory Action. This to harmful cutbacks in employment or relative to recipients’ pre-pandemic interim final rule implements the $350 government services; providing expectations. Moreover, recipients will billion Fiscal Recovery Funds of the premium pay to essential workers; and have the opportunity to re-calculate ARPA, which Congress passed to help making necessary investments in certain revenue loss at several points States, territories, Tribal governments, types of infrastructure. In implementing throughout the program, recognizing and localities respond to the ongoing the ARPA, Treasury also sought to that some recipients may experience COVID–19 public health emergency and support disadvantaged communities revenue effects with a lag. This option its economic impacts. As the agency that have been disproportionately to re-calculate revenue loss on an charged with execution of these impacted by the pandemic. The Fiscal ongoing basis should result in more programs, Treasury has concluded that Recovery Funds as implemented by the support for recipients to avoid harmful this interim final rule is needed to interim final rule can be expected to cutbacks in future years. In calculating ensure that recipients of Fiscal Recovery channel resources toward these uses in revenue loss, recipients will look at Funds fully understand the order to achieve substantial near-term general revenue in the aggregate, rather requirements and parameters of the economic and public health benefits, as than on a source-by-source basis. Given program as set forth in the statute and well as longer-term benefits arising from that recipients may have experienced deploy funds in a manner that best the allowable investments in water, offsetting changes in revenues across reflects Congress’ mandate for targeted sewer, and broadband infrastructure and sources, Treasury’s approach provides a fiscal relief. aid to families. more accurate representation of the This interim final rule is primarily a effect of the pandemic on overall transfer rule: It transfers $350 billion in 183 Gabriel Chodorow-Reich et al., Does State revenues. aid from the Federal Government to Fiscal Relief during Recessions Increase • Premium Pay: Per the statute, states, territories, Tribal governments, Employment? Evidence from the American recipients have broad latitude to and localities, generating a significant Recovery and Reinvestment Act, American Econ. J.: designate critical infrastructure sectors Econ. Policy, 4:3 118–45 (Aug. 2012), available at macroeconomic effect on the U.S. https://www.aeaweb.org/articles?id=10.1257/ and make grants to third-party economy. In making this transfer, pol.4.3.118. employers for the purpose of providing Treasury has sought to implement the 184 See, e.g., Fitzpatrick, Haughwout & Setren, premium pay or otherwise respond to program in ways that maximize its Fiscal Drag from the State and Local Sector?, essential workers. While the interim Liberty Street Economics Blog, Federal Reserve potential benefits while minimizing its Bank of New York (June 27, 2012), https:// final rule generally preserves the costs. It has done so by aiming to target www.libertystreeteconomics.newyorkfed.org/2012/ flexibility in the statute, it does add a relief in key areas according to the 06/fiscal-drag-from-the-state-and-local-sector.html; requirement that recipients give written congressional mandate; offering clarity Jiri Jonas, Great Recession and Fiscal Squeeze at justification in the case that premium U.S. Subnational Government Level, IMF Working to States, territories, Tribal Paper 12/184, (July 2012), available at https:// pay would increase a worker’s annual governments, and localities while www.imf.org/external/pubs/ft/wp/2012/ pay above a certain threshold. To set maintaining their flexibility to respond wp12184.pdf; Gordon, supra note 9. this threshold, Treasury analyzed data

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from the Bureau of Labor Statistics to particularly communities that have been have familiarity with how to administer determine a level that would not require historically disadvantaged and have and report on Federal funds or grant further justification for premium pay to experienced disproportionate impacts of funding provided by other entities. In the vast majority of essential workers, the COVID–19 crisis. Targeting relief is particular, States, territories, and large while requiring higher scrutiny for in line with Executive Order 13985, localities will have received funds from provision of premium pay to higher- ‘‘Advancing Racial Equity and Support the CRF and Treasury expects them to earners who, even without premium for Underserved Communities Through rely heavily on established processes pay, would likely have greater personal the Federal Government,’’ which laid developed last year or through prior financial resources to cope with the out an Administration-wide priority to grant funding, mitigating burden on effects of the pandemic. Treasury support ‘‘equity for all, including people these governments. believes the threshold in the interim of color and others who have been Treasury expects to provide technical final rule strikes the appropriate balance historically underserved, marginalized, assistance to defray the costs of between preserving flexibility and and adversely affected by persistent administration of Fiscal Recovery Funds helping encourage use of these poverty and inequality.’’ 185 To this end, to further mitigate burden. In making resources to help those in greatest need. the interim final rule enumerates a list implementation choices, Treasury has The interim final rule also requires that of services that may be provided using hosted numerous consultations with a eligible workers have regular in-person Fiscal Recovery Funds in low-income diverse range of direct recipients— interactions or regular physical areas to address the disproportionate States, small cities, counties, and Tribal handling of items that were also impacts of the pandemic in these governments—along with various handled by others. This requirement communities; establishes the communities across the United States, will also help encourage use of financial characteristics of essential workers including those that are underserved. resources for those who have endured eligible for premium pay and Treasury lacks data to estimate the the heightened risk of performing encouragement to serve workers based precise extent to which this interim essential work. on financial need; provides that final rule generates administrative • Withholding of Payments to recipients may use Fiscal Recovery burden for State, local, and Tribal Recipients: Treasury believes that for Funds to restore (to pre-pandemic governments, but seeks comment to the vast majority of recipient entities, it levels) state and local workforces, where better estimate and account for these will be appropriate to receive funds in women and people of color are costs, as well as on ways to lessen two separate payments. As discussed disproportionately represented; 186 and administrative burdens. above, withholding of payments ensures targets investments in broadband Executive Order 13132 that recipients can adapt spending plans infrastructure to unserved and to evolving economic conditions and Executive Order 13132 (entitled underserved areas. Collectively, these Federalism) prohibits an agency from that at least some of the economic provisions will promote use of resources benefits will be realized in 2022 or later. publishing any rule that has federalism to facilitate the provision of assistance implications if the rule either imposes However, consistent with authorities to individuals and communities with granted to Treasury in the statute, substantial, direct compliance costs on the greatest need. State, local, and Tribal governments, Treasury recognizes that a subset of Analysis of Costs. This regulatory States with significant remaining and is not required by statute, or action will generate administrative costs preempts state law, unless the agency elevation in the unemployment rate relative to a pre-statutory baseline. This could face heightened additional near- meets the consultation and funding includes, chiefly, costs required to term needs to aid unemployed workers requirements of section 6 of the administer Fiscal Recovery Funds, and stimulate the recovery. Therefore, Executive order. This interim final rule oversee subrecipients and beneficiaries, for a subset of State governments, does not have federalism implications and file periodic reports with Treasury. Treasury will not withhold any funds within the meaning of the Executive It also requires States to allocate Fiscal from the first payment. Treasury order and does not impose substantial, Recovery Funds to nonentitlement believes that this approach strikes the direct compliance costs on State, local, units, which are smaller units of local appropriate balance between the general and Tribal governments or preempt state government that are statutorily required reasons to provide funds in two law within the meaning of the Executive to receive their funds through States. payments and the heightened additional order. The compliance costs are near-term needs in specific States. As Treasury expects that the imposed on State, local, and Tribal discussed above, Treasury set a administrative burden associated with governments by sections 602 and 603 of threshold based on historical analysis of this program will be moderate for a the Social Security Act, as enacted by unemployment rates in recessions. grant program of its size. Treasury the ARPA. Notwithstanding the above, • Hiring Public Sector Employees: expects that most recipients receive Treasury has engaged in efforts to The interim final rule states explicitly direct or indirect funding from Federal consult and work cooperatively with that recipients may use funds to restore Government programs and that many affected State, local, and Tribal their workforces up to pre-pandemic 185 government officials and associations in levels. Treasury believes that this Executive Order on Advancing Racial Equity and Support for Underserved Communities through the process of developing the interim statement is beneficial because it the Federal Government (Jan. 20, 2021) (86 FR 7009, final rule. Pursuant to the requirements eliminates any uncertainty that could , 2021), https://www.whitehouse.gov/ set forth in section 8(a) of Executive cause delays or otherwise negatively briefing-room/presidential-actions/2021/01/20/ Order 13132, Treasury certifies that it impact restoring public sector executive-order-advancing-racial-equity-and- support-for-underserved-communities-through-the- has complied with the requirements of workforces (which, at time of federal-government/ (last visited May 9, 2021). Executive Order 13132. publication, remain significantly below 186 David Cooper, Mary Gable & Algernon Austin, pre-pandemic levels). Economic Policy Institute Briefing Paper, The Administrative Procedure Act Finally, the interim final rule aims to Public-Sector Jobs Crisis: Women and African The Administrative Procedure Act Americans hit hardest by job losses in state and promote and streamline the provision of local governments, https://www.epi.org/ (APA), 5 U.S.C. 551 et seq., generally assistance to individuals and publication/bp339-public-sector-jobs-crisis (last requires public notice and an communities in greatest need, visited May 9, 2021). opportunity for comment before a rule

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becomes effective. However, the APA public health emergency; it is Congressional Review Act or CRA) (5 provides that the requirements of 5 ‘‘extraordinary’’ legislation about which U.S.C. 804(2) et seq.). Under the CRA, U.S.C. 553 do not apply ‘‘to the extent ‘‘both Congress and the President a major rule takes effect 60 days after that there is involved . . . a matter articulated a profound sense of the rule is published in the Federal relating to agency . . . grants.’’ The ‘urgency.’’’ Petry v. Block, 737 F.2d Register. 5 U.S.C. 801(a)(3). interim final rule implements statutory 1193, 1200 (D.C. Cir. 1984). Indeed, Notwithstanding this requirement, the conditions on the eligible uses of the several provisions implemented by this CRA allows agencies to dispense with Fiscal Recovery Funds grants, and interim final rule (sections 602(c)(1)(A) the requirements of section 801 when addresses the payment of those funds, and 603(c)(1)(A)) explicitly provide the agency for good cause finds that the reporting on uses of funds, and funds to ‘‘respond to the public health such procedure would be impracticable, potential consequences of ineligible emergency,’’ and the urgency is further unnecessary, or contrary to the public uses. The rule is thus ‘‘both clearly and exemplified by Congress’s command (in interest and the rule shall take effect at directly related to a federal grant sections 602(b)(6)(B) and 603(b)(7)(A)) such time as the agency promulgating program.’’ National Wildlife Federation that, ‘‘[t]o the extent practicable,’’ funds the rule determines. 5 U.S.C. 808(2). v. Snow, 561 F.2d 227, 232 (D.C. Cir. must be provided to Tribes and cities Pursuant to section 808(2), for the 1976). The rule sets forth the ‘‘process ‘‘not later than 60 days after the date of reasons discussed above, Treasury for necessary to maintain state . . . enactment.’’ See Philadelphia Citizens good cause finds that a 60-day delay to eligibility for federal funds,’’ id., as well in Action v. Schweiker, 669 F.2d 877, provide public notice is impracticable as the ‘‘method[s] by which states can 884 (3d Cir. 1982) (finding good cause and contrary to the public interest. . . . qualify for federal aid,’’ and other under circumstances, including Paperwork Reduction Act ‘‘integral part[s] of the grant program,’’ statutory time limits, where APA Center for Auto Safety v. Tiemann, 414 procedures would have been ‘‘virtually The information collections F. Supp. 215, 222 (D.D.C. 1976). As a impossible’’). Finally, there is an urgent associated with State, territory, local, result, the requirements of 5 U.S.C. 553 need for States to undertake the and Tribal government applications do not apply. planning necessary for sound fiscal materials necessary to receive Fiscal The APA also provides an exception policymaking, which requires an Recovery Funds (e.g., payment to ordinary notice-and-comment understanding of how funds provided information collection and acceptance procedures ‘‘when the agency for good under the ARPA will augment and of award terms) have been reviewed and cause finds (and incorporates the interact with existing budgetary approved by OMB pursuant to the finding and a brief statement of reasons resources and tax policies. Treasury Paperwork Reduction Act (44 U.S.C. therefor in the rules issued) that notice understands that many states require chapter 35) (PRA) emergency processing and public procedure thereon are immediate rules on which they can rely, procedures and assigned control impracticable, unnecessary, or contrary especially in light of the fact that the number 1505–0271. The information to the public interest.’’ 5 U.S.C. ARPA ‘‘covered period’’ began on collections related to ongoing reporting 553(b)(3)(B); see also 5 U.S.C. 553(d)(3) March 3, 2021. The statutory urgency requirements, as discussed in this (creating an exception to the and practical necessity are good cause to interim final rule, will be submitted to requirement of a 30-day delay before the forego the ordinary requirements of OMB for emergency processing in the effective date of a rule ‘‘for good cause notice-and-comment . near future. Under the PRA, an agency found and published with the rule’’). may not conduct or sponsor and a Congressional Review Act Assuming 5 U.S.C. 553 applied, respondent is not required to respond Treasury would still have good cause The Administrator of OIRA has to, an information collection unless it under sections 553(b)(3)(B) and determined that this is a major rule for displays a valid OMB control number. 553(d)(3) for not undertaking section purposes of Subtitle E of the Small Estimates of hourly burden under this 553’s requirements. The ARPA is a law Business Regulatory Enforcement and program are set forth in the table below. responding to a historic economic and Fairness Act of 1996 (also known as the Burden estimates below are preliminary.

Number of Number of Reporting respondents responses per Total responses Hours per Total burden Cost to respondent (estimated) respondent response in hours ($48.80 per hour *)

Recipient Payment Form ...... 5,050 1 ...... 5,050 .25 (15 minutes) ... 1,262.5 $61,610 Acceptance of Award Terms ...... 5,050 1 ...... 5,050 .25 (15 minutes) ... 1,262.5 61,610 Title VI Assurances ...... 5,050 1 ...... 5,050 .50 (30 minutes) ... 2,525 123,220 Quarterly Project and Expenditure Re- 5,050 4*** ...... 20,200 25 ...... 505,000 24,644,000 port. Annual Project and Expenditure Re- TBD 1 per year ...... † 20,000–40,000 15 ...... 300,000–600,000 14,640,000–29,280,000 port from NEUs. Annual Recovery Plan Performance 418 1 per year ...... 418 100 ...... 41,800 2,039,840 report.

Total ...... (**) N/A ...... 55,768–75,768 141 ...... 851,850–1,151,850 41,570,280–56,210,280 *Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Accountants and Auditors, on the internet at https://www.bls.gov/ooh/busi- ness-and-financial/accountants-and-auditors.htm (visited , 2020). Base wage of $33.89/hour increased by 44 percent to account for fully loaded employer cost of employee compensation (benefits, etc.) for a fully loaded wage rate of $48.80. **5,050–TBD. ***Per year after first year. † (Estimate only).

Periodic reporting is required by As discussed in Section VIII of this and thereafter quarterly Project and section 602(c) of Section VI of the Social SUPPLEMENTARY INFORMATION, recipients Expenditure reports until the end of the Security Act and under the interim final of Fiscal Recovery Funds will be award period. Recipients must submit rule. required to submit one interim report interim reports to Treasury by August

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31, 2021. The quarterly Project and pursuant to section 553(b) of the seq.) by adding sections 602 and 603 to Expenditure reports will include Administrative Procedure Act or establish the Coronavirus State Fiscal financial data, information on contracts another law, the agency must prepare a Recovery Fund and Coronavirus Local and subawards over $50,000, types of regulatory flexibility analysis that meets Fiscal Recovery Fund. projects funded, and other information the requirements of the RFA and § 35.2 Applicability. regarding a recipient’s utilization of the publish such analysis in the Federal award funds. Register. 5 U.S.C. 603, 604. This subpart applies to States, Nonentitlement unit recipients will be Rules that are exempt from notice and territories, Tribal governments, required to submit annual Project and comment under the APA are also metropolitan cities, nonentitlement Expenditure reports until the end of the exempt from the RFA requirements, units of local government, counties, and award period. The initial annual Project including the requirement to conduct a units of general local government that and Expenditure report for regulatory flexibility analysis, when accept a payment or transfer of funds Nonentitlement unit recipients must be among other things the agency for good made under section 602 or 603 of the submitted to Treasury by October 31, cause finds that notice and public Social Security Act. 2021. The subsequent annual reports procedure are impracticable, § 35.3 Definitions. must be submitted to Treasury by unnecessary, or contrary to the public As used in this subpart: October 31 each year. States, territories, interest. Since this rule is exempt from Baseline means tax revenue of the metropolitan cities, and counties with a the notice and comment requirements of recipient for its fiscal year ending in population that exceeds 250,000 the APA, Treasury is not required to 2019, adjusted for inflation in each residents will also be required to submit conduct a regulatory flexibility analysis. reporting year using the Bureau of an annual Recovery Plan Performance List of Subjects in 31 CFR Part 35 Economic Analysis’s Implicit Price report to Treasury. The Recovery Plan Deflator for the gross domestic product Performance report will include Executive compensation, Public of the United States. descriptions of the projects funded and health emergency, State and local County means a county, parish, or information on the performance governments, Tribal governments. other equivalent county division (as indicators and objectives of the award. For the reasons stated in the defined by the Census Bureau). Each annual Recovery Plan Performance preamble, the Department of the Covered benefits include, but are not report must be posted on the public- Treasury amends 31 CFR part 35 as limited to, the costs of all types of leave facing website of the recipient. Treasury follows: (vacation, family-related, sick, military, will provide additional guidance and bereavement, sabbatical, jury duty), instructions on the all the reporting PART 35—PANDEMIC RELIEF employee insurance (health, life, dental, requirements outlined above for the PROGRAMS vision), retirement (pensions, 401(k)), Fiscal Recovery Funds program at a ■ 1. The authority citation for part 35 is unemployment benefit plans (Federal later date. and State), workers’ compensation revised to read as follows: These and related periodic reporting insurance, and Federal Insurance requirements are under consideration Authority: 42 U.S.C. 802(f); 42 U.S.C. Contributions Act taxes (which includes and will be submitted to OMB for 803(f); 31 U.S.C. 321; Division N, Title V, Social Security and Medicare taxes). approval under the PRA emergency Subtitle B, Pub. L. 116–260, 134 Stat. 1182; Covered change means a change in provisions in the near future. Section 104A, Pub. L. 103–325, 108 Stat. law, regulation, or administrative 2160, as amended (12 U.S.C. 4701 et seq.); Treasury invites comments on all interpretation. A change in law includes aspects of the reporting and Pub. L. 117–2, 135 Stat. 4 (42 U.S.C. 802 et seq.). any final legislative or regulatory action, recordkeeping requirements including: a new or changed administrative ■ (a) Whether the collection of 2. Revise the part heading to read as interpretation, and the phase-in or information is necessary for the proper set forth above. taking effect of any statute or rule if the performance of the functions of the ■ 3. Add subpart A to read as follows: phase-in or taking effect was not agency, including whether the prescribed prior to the start of the Subpart A—Coronavirus State and information has practical utility; (b) the covered period. accuracy of the estimate of the burden Local Fiscal Recovery Funds Covered period means, with respect to of the collection of information; (c) ways Sec. a State, Territory, or Tribal government, to enhance the quality, utility, and 35.1 Purpose. the period that: clarity of the information to be 35.2 Applicability. (1) Begins on March 3, 2021; and collected; (d) ways to minimize the 35.3 Definitions. (2) Ends on the last day of the fiscal burden of the collection of information; 35.4 Reservation of authority, reporting. year of such State, Territory, or Tribal and (e) estimates of capital or start-up 35.5 Use of funds. government in which all funds received costs and costs of operation, 35.6 Eligible uses. by the State, Territory, or Tribal maintenance, and purchase of services 35.7 Pensions. government from a payment made to provide information. Comments 35.8 Tax. under section 602 or 603 of the Social should be sent by the comment deadline 35.9 Compliance with applicable laws. Security Act have been expended or 35.10 Recoupment. to the www.regulations.gov docket with 35.11 Payments to States. returned to, or recovered by, the a copy to the Office of Information and 35.12 Distributions to nonentitlement units Secretary. Regulatory Affairs, U.S. Office of of local government and units of general COVID–19 means the Coronavirus Management and Budget, 725 17th local government. Disease 2019. Street NW, Washington, DC 20503; or COVID–19 public health emergency email to [email protected]. § 35.1 Purpose. means the period beginning on January This subpart implements section 9901 27, 2020 and until the termination of the Regulatory Flexibility Analysis of the American Rescue Plan Act national emergency concerning the The Regulatory Flexibility Act (RFA) (Subtitle M of Title IX of Pub. L. COVID–19 outbreak declared pursuant generally requires that when an agency 117–2), which amends Title VI of the to the National Emergencies Act (50 issues a proposed rule, or a final rule Social Security Act (42 U.S.C. 801 et U.S.C. 1601 et seq.).

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Deposit means an extraordinary (i) Regular in-person interactions with contracts, subawards, and similar payment of an accrued, unfunded patients, the public, or coworkers of the transactions that require payment. liability. The term deposit does not refer individual that is performing the work; Pension fund means a defined benefit to routine contributions made by an or plan and does not include a defined employer to pension funds as part of the (ii) Regular physical handling of items contribution plan. employer’s obligations related to that were handled by, or are to be Premium pay means an amount of up payroll, such as either a pension handled by patients, the public, or to $13 per hour that is paid to an contribution consisting of a normal cost coworkers of the individual that is eligible worker, in addition to wages or component related to current employees performing the work. remuneration the eligible worker or a component addressing the Funds means, with respect to a otherwise receives, for all work amortization of unfunded liabilities recipient, amounts provided to the performed by the eligible worker during calculated by reference to the recipient pursuant to a payment made the COVID–19 public health emergency. employer’s payroll costs. under section 602(b) or 603(b) of the Such amount may not exceed $25,000 Eligible employer means an employer Social Security Act or transferred to the with respect to any single eligible of an eligible worker who performs recipient pursuant to section 603(c)(4) worker. Premium pay will be essential work. of the Social Security Act. considered to be in addition to wages or Eligible workers means workers General revenue means money that is remuneration the eligible worker needed to maintain continuity of received from tax revenue, current otherwise receives if, as measured on an operations of essential critical charges, and miscellaneous general hourly rate, the premium pay is: infrastructure sectors, including health revenue, excluding refunds and other (1) With regard to work that the care; emergency response; sanitation, correcting transactions, proceeds from eligible worker previously performed, disinfection, and cleaning work; issuance of debt or the sale of pay and remuneration equal to the sum maintenance work; grocery stores, investments, agency or private trust of all wages and remuneration restaurants, food production, and food transactions, and intergovernmental previously received plus up to $13 per delivery; pharmacy; biomedical transfers from the Federal Government, hour with no reduction, substitution, research; behavioral health work; including transfers made pursuant to offset, or other diminishment of the medical testing and diagnostics; home- section 9901 of the American Rescue eligible worker’s previous, current, or and community-based health care or Plan Act. General revenue does not prospective wages or remuneration; or assistance with activities of daily living; include revenues from utilities. Revenue (2) With regard to work that the family or child care; social services from Tribal business enterprises must be eligible worker continues to perform, work; public health work; vital services included in general revenue. pay of up to $13 that is in addition to to Tribes; any work performed by an Intergovernmental transfers means the eligible worker’s regular rate of employee of a State, local, or Tribal money received from other wages or remuneration, with no government; educational work, school governments, including grants and reduction, substitution, offset, or other nutrition work, and other work required shared taxes. diminishment of the workers’ current to operate a school facility; laundry Metropolitan city has the meaning and prospective wages or remuneration. work; elections work; solid waste or Qualified census tract has the same given that term in section 102(a)(4) of hazardous materials management, meaning given in 26 U.S.C. the Housing and Community response, and cleanup work; work 42(d)(5)(B)(ii)(I). Development Act of 1974 (42 U.S.C. requiring physical interaction with Recipient means a State, Territory, 5302(a)(4)) and includes cities that patients; dental care work; Tribal government, metropolitan city, relinquish or defer their status as a transportation and warehousing; work at nonentitlement unit of local metropolitan city for purposes of hotel and commercial lodging facilities government, county, or unit of general receiving allocations under section 106 that are used for COVID–19 mitigation local government that receives a of such Act (42 U.S.C. 5306) for fiscal and containment; work in a mortuary; payment made under section 602(b) or year 2021. work in critical clinical research, 603(b) of the Social Security Act or Net reduction in total spending is development, and testing necessary for transfer pursuant to section 603(c)(4) of measured as the State or Territory’s total COVID–19 response. the Social Security Act. (1) With respect to a recipient that is spending for a given reporting year Reporting year means a single year or a metropolitan city, nonentitlement unit excluding its spending of funds, partial year within the covered period, of local government, or county, workers subtracted from its total spending for its aligned to the current fiscal year of the in any additional sectors as each chief fiscal year ending in 2019, adjusted for State or Territory during the covered executive officer of such recipient may inflation using the Bureau of Economic period. designate as critical to protect the health Analysis’s Implicit Price Deflator for the Secretary means the Secretary of the and well-being of the residents of their gross domestic product of the United Treasury. metropolitan city, nonentitlement unit States. State means each of the 50 States and of local government, or county; or Nonentitlement unit of local the District of Columbia. (2) With respect to a State, Territory, government means a ‘‘city,’’ as that term Small business means a business or Tribal government, workers in any is defined in section 102(a)(5) of the concern or other organization that: additional sectors as each Governor of a Housing and Community Development (1) Has no more than 500 employees, State or Territory, or each Tribal Act of 1974 (42 U.S.C. 5302(a)(5)), that or if applicable, the size standard in government, may designate as critical to is not a metropolitan city. number of employees established by the protect the health and well-being of the Nonprofit means a nonprofit Administrator of the Small Business residents of their State, Territory, or organization that is exempt from Federal Administration for the industry in Tribal government. income taxation and that is described in which the business concern or Essential work means work that: section 501(c)(3) of the Internal Revenue organization operates; and (1) Is not performed while Code. (2) Is a small business concern as teleworking from a residence; and Obligation means an order placed for defined in section 3 of the Small (2) Involves: property and services and entering into Business Act (15 U.S.C. 632).

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Tax revenue means revenue received § 35.4 Reservation of authority, reporting. § 35.6 Eligible uses. from a compulsory contribution that is (a) Reservation of authority. Nothing (a) In general. Subject to §§ 35.7 and exacted by a government for public in this subpart shall limit the authority 35.8, a recipient may use funds for one purposes excluding refunds and of the Secretary to take action to enforce or more of the purposes described in corrections and, for purposes of § 35.8, conditions or violations of law, paragraphs (b) through (e) of this section intergovernmental transfers. Tax including actions necessary to prevent (b) Responding to the public health revenue does not include payments for evasions of this subpart. emergency or its negative economic a special privilege granted or service impacts. A recipient may use funds to (b) Extensions or accelerations of rendered, employee or employer respond to the public health emergency timing. The Secretary may extend or assessments and contributions to or its negative economic impacts, accelerate any deadline or compliance finance retirement and social insurance including for one or more of the date of this subpart, including reporting trust systems, or special assessments to following purposes: requirements that implement this pay for capital improvements. (1) COVID–19 response and subpart, if the Secretary determines that Territory means the Commonwealth prevention. Expenditures for the such extension or acceleration is mitigation and prevention of COVID–19, of Puerto Rico, the United States Virgin appropriate. In determining whether an Islands, Guam, the Commonwealth of including: extension or acceleration is appropriate, (i) Expenses related to COVID–19 the , or the Secretary will consider the period of American Samoa. vaccination programs and sites, time that would be extended or including staffing, acquisition of Tribal enterprise means a business accelerated and how the modified equipment or supplies, facilities costs, concern: timeline would facilitate compliance and information technology or other (1) That is wholly owned by one or with this subpart. administrative expenses; more Tribal governments, or by a (c) Reporting and requests for other (ii) COVID–19-related expenses of corporation that is wholly owned by one information. During the covered period, public hospitals, clinics, and similar or more Tribal governments; or recipients shall provide to the Secretary facilities; (2) That is owned in part by one or periodic reports providing detailed (iii) COVID–19 related expenses in more Tribal governments, or by a accounting of the uses of funds, all congregate living facilities, including corporation that is wholly owned by one modifications to a State or Territory’s skilled nursing facilities, long-term care or more Tribal governments, if all other tax revenue sources, and such other facilities, incarceration settings, owners are either United States citizens information as the Secretary may homeless shelters, residential foster care or small business concerns, as these require for the administration of this facilities, residential behavioral health terms are used and consistent with the section. In addition to regular reporting treatment, and other group living definitions in 15 U.S.C. 657a(b)(2)(D). requirements, the Secretary may request facilities; Tribal government means the other additional information as may be (iv) Expenses of establishing recognized governing body of any necessary or appropriate, including as temporary public medical facilities and Indian or Alaska Native tribe, band, may be necessary to prevent evasions of other measures to increase COVID–19 nation, pueblo, village, community, the requirements of this subpart. False treatment capacity, including related component band, or component statements or claims made to the construction costs and other capital reservation, individually identified Secretary may result in criminal, civil, investments in public facilities to meet (including parenthetically) in the list or administrative sanctions, including COVID–19-related operational needs; published by the Bureau of Indian fines, imprisonment, civil damages and (v) Expenses of establishing Affairs on January 29, 2021, pursuant to penalties, debarment from participating temporary public medical facilities and section 104 of the Federally Recognized in Federal awards or contracts, and/or other measures to increase COVID–19 Indian Tribe List Act of 1994 (25 U.S.C. any other remedy available by law. treatment capacity, including related 5131). construction costs and other capital § 35.5 Use of funds. Unemployment rate means the U–3 investments in public facilities to meet unemployment rate provided by the (a) In general. A recipient may only COVID–19-related operational needs; Bureau of Labor Statistics as part of the use funds to cover costs incurred during (vi) Costs of providing COVID–19 Local Area Unemployment Statistics the period beginning March 3, 2021, and testing and monitoring, contact tracing, program, measured as total ending December 31, 2024, for one or and monitoring of case trends and unemployment as a percentage of the more of the purposes enumerated in genomic sequencing for variants; civilian labor force. sections 602(c)(1) and 603(c)(1) of the (vii) Emergency medical response expenses, including emergency medical Unemployment trust fund means an Social Security Act, as applicable, transportation, related to COVID–19; unemployment trust fund established including those enumerated in section § 35.6, subject to the restrictions set (viii) Expenses for establishing and under section 904 of the Social Security operating public telemedicine Act (42 U.S.C. 1104). forth in sections 602(c)(2) and 603(c)(2) of the Social Security Act, as applicable. capabilities for COVID–19-related Unit of general local government has treatment; the meaning given to that term in (b) Costs incurred. A cost shall be (ix) Expenses for communication section 102(a)(1) of the Housing and considered to have been incurred for related to COVID–19 vaccination Community Development Act of 1974 purposes of paragraph (a) of this section programs and communication or (42 U.S.C. 5302(a)(1)). if the recipient has incurred an enforcement by recipients of public Unserved and underserved obligation with respect to such cost by health orders related to COVID–19; households or businesses means one or December 31, 2024. (x) Expenses for acquisition and more households or businesses that are (c) Return of funds. A recipient must distribution of medical and protective not currently served by a wireline return any funds not obligated by supplies, including sanitizing products connection that reliably delivers at least December 31, 2024, and any funds not and personal protective equipment; 25 Mbps download speed and 3 Mbps expended to cover such obligations by (xi) Expenses for disinfection of of upload speed. December 31, 2026. public areas and other facilities in

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response to the COVID–19 public health or other services, that responds to the (B) Assistance to high-poverty school emergency; negative economic impacts of the districts to advance equitable funding (xii) Expenses for technical assistance COVID–19 public health emergency. across districts and geographies; and to local authorities or other entities on (8) Assistance to households. (C) Educational and evidence-based mitigation of COVID–19-related threats Assistance programs, including cash services to address the academic, social, to public health and safety; assistance programs, that respond to the emotional, and mental health needs of (xiii) Expenses for quarantining or COVID–19 public health emergency. students; and isolation of individuals; (9) Aid to impacted industries. Aid to (iv) Programs or services that address (xiv) Expenses of providing paid sick tourism, travel, hospitality, and other or mitigate the impacts of the COVID– and paid family and medical leave to impacted industries that responds to the 19 public health emergency on public employees to enable compliance negative economic impacts of the childhood health or welfare, including: with COVID–19 public health COVID–19 public health emergency. (A) New or expanded childcare; precautions; (10) Expenses to improve efficacy of (B) Programs to provide home visits (xv) Expenses for treatment of the public health or economic relief by health professionals, parent long-term symptoms or effects of programs. Administrative costs educators, and social service COVID–19, including post-intensive associated with the recipient’s COVID– professionals to individuals with young care syndrome; 19 public health emergency assistance children to provide education and (xvi) Expenses for the improvement of programs, including services responding assistance for economic support, health ventilation systems in congregate to the COVID–19 public health needs, or child development; and settings, public health facilities, or other emergency or its negative economic (C) Services for child welfare- public facilities; impacts, that are not federally funded. involved families and foster youth to (xvii) Expenses related to establishing (11) Survivor’s benefits. Benefits for provide support and education on child or enhancing public health data the surviving family members of development, positive parenting, coping systems; and individuals who have died from (xviii) Mental health treatment, skills, or recovery for mental health and COVID–19, including cash assistance to substance use. substance misuse treatment, and other widows, widowers, or dependents of behavioral health services. (c) Providing premium pay to eligible individuals who died of COVID–19. workers. A recipient may use funds to (2) Public health and safety staff. (12) Disproportionately impacted provide premium pay to eligible Payroll and covered benefit expenses for populations and communities. A workers of the recipient who perform public safety, public health, health care, program, service, or other assistance essential work or to provide grants to human services, and similar employees that is provided in a qualified census eligible employers, provided that any to the extent that the employee’s time is tract, that is provided to households and premium pay or grants provided under spent mitigating or responding to the populations living in a qualified census this paragraph (c) must respond to COVID–19 public health emergency. tract, that is provided by a Tribal eligible workers performing essential (3) Hiring State and local government government, or that is provided to other work during the COVID–19 public staff. Payroll, covered benefit, and other households, businesses, or populations health emergency. A recipient uses costs associated with the recipient disproportionately impacted by the premium pay or grants provided under increasing the number of its employees COVID–19 public health emergency, this paragraph (c) to respond to eligible up to the number of employees that it such as: workers performing essential work employed on January 27, 2020. (i) Programs or services that facilitate during the COVID–19 public health (4) Assistance to unemployed access to health and social services, emergency if it prioritizes low- and workers. Assistance, including job including: training, for individuals who want and (A) Assistance accessing or applying moderate-income persons. The recipient are available for work, including those for public benefits or services; must provide, whether for themselves or who have looked for work sometime in (B) Remediation of lead paint or other on behalf of a grantee, a written the past 12 months or who are lead hazards; and justification to the Secretary of how the employed part time but who want and (C) Community violence intervention premium pay or grant provided under are available for full-time work. programs; this paragraph (c) responds to eligible (5) Contributions to State (ii) Programs or services that address workers performing essential work if the unemployment insurance trust funds. housing insecurity, lack of affordable premium pay or grant would increase an Contributions to an unemployment trust housing, or homelessness, including: eligible worker’s total wages and fund up to the level required to restore (A) Supportive housing or other remuneration above 150 percent of such the unemployment trust fund to its programs or services to improve access eligible worker’s residing State’s average balance on January 27, 2020 or to pay to stable, affordable housing among annual wage for all occupations or their back advances received under Title XII individuals who are homeless; residing county’s average annual wage, of the Social Security Act (42 U.S.C. (B) Development of affordable whichever is higher. 1321) for the payment of benefits housing to increase supply of affordable (d) Providing government services. For between January 27, 2020 and May 17, and high-quality living units; and the provision of government services to 2021. (C) Housing vouchers and assistance the extent of a reduction in the (6) Small businesses. Assistance to relocating to neighborhoods with higher recipient’s general revenue, calculated small businesses, including loans, levels of economic opportunity and to according to paragraphs (d)(1) and (2) of grants, in-kind assistance, technical reduce concentrated areas of low this section. assistance or other services, that economic opportunity; (1) Frequency. A recipient must responds to the negative economic (iii) Programs or services that address calculate the reduction in its general impacts of the COVID–19 public health or mitigate the impacts of the COVID– revenue using information as-of emergency. 19 public health emergency on December 31, 2020, December 31, 2021, (7) Nonprofits. Assistance to nonprofit education, including: December 31, 2022, and December 31, organizations, including loans, grants, (A) New or expanded early learning 2023 (each, a calculation date) and in-kind assistance, technical assistance services; following each calculation date.

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(2) Calculation. A reduction in a recipient’s general revenue equals:

Max {[Base Year Revenue* (1 + Growth Adjustment)(~~)] -Actual General Revenue6 O}

Where: resulting from a covered change during (B) Departments, agencies, or Base Year Revenue is the recipient’s general the covered period. authorities in which the State or revenue for the most recent full fiscal (b) Violation. Treasury will consider a Territory is using funds, in an amount year prior to the COVD–19 public health State or Territory to have used funds to equal to the value of the spending cuts emergency; offset a reduction in net tax revenue if, in those departments, agencies, or Growth Adjustment is equal to the greater of during a reporting year: authorities, minus funds used. 4.1 percent (or 0.041) and the recipient’s (1) Covered change. The State or (c) Amount and revenue reduction average annual revenue growth over the three full fiscal years prior to the Territory has made a covered change cap. If a State or Territory is considered COVID–19 public health emergency. that, either based on a reasonable to be in violation pursuant to paragraph n equals the number of months elapsed from statistical methodology to isolate the (b) of this section, the amount used in the end of the base year to the impact of the covered change in actual violation of paragraph (a) of this section calculation date. revenue or based on projections that use is equal to the lesser of: Actual General Revenue is a recipient’s reasonable assumptions and do not (1) The reduction in net tax revenue actual general revenue collected during incorporate the effects of of the State or Territory for the reporting 12-month period ending on each macroeconomic growth to reduce or year, measured as the difference calculation date; increase the projected impact of the between the State’s or Territory’s Subscript t denotes the specific calculation baseline and its actual tax revenue, each date. covered change, the State or Territory assesses has had or predicts to have the measured as of the end of the reporting (e) To make necessary investments in effect of reducing tax revenue relative to year; and, infrastructure. A recipient may use current law; (2) The aggregate amount of the funds to make investments in: (2) Exceeds the de minimis threshold. reductions in tax revenues caused by (1) Clean Water State Revolving Fund The aggregate amount of the measured covered changes identified in paragraph and Drinking Water State Revolving or predicted reductions in tax revenue (b)(1) of this section, minus the sum of Fund investments. Projects or activities caused by covered changes identified the amounts in identified in paragraphs of the type that would be eligible under under paragraph (b)(1) of this section, in (b)(4)(i) and (ii). section 603(c) of the Federal Water the aggregate, exceeds 1 percent of the § 35.9 Compliance with applicable laws. Pollution Control Act (33 U.S.C. State’s or Territory’s baseline; A recipient must comply with all 1383(c)) or section 1452 of the Safe (3) Reduction in net tax revenue. The other applicable Federal statutes, Drinking Water Act (42 U.S.C. 300j–12); State or Territory reports a reduction in regulations, and Executive orders, and a or, net tax revenue, measured as the recipient shall provide for compliance (2) Broadband. Broadband difference between actual tax revenue with the American Rescue Plan Act, this infrastructure that is designed to and the State’s or Territory’s baseline, subpart, and any interpretive guidance provide service to unserved or each measured as of the end of the by other parties in any agreements it underserved households and businesses reporting year; and and that is designed to, upon (4) Consideration of other changes. enters into with other parties relating to completion: The aggregate amount of measured or these funds. (i) Reliably meet or exceed predicted reductions in tax revenue symmetrical 100 Mbps download speed § 35.10 Recoupment. caused by covered changes is greater (a) Identification of violations—(1) In and upload speeds; or than the sum of the following, in each (ii) In cases where it is not general. Any amount used in violation case, as calculated for the reporting practicable, because of the excessive of § 35.5, § 35.6, or § 35.7 may be year: cost of the project or geography or identified at any time prior to December (i) The aggregate amount of the topography of the area to be served by 31, 2026. expected increases in tax revenue the project, to provide service meeting (2) Annual reporting of amounts of caused by one or more covered changes the standards set forth in paragraph violations. On an annual basis, a that, either based on a reasonable (e)(2)(i) of this section: recipient that is a State or Territory statistical methodology to isolate the (A) Reliably meet or exceed 100 Mbps must calculate and report any amounts impact of the covered change in actual download speed and between at least 20 used in violation of § 35.8. revenue or based on projections that use Mbps and 100 Mbps upload speed; and (b) Calculation of amounts subject to reasonable assumptions and do not (B) Be scalable to a minimum of 100 recoupment—(1) In general. Except as incorporate the effects of Mbps download speed and 100 Mbps provided in paragraph (b)(2) of this macroeconomic growth to reduce or upload speed. section, Treasury will calculate any increase the projected impact of the amounts subject to recoupment § 35.7 Pensions. covered change, the State or Territory resulting from a violation of § 35.5, A recipient may not use funds for assesses has had or predicts to have the § 35.6, or § 35.7 as the amounts used in deposit into any pension fund. effect of increasing tax revenue; and violation of such restrictions. (ii) Reductions in spending, up to the (2) Violations of § 35.8. Treasury will § 35.8 Tax. amount of the State’s or Territory’s net calculate any amounts subject to (a) Restriction. A State or Territory reduction in total spending, that are in: recoupment resulting from a violation of shall not use funds to either directly or (A) Departments, agencies, or § 35.8, equal to the lesser of: indirectly offset a reduction in the net authorities in which the State or (i) The amount set forth in § 35.8(c); tax revenue of the State or Territory Territory is not using funds; and and,

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(ii) The amount of funds received by requirements of paragraph (d) of this with the requirements set forth in such recipient. section; or section 603(b)(2)(C) of the Social (c) Notice. If Treasury calculates an (2) Within 120 calendar days of Security Act and without offsetting any amount subject to recoupment under receipt of the Secretary’s decision under debt owed by such nonentitlement units paragraph (b) of this section, Treasury paragraph (e) of this section, in the case of local governments against such will provide the recipient a written of a recipient that submits a request for payments. notice of the amount subject to reconsideration in accordance with the (b) Budget cap. A State or Territory requirements of paragraph (d) of this recoupment along with an explanation may not make a payment to a section. of such amounts. nonentitlement unit of local government (d) Request for reconsideration. § 35.11 Payments to States. pursuant to section 603(b)(2)(C) of the Unless Treasury extends the time (a) In general. With respect to any Social Security Act and paragraph (a) of period, within 60 calendar days of this section in excess of the amount receipt of a notice of recoupment State or Territory that has an unemployment rate as of the date that equal to 75 percent of the most recent provided under paragraph (c) of this budget for the nonentitlement unit of section, a recipient may submit a it submits an initial certification for payment of funds pursuant to section local government as of January 27, 2020. written request to Treasury requesting A State or Territory shall permit a reconsideration of any amounts subject 602(d)(1) of the Social Security Act that is less than two percentage points above nonentitlement unit of local government to recoupment under paragraph (b) of without a formal budget as of January this section. To request reconsideration its unemployment rate in February 2020, the Secretary will withhold 50 27, 2020, to provide a certification from of any amounts subject to recoupment, an authorized officer of the a recipient must submit to Treasury a percent of the amount of funds allocated under section 602(b) of the Social nonentitlement unit of local government written request that includes: of its most recent annual expenditures (1) An explanation of why the Security Act to such State or territory until the date that is twelve months as of January 27, 2020, and a State or recipient believes all or some of the Territory may rely on such certification amount should not be subject to from the date such initial certification is provided to the Secretary. for purposes of complying with this recoupment; and paragraph (b). (2) A discussion of supporting (b) Payment of withheld amount. In reasons, along with any additional order to receive the amount withheld (c) Units of general local government. information. under paragraph (a) of this section, the Each State or Territory that receives a (e) Final amount subject to State or Territory must submit to the payment from Treasury pursuant to recoupment. Unless Treasury extends Secretary at least 30 days prior to the section 603(b)(3)(B)(ii) of the Social the time period, within 60 calendar days date referenced in paragraph (a) the Security Act, in the case of an amount of receipt of the recipient’s request for following information: to be paid to a county that is not a unit (1) A certification, in the form reconsideration provided pursuant to of general local government, shall provided by the Secretary, that such paragraph (d) of this section, the distribute the amount of the payment to State or Territory requires the payment recipient will be notified of the units of general local government within to carry out the activities specified in Secretary’s decision to affirm, withdraw, such county in accordance with the section 602(c) of the Social Security Act or modify the notice of recoupment. requirements set forth in section and will use the payment in compliance Such notification will include an 603(b)(3)(B)(ii) of the Social Security with section 602(c) of the Social explanation of the decision, including Act and without offsetting any debt Security Act; and, responses to the recipient’s supporting owed by such units of general local (2) Any reports required to be filed by government against such payments. reasons and consideration of additional that date pursuant to this subpart that information provided. have not yet been filed. (d) Additional conditions. A State or (f) Repayment of funds. Unless Territory may not place additional Treasury extends the time period, a § 35.12 Distributions to nonentitlement conditions or requirements on recipient shall repay to the Secretary units of local government and units of distributions to nonentitlement units of any amounts subject to recoupment in general local government. local government or units of general accordance with instructions provided (a) Nonentitlement units of local local government beyond those required by Treasury: government. Each State or Territory that by section 603 of the Social Security Act (1) Within 120 calendar days of receives a payment from Treasury or this subpart. receipt of the notice of recoupment pursuant to section 603(b)(2)(B) of the provided under paragraph (c) of this Social Security Act shall distribute the Laurie Schaffer, section, in the case of a recipient that amount of the payment to Acting General Counsel. does not submit a request for nonentitlement units of government in [FR Doc. 2021–10283 Filed 5–13–21; 11:15 am] reconsideration in accordance with the such State or Territory in accordance BILLING CODE 4810–AK–P

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