Billions of federal dollars are flowing to state and local governments and agencies through the American Rescue Plan Act, providing unprecedented opportunity for a poor state such as Mississippi to enact projects and programs that would otherwise be impossible.
But (properly) spending and riding herd over billions of federal dollars is a monumental undertaking — something Mississippi learned the hard way after Hurricane Katrina, the BP oil disaster and from various scandals such as the welfare fraud case.
It raises the question: Is Mississippi up to the task?
“That’s the question I’m asking every night as I go to bed,” state Auditor Shad White said. “… Do they have the bandwidth to spend the money properly? I think the answer is: the jury is still out.”
It also raises questions of whether the state’s top leadership can get on the same page —something they have struggled to do even though they’re all Republicans — and work together on what many are calling a once-in-a-lifetime opportunity.
Mississippi will receive over $6 billion from the $1.9 trillion ARPA. The money has to be obligated by 2024 and spent by 2026. About $1.8 billion will be controlled by the state Legislature. Another $932 million will go to county and city governments. Around $166 million is earmarked for capital projects, primarily for broadband expansion.
Millions more will go directly to K-21 schools, colleges and universities, mental health and human services and other agencies, and billions of dollars is going or has gone directly to Mississippians through stimulus payments, child tax credits, enhanced unemployment benefits and other areas.
To date, there has been little planning or coordination among state leaders, or solicitation of input from communities, about how to spend the money, and no one appears to be on the same page about even the fundamentals of the task.
“What are we waiting on?” said House Democratic Leader Robert Johnson III. “We have needs. Why are we sitting on our hands? This will take time to do it right. We at least need a special session for planning, or we at least need to be having some meetings … Why not crank the (legislative) committees up to be working on this? … I talk to the leadership, and they’re like, ‘Well, it’s not going anywhere. We’ll get to it when we’re back here in January.'”
Mississippi appears to be behind many other states that have already begun spending the money or earnestly developing plans. Gov. Tate Reeves, who would have to sign off on much of the spending, has not presented any proposal. Legislative leaders have not held any joint hearings or major committee meetings on ARPA. Much of lawmakers’ focus this summer has been on medical marijuana.
Only Lt. Gov. Delbert Hosemann has appeared to focus on ARPA, traveling the state meeting with local leaders to discuss how the money could be spent on projects “that have an impact not for one or two years, but one or two generations.” But no one else in upper state leadership appears sold on Hosemann’s proposal to allocate much of the state-controlled money to cities and counties to augment the direct funds they are receiving from the act.
With an earlier round of federal pandemic money, legislative leaders and Gov. Reeves spent much time, despite a tight spending deadline, fighting over who controlled the bulk of the money — the governor, through his emergency powers, or the Legislature, which constitutionally holds the purse strings. The Legislature mostly won out. Other states saw similar battles, and in most it appears legislatures will control the spending.
The verdict is still out on the state’s spending and management of the $1.2 billion it got from Congress’ first round of state pandemic relief, but much of the money lawmakers earmarked for small businesses went unspent as business owners complained of excessive red tape for the funds, and a rental assistance plan has been something of a disaster. Other states saw similar problems, with much of the blame being put on Congress’ short deadline to spend the money.
While the Legislature is used to spending the state’s money, it is not equipped to manage that spending, and is constitutionally prohibited from many of those functions. A coordinated effort with the executive branch and myriad state agencies will be required.
The lack of communication, and at times disfunction between the state’s top leaders, has some worried about how planning and implementation of ARPA will go in Mississippi. While legislative leaders appear in no hurry to get moving on such plans because of the relatively lenient deadline of 2024, the state is burning daylight on what will be a huge undertaking with many moving parts.
With every state in the Union and region potentially ramping up similar projects, there could be shortages of engineers, planners and contractors, potentially causing delays.
Also, for the Legislature’s regular 90-day session starting in January, there are numerous major issues and chores stacked up — including decennial redistricting, a proposed elimination of income taxes and restoring the ballot initiative process.
“I’m glad to see the lieutenant governor is out there doing that, but that’s part of the problem — the lieutenant governor says, ‘I’m out here doing this, I’m going to do that.'” Johnson said. “… I thought one of the advantages of having this unilateral leadership, one party controlling both houses and the executive branch, was they would all be on the same page and talking. They don’t talk. That’s frustrating … disheartening.”
Johnson said he likes Hosemann’s idea of the state supplementing local governments’ direct payments for larger projects, but he also wants to see money directed to essential workers — law enforcement, first responders, nurses, even grocery workers. Other states are providing such direct payments to workers with ARPA, but there has been little talk of that from Mississippi leaders. And if there’s a need for such payments to workers, it would be clear and present, during a fourth wave of the pandemic, not down the road after lawmakers haggle it out.
The U.S. Treasury is still tweaking some of the rules for the money, but generally the funds can be used for:
- Revenue replacement for providing government services “to the extent of the reduction in revenue due to the (pandemic) …” compared to revenue the year prior to the pandemic.
- Assistance to small businesses, households, hard-hit industries and economic recovery
- Premium pay for essential workers
- Water, sewer and broadband infrastructure projects
Hurricane Katrina is Mississippi’s nearest point of reference to the ARPA spending. After the 2005 storm’s destruction, nearly $25 billion in federal dollars flowed to the state over the next decade.
The state got high marks for some of the spending, including an unprecedented more than $5 billion program to make uninsured or underinsured homeowners whole. But it also made headlines for fraud, waste and abuse.
Local governments, in particular, struggled to manage the money, come up with plans to use it for transformative changes, and at times to even spend it in a timely fashion. At one point, five years out from the storm, Congress noted Gulf states still had $20 billion unspent, and pulled back some of the funds. In other cases, local governments faced “clawbacks” and had to either repay the feds or beg for waivers for failure to follow myriad rules and regulations on the spending.
Auditor White is tasked with accounting for Mississippi’s pandemic relief spending, although he is prohibited from helping actually run the projects and programs. He said Mississippi’s Katrina experience is an advantage, and his office has numerous veterans of that time “who still have the playbook from back then.”
White said his office was allocated about $3 million from the first round of pandemic money, and for now that is sufficient for extra work tracking the ARPA funds. He said he may need to hire some extra data expertise he doesn’t have in house. He also said he has floated the idea of having a joint investigator between his office and the Ethics Commission, and that “maybe now is the time for that seeing all this money flow.”
“Somebody could follow all the purchasing procedures, and it still be illegal if you give a project to your sister or something like that,” White said. “That’s Ethics Commission jurisdiction, but I think we could have someone who straddles both agencies.”
White said his office is already providing training and guidance to local governments.
“You have this situation where an unprecedented amount of money will be flying around the state and there are a lot of questions about whether or not local governments can spend it properly, or spend it at all,” White said. “One question is whether they are getting the guidance they need, and if they are, are there enough legal things to spend it on. The jury is still out on both of those questions.
“We are encouraging boards of supervisors, council members and mayors, if they are confused about how to spend it, they really do need to make sure their attorneys are up to speed, or hire an attorney or consultant who understands — or to be on the phone with us all the time.”
“If you don’t get this right, the person who is going to come calling is a federal Office of the Inspector General employee, and those folks don’t take excuses,” White said. “It’s important to get this right, look at the rules first, then figure out how to spend it, not the other way around.”
White said he’s concerned some local leaders are already planning for things not allowed with ARPA.
“I hear some talk as if they’re set on a plan and will not be dissuaded,” White said. “That’s when it gets dangerous. ‘Hey, I want to use this stimulus money to build a soccer field in the county.’ When we tell them, no you can’t, I’m at least comforted they asked, but concerned that others are out there already planning for such things.”
With Katrina, most of the relief money spending was controlled by the governor, the feds, and local governments — very little by the Legislature. There is still debate whether that was best, but most agree the governor’s control streamlined things.
“(Former Gov.) Haley Barbour did a great job with Katrina,” Johnson said. “If you look back some of it might have been laden with friends or partisan politics … that his buddies made money — but we got a lot done quickly when it needed to be done … If Haley Barbour were governor now, half that $1.8 billion would already be spent.”
Neither Gov. Reeves nor Barbour responded to requests for interviews.
But Barbour recently opined, when the first round of federal money came in, that Reeves, not the Legislature, should be in charge of the spending, saying, “In an emergency, someone has to be in charge, and in our system of government, that is the governor.”
White said it’s not his place to comment on or promote specific policies with ARPA spending. But he does agree the state’s leaders need to be on the same page and that it will require coordination from all branches of government and from top to bottom. He said small cities and counties, in particular, need all the help and guidance they can get.
“Our local governments vary wildly in their back-office capacity to spend this amount of money,” White said. “But the rules don’t change.”
Gulfport Mayor Billy Hewes III, who leads the state’s second-largest city, is a former longtime state senator who served during Katrina and helped lead Coast recovery. Asked if state and local governments are up to the task of managing ARPA, Hewes said: “That’s above my pay grade. That’s like asking do you have a plan for COVID.”
He said local governments are still trying to get their bearings, figure out what’s allowed or not allowed with ARPA money, and lobbying for changes, such as allowing road and bridge work, not just water and sewerage. Hewes, whose city will receive $19.4 million directly, said there appears to be time to get things right, but the clock is ticking.
“The projects we would want spend it on take time to plan, do the engineering, planning, bidding, design process,” Hewes said. “There are so many moving parts … sometimes these things take years. There are probably very few cities that have anything that would qualify as shovel-ready.
“And as we learned in Katrina, you have to keep in the back of your mind that unprecedented money coming in will probably mean unprecedented audits later on,” Hewes said.
Hewes said he like the idea of the state providing supplements or matching funds for local projects.
“That opens the door to consideration of really impactful projects, such as wastewater treatment plants, that can run into the tens of millions of dollars, and most cities don’t have that much money available to them,” Hewes said. “That’s actually a good consideration. Otherwise, we don’t want to look up years later and say, what did we spend that money on? Why didn’t it have more lasting impact?”
House Speaker Philip Gunn said his team has been working on ARPA plans, and “the good news here is we do have until 2024 to make those decisions.”
“We have a little more breathing room, a little more time to think through it,” Gunn said. “We are still in the process of determining what they can and cannot be used for. We have a lot of lawyers, a lot of people trying to figure that out … We are still in the process of trying to figure out what to do with these dollars.”
Gunn said there is not consensus on the Legislature providing the bulk of state-controlled funds to local governments.
“Again, more than $800 million is going to the cities already,” Gunn said. “Obviously there are needs there, water and sewer needs all around. There will have to be an ongoing analysis of how those cities have used their money, what needs remain after that and what needs to counties have … My understanding is you can’t do roads and bridges, so that presents a new challenge … We do have the luxury of time. We’ve got at least two more (legislative sessions), maybe three. I think we just need to be very methodical about how we do this.”
Hosemann said that he’s been “driving pretty much all over the state, from Corinth to Pass Christian, meeting with supervisors and cities.”
“We’ve been asking them to put the money into an account, and go about planning things not for one or two years, but one or two generations,” Hosemann said. “This will really dictate how their communities grow, which direction they’re going. All of those decisions need to be made at the city and county level.”
Hosemann said he foresees local governments working with their legislative delegations, and coming to the Legislature with specific projects and plans.
“It may end up being all the way to a match, up to $900 million of the (state) money, if they come with viable, reasonable projects,” Hosemann said.
After Katrina and the BP oil disaster, the state stood up numerous task forces, committees and agency partnerships to plan and oversee much of the federal spending. Hosemann and Gunn said that’s a possibility with ARPA.
“We have been talking with our leadership team, working through how we would go through our normal process, and I anticipate we will go through and see if special processes or groups are needed,” Hosemann said.
Gunn said: “At this point, we are just communicating among legislators, talking with the Senate, to decide how these dollars are best spent and we will analyze that as we move along. Again, we have a little more breathing room here than with Katrina or BP or other dollars.”
But both agree that managing the ARPA funds is a monumental task.
“A lot of people don’t understand the perspective of this amount of money,” Gunn said. “Six billion dollars total is significant when you consider that’s roughly our total state budget each year.”
Hosemann said: “I’ve got seven (staff) here, and the senators are allegedly supposed to be part time. We’re trying to go through hundreds of pages of regulations with seven people. The best way to do this is involve other state agencies … make sure there is a massive coordination.
“We have to realize the scope and enormity of this, and that it will likely never happen again.”