The $1.9 trillion American Rescue Plan Act signed into law in March directs about $6 billion to Mississippi — an amount roughly equal to the state’s annual general fund budget.
The bulk of the money is going to individuals, including $1,400 stimulus checks and child tax credits, or directly to education, other agencies and programs. Mississippi state government is receiving $1.8 billion and city and county governments $900 million. State and local governments have through December 2024 to allocate the money and December 2026 to have it all spent.
The U.S. Department of Treasury sets the rules on the spending, an ongoing process with final rules expected by the end of the year. In May, Treasury issued its “Interim Final Rule” on the spending, including lists of eligible and prohibited expenditures.
How governments can spend the money:
- To respond to the COVID-19 pandemic or its economic impact
- To help workers providing essential services during the pandemic by providing premium pay or grants to their employers.
- For providing government services subject to a reduction in revenue due to the pandemic, relative to revenue collected in the fiscal year prior to the emergency.
- To make necessary improvements in water, sewer or broadband infrastructure.
More specifically, spending is allowed for:
- Public health: This includes programs to mitigate the spread of COVID-19, services to address behavioral health needs and payroll and benefits expenses for public health, healthcare, human services, public safety and others who work on the pandemic response
- Negative economic impact: This can include assistance for workers and families, including aid to those unemployed and job training, and survivor benefits for families of COVID-19 victims. This also can include support for small businesses including grants and loans, and help speeding the recovery of tourism, travel and hospitality sectors. Also this can include rebuilding public sector capacity and rehiring public sector staff.
- Services to communities disproportionately impacted by the pandemic: If an area is a Qualified Census Tract, meeting certain low-income or poverty levels, the money can be used to fund a broad array of services, including help for homelessness, funding community health workers, housing vouchers, affordable housing development childcare, education and other support.
- Premium pay: Premium pay for essential workers can be given directly to the workers or with grants to employers, and Treasury said it should be prioritized for lower income workers. Any pay above 150% of the area’s average annual wage requires specific justification. Pay can be retroactive, and a broad range of workers are covered, including those at nursing homes, hospitals, farms, food facilities, grocery stores, restaurants, janitors, sanitation workers, educators and human service workers.
- Infrastructure: Treasury specifies water, sewer and broadband infrastructure, not general infrastructure (see details below). This includes projects that address the impact of climate change, flood resilience and green infrastructure. Investments in broadband should be made in areas unserved or underserved, with a priority on projects that achieve “last mile” connections to homes and businesses.
- Revenue replacement: State and local governments can compare actual revenue to what could have been expected without the pandemic. The governments can recalculate lost revenue in periods up to Dec. 31, 2023. The calculations begin with the last full fiscal year prior to the pandemic and can be calculated by the average annual revenue growth in three previous fiscal years prior to the pandemic, or using 4.1% — the national average growth from 2015-2018 — whichever is highest.
- Administrative costs: The money can be used to pay consultants or for payroll for staff to assist with ARPA projects, including legal work.
How the funds cannot be spent:
- To fund pension programs
- To offset, directly or indirectly, a tax cut made since March 3, 2021. But more than a dozen states — including Mississippi — are challenging this rule in court, and at least two federal district courts have ruled in favor of the states. Texas recently earmarked $3 billion of its funds for property tax relief, in hopes the rule is eventually overturned. The prohibition on tax decreases applies only to state governments. The local government section of the bill has no such limitation.
- For general infrastructure, such as highways, roads and bridges, other than water, sewerage and broadband. However, state and local governments can use the money for such projects if they can show the projects or infrastructure funds lost revenue due to the pandemic. Some state and local governments are using lost revenue calculations to restore money to general or infrastructure funds. Also, legislation pending in Congress would more broadly allow the ARPA funds to be used for general infrastructure projects. A separate $1.2 trillion federal infrastructure bill has just passed Congress.
- To pay debt service.
- To fill rainy day funds or other financial reserves.
- To further restrictions from state governments. In other words, states cannot restrict city and county spending of the funds beyond the federal regulations.