Mississippi is one of only a handful of states that hasn’t spent any of its federal American Rescue Plan Act money coming directly to state government — about $1.8 billion for the Magnolia State’s Legislature.
It’s one of even fewer states that hasn’t earnestly been planning, cataloguing most pressing needs and soliciting community input on how to spend the unprecedented windfall of federal tax dollars. That process began Monday when a special Senate subcommittee formed by Lt. Gov. Delbert Hosemann held its first hearing.
Many states are using the money for water and sewerage and broadband internet infrastructure. Some are addressing health care needs, including shortages of health workers. Texas has earmarked $400 million for additional healthcare workers.
Others are helping their most needy citizens, or helping tourism or other industries most impacted by the pandemic.
Some are getting creative, such as in Florida, where students struggling with reading will have free books delivered to their homes. Louisiana has earmarked $10 million of the money to help land major events, such as the Super Bowl, and $4.5 million to help keep movie theaters afloat.
Some states want to use the money to provide tax cuts or breaks — even though that is prohibited in the ARPA spending bill. Mississippi has joined with more than a dozen other state challenging this provision, including Louisiana and Texas. At least two federal district courts have ruled in favor of states challenging the tax cut prohibition on the pandemic dollars, and Texas has earmarked $3 billion of its ARPA funds for property tax breaks in anticipation of it being overturned.
House Speaker Philip Gunn has proposed eliminating Mississippi’s income tax, although his phase-in plan doesn’t earmark federal pandemic relief dollars but pays for the cuts with increases in sales and other taxes.
John Goodman, a researcher with the Pew Charitable Trusts, says one thing states should keep in mind is that the ARPA funds are one-time money, not recurring payments to states. He said states should be careful to avoid a “fiscal cliff” by using the money for recurring expenses that leave a budget hole once the federal funds dry up.
“The challenge states face right now, as they did in the Great Recession, is that there’s a lot of money, but that money won’t last forever,” Goodman said. “The question is, what’s sustainable after the temporary federal aid is no longer available? With the Great Recession, just as states were making a comeback, the federal aid ran out and they had to cut budgets again in many cases. It was a lost decade for state governments … We are urging states to avoid that budget cliff — it doesn’t make sense for states to hire workers now only to have to lay them off in a few years.”
Mississippi was forced to make drastic state budget cuts and raid its rainy day funds after the Great Recession, in large part because of numerous tax cuts that stalled the state budget’s recovery.
According to a survey of state budget officers by the National Association of State Budget Officers, 44% of respondents said their state or territory has created a separate office or unit to manage federal COVID-19 funds. A majority said they have added government staff to deal with it. Just under half of those responding said they plan to use private contractors to help with managing funds.
“While a number of states are further along, Mississippi is not alone in taking a slower approach,” said Kathryn White with NASBO. “Some of this just comes down to a state’s budget process and legislative calendar. We’ve seen both — special sessions or special committees formed. Sometimes committees formed by the governor, sometimes formed by the legislature … It’s definitely a huge, heavy lift, deciding how to budget for these funds in a sustainable way, and this is not the only new source of federal funding, too. We are hearing that most states are adding additional staff to tackle this.”
Lt. Gov. Delbert Hosemann and the state Senate took the first steps toward planning for ARPA spending. A special subcommittee held its first hearing on Monday and hopes to present proposals to lawmakers in January on how best to spend the money. The committee heard from officials in Louisiana and Tennessee on how they’ve spent the money so far.
Here’s a look at money going to states in the region and where they stand on ARPA planning and spending:
$1.8 billion to state government
$900 million to local governments
Mississippi has to date done little planning for spending its state-government share of American Rescue Plan Act funds, about $1.8 billion. Most local governments are still working on how to spend their separate allocations – and hoping the state provides some matching funds. Lt. Gov. Delbert Hosemann has recommended such matching funds for local projects and recently created a special committee to make recommendations to the Legislature by its regular session in January. House Speaker Philip Gunn said his top lieutenants are studying how to spend the funds. Gov. Tate Reeves has made some broad recommendations for spending the money in his annual budget recommendation to lawmakers.
$2.1 billion to state government
$1.7 billion to local governments
The Alabama Legislature in a special session in October approved spending some of the state’s ARPA money on new prisons to help with the state’s prison crisis. The Legislature is now back in a special session on redistricting, but Gov. Kay Ivey has not indicated she would add ARPA spending to the session, meaning it will likely wait until next year’s regular session that begins in January.
Alabama has allocated:
- $400 million to help build two new prisons. Facing Department of Justice action over its deadly, overcrowded and understaffed prisons, the state is using some of its federal ARPA funding to help address the prison crisis and build two facilities. The state is providing its Department of Corrections the $400 million in ARPA money as “revenue replacement” for COVID-19 costs.
$1.57 billion to state government
$1.01 billion to local governments
Gov. Asa Hutchinson created a 15-member Arkansas American Rescue Plan Act Steering Committee, which includes members of the state General Assembly, to recommend how to spend the state’s ARPA money. The panel has had public, livestreamed meetings and has created a website for people and agencies to submit proposals for the money. The committee is considering, among other proposals, setting aside $300 million for grants for broadband projects.
$8.8 billion to state government
$7.1 billion to local governments
Florida has to-date spent about half of its state government ARPA funds, with much of the spending going to transportation – state highway projects – tourism and environmental restoration and protection projects.
Florida has earmarked:
- $2 billion to the state Transportation Trust Fund to offset pandemic losses. Of this, $1.75 billion must be used on state highway system projects, with the remaining $250 million for grants for operations at ports with cruise ship or cargo traffic impacted by the pandemic.
- $350 million to address pandemic economic impact by investing in deferred maintenance needs in state, college and university facilities.
- $208.4 million for one-time bonus payments of $1,000 to each essential first responder.
- $100 million for a new state Emergency Operations Center in Leon County.
- $125 million to the Department of Education to implement the New Worlds Reading initiative, contingent on passage of legislation creating the program.
- $25 million to contract with the Florida Tourism Industry Marketing Corporation to support Florida’s tourism industry and recovery from the pandemic.
- $30 million for African-American cultural and historical grants. The money will provide grants for capital projects that highlight the contributions, culture or history of African Americans.
- $500 million for the Resilient Florida Trust Fund. The money would fund environmental projects, contingent on legislation identifying the projects becoming law.
- $475 million to the Department of Environmental Protection. The money would offset pandemic revenue losses, cover emergency response efforts and be used for land acquisition and capital projects to protect the environment.
- $100 million to the Department of Environmental Protection to buy high-resolution coastal mapping services to provide seafloor data.
- $45 million to the Department of Environmental Protection to create a small community wastewater grant program for septic to sewer upgrades and for monitoring water quality.
- $40 million to the DEP to create a grant program to help communities plan for and implement conservation, resuse and other water supply projects.
- $48 million to DEP for phase II of the C-51 Reservoir.
- $50 million for the Beach Management Funding Assistance Program.
- $500 million for the Water Protection and Sustainability Program Trust Fund, contingent upon a wastewater grant program legislation becoming law.
- $59 million for Everglades restoration, including projects in the Comprehensive Everglades Restoration Plan.
- $25 million to the Fish and Wildlife Conservation Commission for removal of derelict vessels.
- $401 million to the Department of Education for specific school and college projects detailed in legislation.
- $50 million to the Florida National Guard for new readiness centers.
- $8.4 million to the Fish and Wildlife Conservation Commission for buying three aircraft, plus funds for fuel and maintenance.
- $100 million to the Department of Economic Opportunity for a consumer-frst workforce information system.
- $50 million for the Florida Job Growth Grant Fund.
- $56.4 million for the modernization of the Reemployment Assistance System.
$4.85 billion to state government
$3.5 billion to local governments
The state plans to spend $875 million through a statewide, competitive grant program for broadband infrastructure, water and sewerage projects and to cover negative economic impact of the pandemic. Gov. Brian Kemp has appointed state agency leaders along with members of the General Assembly for a Georgia Jobs and Infrastructure Committee to oversee the grant process. Grants are expected to be awarded by early January. The state also has general plans to allocate money for state employees health benefits and to provide recovery grants to the state’s hardest-hit industries.
$2.18 billion to state government
$1.62 for local governments
Kentucky has taken official action to devote nearly half of its state government ARPA funding to “critical economic recovery and pandemic response.” Gov. Andy Beshear earlier this year signed bipartisan legislation spending nearly $1.17 billion.
Kentucky has allocated:
- $250 million for the Drinking Water Wastewater Grant Program. The money will be for counties for unserved rural customers and to supplement county projects.
- $69.3 million in FY2022 to Health and Human Services for COVID-19 testing, assisting providers of treatment centers and for providing “test and stay” COVID-19 testing at schools.
- $300 million to increase broadband internet access. The first phase includes $50 million to target areas unserved by broadband.
- $575 million for Unemployment Trust Fund. The money will pay off unemployment insurance debts.
Louisiana has earmarked:
- $10 million for the Major Events Fund, a fund to help the state lure major sporting events, such as the Superbowl, and other events to the state.
- $563 million for the Transportation Trust Fund for construction, maintenance and transit infrastructure projects on the state and local levels.
- $15 million for the Legislative Capitol Technology Enhancement Fund for government services.
- $35 million for revenue replacement into the Capital Outlay Relief Fund for government services.
- $5 million for the Health Care Employment Reinvestment Opportunity Fund, to help the state meet demands for nursing and other health professionals and support nursing schools.
- $4.5 million to the Save Our Screens Program to provide grants to movie theater businesses impacted by the pandemic.
- $77.5 million for the Louisiana Tourism Revival program to support local and regional tourism entities marketing Louisiana tourism.
- $10 million to the Loggers Relief Fund to provide grants to timber businesses up to $25,000 each.
- $10 million to the Louisiana Small Business and Nonprofits Fund to provide grants to nonprofits including charities, faith based organizations and education assistance programs.
- $50 million to the Louisiana Port Relief Fund, to help port authorities overcome revenue loss and pandemic expenses.
- $490 million to the Unemployment Trust Fund Clearing Account, with up to $190 million to repay the state’s federal unemployment insurance loan.
- $300 million to provide assistance to local governments for water system maintenance, upgrades and improvements.
- $30 million for the Southwest Louisiana Hurricane Fund for damages during the 2020 hurricane season.
$5.4 billion to state government
$3.4 billion to local governments
The N.C. General Assembly is in session and the House and Senate are negotiating over competing plans for ARPA spending. Lawmakers have faced some criticism that they are considering spending ARPA funds on recurring expenses while at the same time considering tax cuts. Gov. Roy Cooper in May released his recommendations for state ARPA spending, including $250 million for grants to low- and middle-income families with children, $75 million for an affordable housing program, $125 million for programs to fight diabetes, obesity, heart disease and other risk factors with COVID-19, $1.2 billion for broadband access and $800 million for water and sewerage infrastructure.
$2.5 billion to state government
$1.6 billion to local governments
Gov. Henry McMaster, working with lawmakers, created the AccelerateSC task force to make recommendations on revitalizing the state’s economy after the pandemic and to advise the Legislature on how best to spend ARPA funds. The task force has held public meetings and recently released a report that include recommendations the state spend more than $490 million on broadband expansion, $250 million on business grants or shoring up the unemployment trust fund, $400 million on a state matching program for local water and sewerage projects, and spending for workforce development, education, tourism recovery and an intermodal facility to improve the state’s ports.
$3.91 billion to state government
$2.28 billion to local governments
The Financial Stimulus Accountability Group created by Gov. Bill Lee and legislative leaders has recently released a plan to spend much of the $3.9 billion in ARPA funds controlled by the state. This includes spending on water and sewerage, broadband, increasing hospital staffing and helping the state’s agriculture, arts and tourism industries. The state is also providing guidance to local governments on spending and administering their funds with technical assistance and webinars. Tennessee, along with Kentucky, has challenged in court federal provisions that say states cannot accept ARPA funds and then cut taxes. The states so far prevailed in a federal district court ruling.
Tennessee has so far earmarked:
- $500 million to expand broadband. Program will use $400 million for two funds, the Distressed County Connectivity Fund, targeting unserved and at-risk counties and the Broadband Local Match Fund, supporting local government projects using local ARPA money. Remainder will be used for initiatives including a residential service temporary subsidy for qualifying households, for community connectivity including digital literacy programs in schools, libraries, public housing and state parks and connecting downtown business districts with free public wi-fi.
- $1.35 billion for water and sewerage improvements and maintenance. Plan includes $1 billion to match local government projects, $350 million for state strategic priorities coupled with competitive grants.
$15.8 billion to state government
$10.5 billion to local governments
In a special legislative session in late October, Texas lawmakers allocated nearly $16 billion in ARPA funding, including billions for a property tax cut (pending states prevail in court in overturning Congress’ provision the money not be used for tax cuts). Despite widespread problems with the state’s water infrastructure and frequent drinking water outages, a proposal to allocate $3 billion of the state’s funds failed and the passed spending plan did not include major spending for water and sewerage projects. Legislative leaders noted they had until 2024 to allocate the money, but said addressing it early will help clear the Legislature’s plate for other issues next year.
Texas lawmakers’ earmarks included:
- $7.2 billion to replenish the state’s unemployment trust fund, which was depleted during the pandemic and forced the state to take out $6.9 billion in federal loans.
- $3 billion for property tax cuts, expected to be passed by lawmakers in 2023. Congress prohibited ARPA money being used to cut taxes, but that is being challenged and an Ohio federal court already ruled against the congressional stipulation.
- $2 billion to help increase the state’s health care staffing and COVID-19 response.
- $500 million for broadband expansion
- $400 million for additional health care staffing
- $200 million to help the state’s tourism industry recover from the pandemic.
- $325 million for projects at state universities.
- $238 million for a new psychiatric hospital in Dallas.
- $113 million for the Texas Child Mental Health Consortium for treatment.
- $100 million for food banks across the state.