Treasury Interim Final Rule: Coronavirus State and Local Fiscal Recovery Funds (31 CFR Part 35)
- Date
- 2021-05-17
Summary
An interim final rule of the Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds, published in the Federal Register, Vol. 86, No. 93, on May 17, 2021 at 31 CFR Part 35 (RIN 1505–AC77), FR Doc. 2021–10283. The rule implements the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund established under the American Rescue Plan Act, is effective May 17, 2021, and sets a comment deadline of July 16, 2021. The background describes the pandemic's effects on State, local, and Tribal governments and the four categories of eligible uses in sections 602(c)(1) and 603(c)(1) of the Social Security Act. The rule closes with regulatory text on recoupment, repayment of funds and § 35.12 distributions to nonentitlement units of local government, signed by Acting General Counsel Laurie Schaffer.
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Cite this document
“Treasury Interim Final Rule: Coronavirus State and Local Fiscal Recovery Funds (31 CFR Part 35).”
Dated 2021-05-17. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-05-17-2021-10283-dac2a66d45/
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26786 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 April 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 July 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 May 8, 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, May 3, 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.
include a short executive summary. 3 U.S. Bureau of Labor Statistics, All Employees,
downturn and changing economic
In general, comments received will be Total Nonfarm [PAYEMS], retrieved from FRED, patterns during the pandemic.7 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, May 7, 2021. local, and Tribal governments have been
4 Nirmita Panchal et al., The Implications of
or personal information provided. forced to make cuts to services or their
COVID–19 for Mental Health and Substance Abuse
Comments received, including (Feb. 10, 2021), https://www.kff.org/coronavirus-
workforces, or delay critical
attachments and other supporting covid-19/issue-brief/the-implications-of-covid-19- investments. From February 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
more,prior%20to%20the%20current%20crisis; U.S.
Do not enclose any information in your Census Bureau, Household Pulse Survey:
by more than 1.5 million jobs and, in
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.,
FOR FURTHER INFORMATION CONTACT: Mental Health-Related Emergency Department
pandemic levels.8 These cuts to State,
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, January 1—
Department of the Treasury, (844) 529– October 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 (June 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
6 Joseph R. Biden, Remarks by President Biden on Employees, Local Government [CES9093000001],
Since the first case of coronavirus
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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26787
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 March 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
webtest.childrensinstitute.net/sites/default/files/ services to the extent of the reduction in
severe COVID–19 health outcomes.12 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 types of uses which do not fall within
infrastructure.13 Finally, though schools (last visited May 9, 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). thus funds may not be used for,
models.14 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
local-budgets-and-the-great-recession. District of Columbia. The term ‘‘territory’’ as used
10 Sebastian D. Romano et al., Trends in Racial in this SUPPLEMENTARY INFORMATION and defined in indirectly offset[ting] a reduction in the
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,
December 2020, MMWR Morb Mortal Wkly Rep Guam, the Commonwealth of Northern Mariana regulation, 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 May 4, 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.
5131).’’ See section 602(g)(7) of the Social Security
State, local, and Tribal governments
Disproportionate Impact of COVID–19 on
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, January 29, 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
governments’’ as used in this SUPPLEMENTARY
under control. Payments from the Fiscal
37320-001.pdf.
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
17 42 U.S.C. 801 et seq.
Outbreak (Apr. 30, 2020), https:// 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
during-the-covid-19-outbreak/. the Act as added by the Coronavirus Aid, Relief,
the pandemic, including resources to
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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26788 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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
whether a program or service ‘‘responds 1. Responding to COVID–19
health emergency.
Implementation of the Fiscal to’’ the COVID–19 public health On January 21, 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, February 24–April 21, 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26789
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
Childhood Vaccine Administration Following
trends and genomic sequencing for 2019.26, The proportion of children’s Decline During the COVID–19 Pandemic—New
variants), enhancement to health care emergency department visits related to York City, March 1–June 27, 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://
in drug overdose mortality from www.whitehouse.gov/wp-content/uploads/2021/01/
supported major efforts to prevent National-Strategy-for-the-COVID-19-Response-and-
COVID–19 spread through safety September 2019 to September 2020.28 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
COVID Data Tracker: COVID–19 Vaccinations in the Romano, supra note 10.
making ventilation improvements in 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 É. 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
States, June 24–30 2020, Morb. Mortal. Wkly. Rep. May 8, 2021).
facilities to meet pandemic operational 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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26790 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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
declined during the pandemic.38 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 continue to provide care and services to
in health outcomes.39 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 (e.g., telemedicine costs, costs to facilitate
medical or public health services; compliance with public health orders, disinfection
COVID–19 (Dec. 10, 2020), https://www.cdc.gov/
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 employees to enable compliance with
public health orders; public COVID–19 public health precautions), with the
Frontline Workers and Housing Crowding During
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 SUPPLEMENTARY INFORMATION) and (2) expenses
personal protective equipment; support related to the issuance of tax-anticipation notes are
McCormack et al., Economic Vulnerability of
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).
42 Coronavirus Relief Fund for States, Tribal
2767630. settings, homeless shelters, group living
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
Testing During COVID–19—34 Jurisdictions, schools; 40 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.
43 Centers for Disease Control and Prevention,
70(5):155–61 (Feb. 5, 2021), https://www.cdc.gov/ note 38; Nathaniel M. Lewis et al., Disparities in
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, March 3–July 9, 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26791
• 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
assessing the extent to which an may speed implementation and decrease
As businesses closed, consumers stayed
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.
While QCTs are an effective tool generally, many 49 The social determinants of health are the social
COVID–19 public health emergency,
tribal communities have households with a wide and environmental conditions that affect health
provided that the recipient reassesses 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
levels of income, are often not included as eligible of Disease Prevention and Health Promotion,
staff, or regular work product or 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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26792 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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
https://www.cbpp.org/research/poverty-and- declining revenues as customers stayed
often not enough food to eat and an inequality/tracking-the-covid-19-recessions-effects-
estimated 10.7 million adults living in on-food-housing-and (last visited May 8, 2021).
home.69 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 & Marı́a J. Prados, were already financially fragile at the
51 U.S. Bureau of Labor Statistics, All Employees,
Gender differences in couples’ division of outset of the pandemic.71 Non-profits,
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 May 10.1007/s11150-020-09534-7; Titan Alon et al., The
8, 2021). Impact of COVID–19 on Gender Equality, National
52 Id. Russell Sage Foundation (Aug. 2016), available at
Bureau of Economic Research Working Paper 26947 https://www.russellsage.org/publications/children-
53 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 Daniel Wilmoth, U.S. Small Business
2021); U.S. Bureau of Labor Statistics, Labor Force American Men [LNS11300031], retrieved from
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.
68 U.S. Census Bureau, Small Business Pulse
Statistics from the Current Population Survey: Reserve Bank of St. Louis; https://
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 (July 28,
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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26793
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)
concentrated poverty in the wake of the Great and 603(c)(1)(A) permit use of payments
the concentration of low- and moderate- Recession, Brookings Institution (Mar. 31, 2016),
income families within certain https://www.brookings.edu/research/u-s-
from the Fiscal Recovery Funds to
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
has a long-term impact on children’s public health public health emergency. In considering
were observed after the 2007–2009 and economic outcomes. See, e.g., Tyler W. Watts
recession, including a large increase in et al., The Chicago School Readiness Project:
whether a program or service would be
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 Golding, Native Employment During COVID–19:
districts often disproportionately serve low-income
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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26794 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 January 27, 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
uses that would be eligible under this workers. Funds to improve efficacy of programs
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
hospitality. includes: Food assistance; rent, infrastructure, and impact evaluations.
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,
workers, including services like job whether, and the extent to which, the including:
training to accelerate rehiring of household has experienced a negative Æ 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;
86 In some cases, a use may be permissible under unemployment or increased food or Æ 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26795
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
communities. Recipients should districts that were closed during the
identifies services and programs that
consider local economic conditions and COVID–19 public health emergency, as
will be presumed to be responding to
business data when establishing such well as aid for a planned expansion or
the negative economic impacts of the
criteria.87 upgrade of tourism, travel, and
COVID–19 public health emergency
• Rehiring State, Local, and Tribal hospitality facilities delayed due to the
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 that certain types of services, outlined
industries other than tourism, travel,
pandemic impacts in overall staffing below, are eligible uses when provided
and hospitality, recipients should
levels: State, local, and Tribal in a QCT, to families and individuals
consider the extent of the economic
government employment remains more living in QCTs, or when these services
impact as compared to tourism, travel,
than 1 million jobs lower in April 2021 are provided by Tribal governments.90
and hospitality, the industries
than prior to the pandemic.88 Recipients may also provide these
enumerated in the statute. For example,
Employment losses decrease a state or services to other populations,
on net, the leisure and hospitality
local government’s ability to effectively households, or geographic areas
industry has experienced an
administer services. Thus, the interim disproportionately impacted by the
approximately 24 percent decline in
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. consider whether impacts were due to pandemic resulted in disproportionate
• 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,
87 See Federal Reserve Bank of Cleveland, An
Neighborhoods. The economic impacts
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
impact of COVID–19 on minority owned 2020Q4, gross output (e.g. revenue) in arts,
opportunity, and housing insecurity.91
businesses). entertainment, recreation, accommodation, and
88 U.S. Bureau of Labor Statistics, All Employees, 90 HUD, supra note 48.
food services has fallen by approximately 24
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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26796 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 under sections 602(c)(1)(C) or
D Home visiting programs to provide
to neighborhoods with high levels of 603(c)(1)(C) to provide ‘‘government
structured visits from health, parent
economic opportunity and mobility for services’’ broadly to the extent of their
educators, and social service
low-income residents, to help residents reduction in revenue. See Section II.C of
professionals to pregnant women or
increase their economic opportunity this SUPPLEMENTARY INFORMATION.
families with young children to offer
and reduce concentrated areas of low This category of eligible uses also
education and assistance navigating
economic opportunity.93 would not include contributions to
Æ Addressing Educational Disparities. resources for economic support, health
needs, or child development; and rainy day funds, financial reserves, or
As outlined above, school closures and similar funds. Resources made available
the transition to remote education raised D Enhanced services for child welfare-
involved families and foster youth to under this eligible use category are
particular challenges for lower-income intended to help meet pandemic
students, potentially exacerbating provide support and training on child
response needs and provide relief for
educational disparities, while increases development, positive parenting, coping
households and businesses facing near-
in economic hardship among families skills, or recovery for mental health and
and long-term negative economic
could have long-lasting impacts on substance use challenges.
impacts. Contributions to rainy day
children’s educational and economic State, local, and Tribal governments
funds and similar financial reserves
prospects. Services under this prong are encouraged to use payments from
would not address these needs or
would enhance educational supports to the Fiscal Recovery Funds to respond to
respond to the COVID–19 public health
help mitigate impacts of the pandemic. the direct and immediate needs of the
emergency but would rather constitute
Eligible services include: pandemic and its negative economic
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 or its negative economic impacts. The
(HHS), Office of Disease Prevention and Health
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
26, 2021).
continue to respond to the COVID–19
93 The Opportunity Atlas, https://
recipients to consider funding uses that 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26797
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
consider as eligible uses to respond to emergency or its negative economic restaurants;
the public health impacts of COVID–19? impacts, including its exacerbation of • Janitors and sanitation workers;
pre-existing challenges in these areas. • Truck drivers, transit staff, and
Describe how these respond to the
Question 9: The interim final rule warehouse workers;
COVID–19 public health emergency. • Public health and safety staff;
includes eligible uses to support
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
reimbursable, in an easily-administrable What considerations, if any, could
Prevention, COVID Data Tracker: Cases & Death
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
to the government’s pre-pandemic housing units?
COVID–19 Cases and Deaths among Staff and Rate
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 (May 23, 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- workers: A narrative review of health outcomes and
performing essential work.95 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 was increased among non-Hispanic blacks, who
public health emergency in January 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 (June 16, 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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26798 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 May 1, 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
excluded management and supervisory positions, as
production and services, among others performing essential worker during the such positions may not necessarily involve regular
public health emergency.105 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26799
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
eligible workers pursuant to a contract. a significant drag on the overall consistent manner.115 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.
sectors beyond those listed in the The interim final rule defines the term
decade, until August 2019—just a few
interim final rule that should be ‘‘general revenue’’ to include revenues
months before the COVID–19 public
considered essential critical collected by a recipient and generated
health emergency began.114
infrastructure sectors? from its underlying economy and would
Question 11: What, if any, additional 109 Major sources include personal income tax,
capture a range of different types of 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
Question 12: What consideration, if and Econ. Rev. (Q. 3, 2020), available at https://
revenue, recipients should sum across
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/
recipients, and presents a more accurate
wp-content/uploads/2020/08/City_Fiscal_
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 See, e.g., Fitzpatrick, Haughwout & Setren, series/CES9093000001 (last visited Apr. 27, 2021).
public health emergency.108 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 The interim final rule would define tax
revenue collected in the most recent full 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).
wp12184.pdf; Gordon, supra note 9. Current charges are defined as ‘‘charges imposed for
significant budget shortfalls, which can 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
Bureau of Economic Analysis, National Income and revenues. Miscellaneous general revenue comprises
4.3 percent in the six months ended 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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26800 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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: December 31, 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.
120 For example, in 2018, state transfers to elapsed since the end of the base year
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/
econ/local/public-use-datasets.html.
revenue growth in the three full fiscal
of one another, which results in 121 For example, following the 2007–09 recession,
122 Together with revenue from liquor stores from
local government property tax collections did not
117 Fund-oriented reporting, such as what is used 2015 to 2018. This estimate does not include any
begin to decline until 2011, suggesting that property
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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26801
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 June 30. 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)
,:,-::f l1
~
rlf1
~" ~'1,
,l1
~
0cJ
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
judicial, administrative, or regulatory circumstances in which it could be
services; and the provision of police,
proceeding, except if the judgment or necessary or appropriate to calculate
fire, and other public safety services.
settlement required the provision of the reduction in revenue by source.
However, expenses associated with
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
123 Pay-go infrastructure funding refers to the
the settlement required the provision of recipient as well as the expiration of 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
ER17MY21.002</GPH>
rather than with borrowed sums. rainy day or other reserve funds) would revenue losses are ‘‘due to’’ the COVID–
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26802 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 Clean Water Act
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
paying interest or principal on or workplace injuries. from pollution.129 Each of the 51 State
government debt is not considered programs established under the CWSRF
To provide public transparency on have the flexibility to direct funding to
provision of a government service.
whether projects are using practices that their particular environmental needs,
Discuss the advantages and
promote on-time and on-budget and each State may also have its own
disadvantages of this approach,
delivery, Treasury will seek information statutes, rules, and regulations that
including circumstances in which
from recipients on their workforce plans guide project eligibility.130
paying interest or principal on
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
existing infrastructure in water, sewer, improvements necessary to protect
1. Water and Sewer Infrastructure public health and comply with drinking
and broadband, the Fiscal Recovery
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
127 Water Quality Act of 1987, Public Law 100–
investments in these sectors. The necessary investments in water and 4.
interim final rule outlines eligible uses sewer infrastructure.125 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 American Recovery and Reinvestment Act created
recognized the critical role that clean 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.
129 See Environmental Protection Agency, The
sources of funds. Necessary investments 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 (May 22, 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26803
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.
lines. Question 18: What are the advantages
projects are less likely to be addressed
Fiscal Recovery Funds may also be and disadvantages of aligning eligible
with private sources of funding; for
used to support the consolidation or uses with the eligible project type
example, by remediating failing 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
health and wellbeing as soon as used for cybersecurity needs to protect
communities? How do these projects
possible. Further, the interim final rule water or sewer infrastructure, such as
differ from DWSFR and CWSRF eligible
is intended to preserve flexibility for developing effective cybersecurity
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
applying their own additional project Many of the types of projects eligible
State, local, and Tribal governments in
eligibility criteria. under either the CWSRF or DWSRF also
mitigating the negative impacts of
137 House Committee on the Budget, State and
climate change? Discuss emerging
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-
documents/corrected_sixth_drinking_water_ infrastructure. Discuss any challenges
are-dire-need-federal-relief.
infrastructure_needs_survey_and_assessment.pdf. 138 Environmental Protection Agency, Drinking
faced by States and local governments
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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26804 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 November, 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 Federal Communications Commission,
https://www.ntia.gov/blog/2020/nearly-third- 141 How Do U.S. Internet Costs Compare To The
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).
140 As an example, data from the Federal 146 Letter from Lisa R. Youngers, President and
142 See, e.g., Federal Communications
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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26805
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
households across the country became gigabytes—between December, 2019 and less than 20 Mbps.157
increasingly reliant on tools and December, 2020.153 According to an The 100 Mbps upload and download
OECD Broadband statistic from June speeds will support the increased and
applications that require greater internet
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 designed to deliver, upon project
interactive video meetings.150 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
shared with others. 151 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
Quarterly Advisory (Feb. 10, 2021), available at an ‘‘advanced telecommunications
gigabytes per month, representing a 40 https://openvault.com/complimentary-report-4q20/.
percent increase over the 344 gigabytes 153 OVBI Special Report: 202 Upstream Growth
capability.’’ 158 This threshold is also
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, (April 1, 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-
years/; Additional data is provided in OpenVault
improve broadband services. For
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
Windows, macOS, and Linux, https:// 100 inhabitants, per speed tiers (June 2020), https:// 25 Mbps download and 3 Mbps upload
support.zoom.us/hc/en-us/articles/201362023- www.oecd.org/sti/broadband/5.1-FixedBB- speeds.159 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
151 By one estimate, to upload a one gigabit video Order, 35 FCC Rcd 686, 690, para. 9 (2020),
if they lack access to broadband service
file to YouTube would take 15 minutes at an upload available at https://www.fcc.gov/document/fcc-
157 Section 905(d)(4) of the Consolidated
speed of 10 Mbps compared with 1 minute, 30 launches-20-billion-rural-digital-opportunity-fund-
seconds at an upload speed of 100 Mbps, and 30 0. Appropriations Act, 2021.
156 The BIPP was authorized by the Consolidated 158 Deployment Report, supra note 142.
seconds at an upload speed of 300 Mbps.
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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26806 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 interprets ‘‘deposit’’ in this context to
non-profits, and co-operatives—
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 Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26807
(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, process. The sum of these values in the
B. Offset a Reduction in Net Tax
increases in revenue (e.g., an increase in year for which the government is
Revenue 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 for’’ with sources other than Fiscal
governments 160), 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
obtain. This approach ensures that as discussed below, the recipient
Treasury an amount equal to the lesser
recipient governments have the government need not identify any
of (i) the amount of the applicable
information they need to understand the sources of funding to pay for revenue
reduction attributable to the
implications of their decisions regarding reducing changes and will not be
impermissible offset and (ii) the amount
the use of the Fiscal Recovery Funds— subject to recoupment.
received by the State or territory under
and, in particular, whether they are • Third, a recipient government will
the ARPA. See Section IV of this
using the funds to directly or indirectly consider the amount of actual tax
SUPPLEMENTARY INFORMATION. As
offset a reduction in net tax revenue, revenue recorded in the year for which
discussed below Section IV of this
making them potentially subject to they are reporting. If the recipient
SUPPLEMENTARY INFORMATION, a State or
recoupment. government’s actual tax revenue is
territory that chooses to use Fiscal
Reporting on both the eligible uses greater than the amount of tax revenue
Recovery Funds to offset a reduction in
and on a State’s or territory’s covered received by the recipient for the fiscal
net tax revenue does not forfeit its entire
tax changes that would reduce tax year ending 2019, adjusted annually for
allocation of Fiscal Recovery Funds
revenue will enable identification of, inflation, the recipient government will
(unless it misused the full allocation to
and recoupment for, use of Fiscal not be considered to have violated the
offset a reduction in net tax revenue) or
Recovery Funds to directly offset offset provision because there will not
any non-ARPA funding received.
The interim final rule implements reductions in tax revenue resulting from have been a reduction in net tax
these conditions by establishing a tax relief. Moreover, this approach revenue.
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.
161 For brevity, referred to as ‘‘changes in law, reduction. By focusing on the cost of Fiscal Recovery Funds. These are:
regulation, or interpretation’’ for the remainder of changes that reduce net tax revenue— Æ State or territory tax changes that
this preamble. and how a recipient government is would increase any source of general
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26808 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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. increase—and thus its tax revenue Reporting year. The interim final rule
• 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. and any sources of offsetting revenue
policy occurs during the covered period;
Together, these steps allow Treasury increases (‘‘in-year’’ value), regardless of
it excludes regulations or other actions
to identify the amount of reduction in when those changes were enacted. For
that implement a change or law
net tax revenue that both is attributable the fiscal years ending in 2021 or 2025
substantively enacted prior to March 3,
to covered changes and has been (partial years), the term ‘‘reporting year’’
2021. Finally, Treasury has determined
directly or indirectly offset with Fiscal refers to the portion of the year falling
and previously announced that income
Recovery Funds. This process ensures within the covered period. For example,
tax changes—even those made during
Fiscal Recovery Funds are used in a the reporting year for a fiscal year
the covered period—that simply
manner consistent with the statute’s beginning July 2020 and ending June
conform with recent changes in Federal
defined eligible uses and the offset 2021 would be from March 3, 2021 to
law (including those to conform to
provision’s limitation on these eligible July 2021.
recent changes in Federal taxation of
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 Government Finances.166 It provides a
Baseline. For purposes of measuring a
Fiscal Recovery Funds that were used to consistent, well-established definition
reduction in net tax revenue, the interim
offset reductions in net tax revenue, with which States and territories will be
final rule measures actual changes in tax
including the calculation of any familiar and is consistent with the
revenue relative to a revenue baseline
amounts that may be subject to approach taken in Section II.C of this
(baseline). The baseline will be
recoupment, a process for a recipient SUPPLEMENTARY INFORMATION describing
calculated as fiscal year 2019 (FY 2019)
government to respond to a notice of the implementation of sections
tax revenue indexed for inflation in
recoupment, and clarification regarding 602(c)(1)(C) and 603(c)(1)(C) of the Act,
each year of the covered period, with
amounts excluded from recoupment. regarding revenue loss. Consistent with
inflation calculated using the Bureau of
See Section IV of this SUPPLEMENTARY the approach described in Section II.C
Economic Analysis’s Implicit Price
INFORMATION. of this SUPPLEMENTARY INFORMATION, tax
Deflator.163
The interim final rule includes several
FY 2019 was chosen as the starting
definitions that are applicable to the 164 Using Fiscal Year 2019 is consistent with
year for the baseline because it is the
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
affecting the provision of government services. See
is triggered by a reduction in net tax 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 (February 1,
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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26809
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 changes, by definition must have been
total value of the revenue reductions
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
The de minimis level is calculated as in the reporting year. These changes
reporting year, similar to the way it
1 percent of the reporting year’s consist of two categories:
would in the ordinary course of its (a) Tax and other increases in
budgeting process. The value of these baseline. Treasury recognizes that,
pursuant to their taxing authority, States revenue. The recipient government must
covered changes may be reported based identify and consider covered changes
on estimated values produced by a and territories may make many small
changes to alter the composition of their in policy that the recipient government
budget model, incorporating reasonable predicts will have the effect of
tax revenues or implement other
assumptions, that aligns with the increasing general revenue in a given
policies with marginal effects on tax
recipient government’s existing reporting year. As when identifying and
revenues. They may also make changes
approach for measuring the effects of valuing covered changes that reduce tax
based on projected revenue effects that
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
methodology to isolate the change in assumptions, aligned with the recipient
changes. The de minimis level
year-over-year revenue attributable to government’s existing approach for
recognizes the inherent challenges and
the covered change(s), relative to the measuring the effects of fiscal policies,
uncertainties that recipient governments
current law baseline prior to the and measured relative to a current law
face, and thus allows relatively small
change(s). Further, estimation baseline, or based on actual values using
reductions in tax revenue without
approaches should not use dynamic a statistical methodology to isolate the
consequence. Treasury determined the 1
methodologies that incorporate the change in year-over-year revenue
percent level by assessing the historical
projected effects of macroeconomic attributable to the covered change(s).
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 dynamic scoring methodologies that
framework. Relative to these dynamic revenues.168 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 their existing budget scoring practices
In general and where possible, a safe harbor and outside the ambit of
reporting should be produced by the and capabilities.
the offset provision. This approach is (b) Covered spending cuts. A recipient
agency of the recipient government 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
reporting methodology based on their Policy Center, Sustainable Budgeting in the States:
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
law that enact fiscal policies to estimate states_1.pdf.
168 Data provided by the Urban-Brookings Tax better align with existing reporting and
the net effect of such policies is 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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26810 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 reporting required on eligible uses, in
replaced with Fiscal Recovery Funds
count. each year of the reporting period, each
and used to indirectly offset a reduction
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
government must first consider whether such change to be an evasion of the
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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26811
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
the Uniform Guidance, which will allow permits funds to be used to cover costs
C. Other Restrictions on Use
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 COVID–19 public health emergency sections 602(c) and 603(c) of the Act
Recovery Funds be used only to cover necessarily takes into consideration the may result in recoupment of funds.174
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
incurred by December 31, 2021.171 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.
171 Section 1001 of Division N of the Consolidated
workers performing essential work by 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.
December 30, 2020 to December 31, 2021. of the Act. 174 Sections 602(e) and 603(e) of the Act.
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26812 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 Federal funding, yet will be much less restrictive
by the interim final rule are intended to 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26813
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
and Contractions, https://www.nber.org/research/
that receive a subaward from a recipient 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
FRED, Federal Reserve Bank of St. Louis, https://
recipient remains responsible for and disadvantages of treating the list of
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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26814 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
‘‘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 July 31, 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 August 31, 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 September 30, 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 October 31, 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26815
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 Executive order.
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 July 16, 2021. Executive Order 12866. To the extent
eligible use categories and the specific permitted by law, section 1(b) of
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 July 1, 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 performance objectives, rather than the
develop a Recovery Plan Performance
must determine whether this regulatory behavior or manner of compliance a
report.
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
182 5 U.S.C. 553(b)(3)(B); see also 5 U.S.C.
This interim final rule is being issued 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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26816 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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.:
Econ. Policy, 4:3 118–45 (Aug. 2012), available at
designate critical infrastructure sectors
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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26817
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 requirements of section 6 of the
term needs to aid unemployed workers
administer Fiscal Recovery Funds, Executive order. This interim final rule
and stimulate the recovery. Therefore,
oversee subrecipients and beneficiaries, does not have federalism implications
for a subset of State governments,
and file periodic reports with Treasury. within the meaning of the Executive
Treasury will not withhold any funds
It also requires States to allocate Fiscal order and does not impose substantial,
from the first payment. Treasury
Recovery Funds to nonentitlement direct compliance costs on State, local,
believes that this approach strikes the
units, which are smaller units of local and Tribal governments or preempt state
appropriate balance between the general
government that are statutorily required law within the meaning of the Executive
reasons to provide funds in two
to receive their funds through States. order. The compliance costs are
payments and the heightened additional
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 Executive Order on Advancing Racial Equity
government officials and associations in
levels. Treasury believes that this 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 January 25, 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
executive-order-advancing-racial-equity-and-
impact restoring public sector 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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26818 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 rulemaking. near future. Under the PRA, an agency
found and published with the rule’’). may not conduct or sponsor and a
Congressional Review Act respondent is not required to respond
Assuming 5 U.S.C. 553 applied,
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 Hours per Total burden Cost to respondent
Reporting respondents responses per Total responses response in hours ($48.80 per hour *)
(estimated) respondent
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 March 28, 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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26819
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 Economic Analysis’s Implicit Price
report to Treasury. The Recovery Plan List of Subjects in 31 CFR Part 35
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 unemployment benefit plans (Federal
later date. ■ 1. The authority citation for part 35 is
and State), workers’ compensation
These and related periodic reporting revised to read as follows:
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
Treasury invites comments on all 2160, as amended (12 U.S.C. 4701 et seq.);
Pub. L. 117–2, 135 Stat. 4 (42 U.S.C. 802 et interpretation. A change in law includes
aspects of the reporting and any final legislative or regulatory action,
recordkeeping requirements including: seq.).
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
information has practical utility; (b) the Subpart A—Coronavirus State and 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 a State, Territory, or Tribal government,
Sec.
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
35.9 Compliance with applicable laws.
should be sent by the comment deadline 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 oira_submission@omb.eop.gov. § 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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26820 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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 hour with no reduction, substitution,
transfers from the Federal Government,
research; behavioral health work; offset, or other diminishment of the
including transfers made pursuant to
medical testing and diagnostics; home- eligible worker’s previous, current, or
section 9901 of the American Rescue
and community-based health care or prospective wages or remuneration; or
Plan Act. General revenue does not
assistance with activities of daily living; (2) With regard to work that the
include revenues from utilities. Revenue
family or child care; social services eligible worker continues to perform,
from Tribal business enterprises must be
work; public health work; vital services pay of up to $13 that is in addition to
included in general revenue.
to Tribes; any work performed by an the eligible worker’s regular rate of
Intergovernmental transfers means
employee of a State, local, or Tribal wages or remuneration, with no
money received from other
government; educational work, school reduction, substitution, offset, or other
governments, including grants and
nutrition work, and other work required diminishment of the workers’ current
shared taxes.
to operate a school facility; laundry and prospective wages or remuneration.
Metropolitan city has the meaning
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 transfer pursuant to section 603(c)(4) of
development, and testing necessary for
measured as the State or Territory’s total the Social Security Act.
COVID–19 response.
(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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26821
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 respond to the public health emergency
rendered, employee or employer
timing. The Secretary may extend or or its negative economic impacts,
assessments and contributions to
accelerate any deadline or compliance including for one or more of the
finance retirement and social insurance
date of this subpart, including reporting following purposes:
trust systems, or special assessments to
requirements that implement this (1) COVID–19 response and
pay for capital improvements.
subpart, if the Secretary determines that prevention. Expenditures for the
Territory means the Commonwealth such extension or acceleration is
of Puerto Rico, the United States Virgin mitigation and prevention of COVID–19,
appropriate. In determining whether an including:
Islands, Guam, the Commonwealth of extension or acceleration is appropriate,
the Northern Mariana Islands, or (i) Expenses related to COVID–19
the Secretary will consider the period of vaccination programs and sites,
American Samoa. 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. investments in public facilities to meet
Unemployment rate means the U–3
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
Social Security Act, as applicable, expenses, including emergency medical
Unemployment trust fund means an
including those enumerated in section transportation, related to COVID–19;
unemployment trust fund established (viii) Expenses for establishing and
under section 904 of the Social Security § 35.6, subject to the restrictions set
forth in sections 602(c)(2) and 603(c)(2) operating public telemedicine
Act (42 U.S.C. 1104). capabilities for COVID–19-related
Unit of general local government has of the Social Security Act, as applicable.
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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26822 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
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
Payroll and covered benefit expenses for provide premium pay to eligible
populations and communities. A
public safety, public health, health care, workers of the recipient who perform
program, service, or other assistance
human services, and similar employees essential work or to provide grants to
that is provided in a qualified census
to the extent that the employee’s time is eligible employers, provided that any
tract, that is provided to households and
spent mitigating or responding to the premium pay or grants provided under
populations living in a qualified census
COVID–19 public health emergency. this paragraph (c) must respond to
tract, that is provided by a Tribal
(3) Hiring State and local government eligible workers performing essential
government, or that is provided to other
staff. Payroll, covered benefit, and other work during the COVID–19 public
households, businesses, or populations
costs associated with the recipient health emergency. A recipient uses
disproportionately impacted by the
increasing the number of its employees premium pay or grants provided under
COVID–19 public health emergency,
up to the number of employees that it this paragraph (c) to respond to eligible
such as:
employed on January 27, 2020. workers performing essential work
(i) Programs or services that facilitate
(4) Assistance to unemployed during the COVID–19 public health
access to health and social services,
workers. Assistance, including job emergency if it prioritizes low- and
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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Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations 26823
(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; between the State’s or Territory’s
Subscript t denotes the specific calculation
increase the projected impact of the
covered change, the State or Territory baseline and its actual tax revenue, each
date.
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
Pollution Control Act (33 U.S.C. § 35.9 Compliance with applicable laws.
State’s or Territory’s baseline;
1383(c)) or section 1452 of the Safe A recipient must comply with all
(3) Reduction in net tax revenue. The
Drinking Water Act (42 U.S.C. 300j–12); other applicable Federal statutes,
State or Territory reports a reduction in
or, regulations, and Executive orders, and a
net tax revenue, measured as the
(2) Broadband. Broadband recipient shall provide for compliance
difference between actual tax revenue
infrastructure that is designed to with the American Rescue Plan Act, this
and the State’s or Territory’s baseline,
provide service to unserved or subpart, and any interpretive guidance
each measured as of the end of the
underserved households and businesses by other parties in any agreements it
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 § 35.10 Recoupment.
symmetrical 100 Mbps download speed caused by covered changes is greater
and upload speeds; or (a) Identification of violations—(1) In
than the sum of the following, in each general. Any amount used in violation
(ii) In cases where it is not
case, as calculated for the reporting of § 35.5, § 35.6, or § 35.7 may be
practicable, because of the excessive
year: identified at any time prior to December
cost of the project or geography or
(i) The aggregate amount of the 31, 2026.
topography of the area to be served by
expected increases in tax revenue (2) Annual reporting of amounts of
the project, to provide service meeting
caused by one or more covered changes violations. On an annual basis, a
the standards set forth in paragraph
that, either based on a reasonable recipient that is a State or Territory
(e)(2)(i) of this section:
statistical methodology to isolate the must calculate and report any amounts
(A) Reliably meet or exceed 100 Mbps
impact of the covered change in actual used in violation of § 35.8.
download speed and between at least 20
revenue or based on projections that use (b) Calculation of amounts subject to
Mbps and 100 Mbps upload speed; and
reasonable assumptions and do not recoupment—(1) In general. Except as
(B) Be scalable to a minimum of 100
incorporate the effects of provided in paragraph (b)(2) of this
Mbps download speed and 100 Mbps
macroeconomic growth to reduce or section, Treasury will calculate any
upload speed.
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);
ER17MY21.003</GPH>
tax revenue of the State or Territory Territory is not using funds; and and,
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26824 Federal Register / Vol. 86, No. 93 / Monday, May 17, 2021 / Rules and Regulations
(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
recoupment along with an explanation requirements of paragraph (d) of this
may not make a payment to a
of such amounts. section.
nonentitlement unit of local government
(d) Request for reconsideration. pursuant to section 603(b)(2)(C) of the
§ 35.11 Payments to States.
Unless Treasury extends the time Social Security Act and paragraph (a) of
period, within 60 calendar days of (a) In general. With respect to any
State or Territory that has an this section in excess of the amount
receipt of a notice of recoupment equal to 75 percent of the most recent
provided under paragraph (c) of this unemployment rate as of the date that
it submits an initial certification for budget for the nonentitlement unit of
section, a recipient may submit a local government as of January 27, 2020.
written request to Treasury requesting payment of funds pursuant to section
602(d)(1) of the Social Security Act that A State or Territory shall permit a
reconsideration of any amounts subject nonentitlement unit of local government
to recoupment under paragraph (b) of is less than two percentage points above
its unemployment rate in February without a formal budget as of January
this section. To request reconsideration 27, 2020, to provide a certification from
of any amounts subject to recoupment, 2020, the Secretary will withhold 50
percent of the amount of funds allocated an authorized officer of the
a recipient must submit to Treasury a nonentitlement unit of local government
written request that includes: under section 602(b) of the Social
Security Act to such State or territory of its most recent annual expenditures
(1) An explanation of why the as of January 27, 2020, and a State or
recipient believes all or some of the until the date that is twelve months
from the date such initial certification is Territory may rely on such certification
amount should not be subject to for purposes of complying with this
recoupment; and provided to the Secretary.
(b) Payment of withheld amount. In paragraph (b).
(2) A discussion of supporting
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 of general local government, shall
reconsideration provided pursuant to
provided by the Secretary, that such distribute the amount of the payment to
paragraph (d) of this section, the
State or Territory requires the payment units of general local government within
recipient will be notified of the
to carry out the activities specified in such county in accordance with the
Secretary’s decision to affirm, withdraw,
section 602(c) of the Social Security Act requirements set forth in section
or modify the notice of recoupment.
and will use the payment in compliance 603(b)(3)(B)(ii) of the Social Security
Such notification will include an
with section 602(c) of the Social Act and without offsetting any debt
explanation of the decision, including
Security Act; and, owed by such units of general local
responses to the recipient’s supporting (2) Any reports required to be filed by
reasons and consideration of additional government against such payments.
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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