March 19, 2021

A Guide to the American Rescue Plan Act

The American Rescue Plan Act (ARPA) that Congress passed and President Biden signed into law will allocate much-needed help to tens of millions of Floridians, reduce hardship, help school districts, and bolster Florida’s economy. The state is poised to receive approximately $10.2 billion. To date, legislative leaders and Governor DeSantis have offered ideas about what to do with the federal relief.

The Current Situation in Florida

Since July 2020, economic activity and sales tax revenue in Florida has increased. Moving forward, the state’s overall recovery depends on the tourism and hospitality sector rebounding and the swift and widespread administration of the COVID-19 vaccine. Yet, despite promising revenue reports, it is essential to acknowledge that Florida’s recurring or year-to-year revenue expectations are still below pre-pandemic forecasts. Fortunately, federal policies have helped Florida manage its ongoing revenue shortfalls.

Federal Aid

Thanks to the ARPA, Florida will receive approximately $10.23 billion, counties will get $4.17 billion, metropolitan cities will receive $1.47 billion, and other local governments will receive $1.4 billion. Furthermore, the state is poised to receive about $364 million for construction projects directly enabling work, education, and health monitoring in response to the pandemic. Lastly, ARPA also includes stimulus checks, assistance for public schools, child care, and unemployment benefits; additionally, it increases SNAP benefits, expands the Earned Income Tax Credit, and offers $3.5 billion if Florida expands Medicaid.

What is Allowed?

State and local governments can use the dollars to address the pandemic and its negative economic impacts – this includes direct assistance to households, small businesses, and nonprofits. State and local governments can also use the dollars to provide enhanced pay for essential employees, cover the costs of public services that took a hit due to pandemic-induced revenue shortfalls, and even improve local water, sewer, or broadband infrastructure.

What is Not Allowed?

Per ARPA, the state cannot use federal money to address any rising pension costs, nor can the state use the federal relief to directly or indirectly cover the costs of cutting taxes. Specifically, the state cannot use federal dollars to make up for changing a law, regulation, or administrative procedure that reduces any tax – this includes rate reductions, rebates, deductions, or credits – or delays the imposition of any tax or tax increase.

While substantial, ARPA is a one-time payment intended to mitigate the immediate impact of the pandemic. However, Floridians will be living with the economic fallout from COVID for much longer. Using one-time federal dollars to offset any tax reduction, despite revenue shortfalls, would seriously hinder the state’s ability to fund public services in the years to come.  Ultimately, the logic of this provision is to ensure long-term sustainability.

Failure to Comply

ARPA notes that if the state fails to comply, it will have to return an amount equal to the revenue lost due to tax cuts. Currently, states are still waiting for the Department of the Treasury to publish their guidance document. Upon publication, the guidance will help the public understand how the Treasury will administer and enforce the act.

Principles to Guide State Implementation Decisions

As mentioned, legislative leaders and Governor DeSantis have offered ideas about what to do with the one-time ARPA dollars. In terms of guiding principles, the $10.2 billion should be used to:

  • Help those most in need due to the COVID-19 and consequent economic crises, including people who need help feeding their children and paying rent, children who need extra support, and people dealing with depression and addiction.'
  • Advance antiracist, equitable policies to dismantle persistent inequalities. States can use this moment to address inequities due to historical racism and various forms of ongoing bias and discrimination.
  • Think strategically about how to set up and sustain long-term change from non-recurring (or one-time) investments to mitigate the harmful consequences of the pandemic. While the state could use ARPA funds to finance programs - usually funded via general revenue - and offset ongoing revenue shortfalls, using these federal dollars to pay for new long-term recurring programs and positions means that the state would have to pay once ARPA funds run out.

How can Florida Use ARPA Funds?

The ARPA dollars provide an unprecedented opportunity for Florida to invest in communities and mitigate the harm caused by COVID-19. The law restricts states to four areas of allowable uses. Legislative leaders and the governor have provided some insights on how they envision spending the $10.2 billion in state fiscal aid. Detailed below are other investments that could be made within each of the allowable uses, which would prioritize the needs of Floridians and foster an equitable economic recovery.

1. Responding  to COVID-19 and its economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.

  • Establish a temporary working families tax rebate program to grant individuals and households ARPA funds if they received a tax credit under the federal Earned Income Tax Credit program.
  • Establish a temporary relief program to help small businesses meet their rental obligations.
  • Increase funding and staffing for county health departments, which have seen significant funding and capacity cuts since 2010. COVID-19 has shown just how critical public health, and in particular, county health departments, are to ensuring the well-being of families and communities, especially during a crisis.
  • Provide a temporary increase in benefit levels for safety net programs, such as SNAP and TANF, which would help families afford food and meet their day-to-day needs. 
  • Provide relief for families at-risk of or experiencing utilities shut-offs.
  • Update and fix the state’s outdated CONNECT system to process unemployment claims effectively and efficiently, including by investing in a migration to cloud data storage.

2. Providing  premium pay to essential workers.

  • Boost pay for staff at the Department of Corrections, which has been plagued by financial challenges in recent years leading to understaffing.
  • Provide one-time direct relief to child care workers , K-12 employees (including teachers) and postsecondary employees.
  • Offer temporary premium pay to workers in our hardest hit industries, including tourism, hospitality, and food service.

3. Covering loss of revenue from the previous fiscal year

  • Provide full funding for the Sadowski Housing Trust Fund to increase access to affordable housing and mitigate Florida’s affordable housing crisis.
  • Provide full funding for environment and conservation programs, such as Florida Forever, State Lands, Waste Management, and the Fish and Wildlife Conservation Commission. Along with Everglades restoration, these programs are integral to protecting Florida’s unique ecosystem and mitigating the effects of climate change.
  • Fully fund mental health and substance use disorder treatment, particularly non-recurring special projects, which make up a substantial portion of the community mental health budget.

4. Investing in broadband, water, and sewer infrastructure

  • Invest in broadband infrastructure to ensure that Floridians in all communities are able to access the internet for school, work, and recreation and diminish the “digital divide.”
  • Invest in water quality infrastructure, which are in dire need of upgrades , to improve wastewater treatment and the disposal of human and industrial waste. Many local water projects that were vetoed by the Governor in the current year’s budget can be revived and reevaluated.

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