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How State and Local Governments Can More Effectively Use COVID-19 Federal Aid

The Brief
  • The CARES Act authorized more than $2 trillion in federal funds to combat the COVID-19 crisis, including $150 billion for a new Coronavirus Relief Fund to states and local governments and $330 billion in emergency supplemental appropriations.
  • Capacity-strained public agencies face an immense challenge in responding to their most pressing public health needs while navigating, accessing, and deploying these new resources.
  • This blog post provides state and local governments with a few steps they can take to most effectively use COVID-19-related federal aid.

Cascade funding streams, using the most flexible first.

Federal grants and loans frequently come with strings attached and administrative burdens, such as  required reporting and documentation, cross-cutting federal regulations, and reimbursement procedures. Navigating, accessing, and deploying resources provided in the CARES Act may further burden capacity-strained local agencies, already consumed with addressing the COVID-19 public health crisis. State and local governments should first make use of the most flexible resources available to them—such as federal programs that have waived more burdensome rules, a wide range of eligible uses, and low or no non-federal matching. For example, Congress authorized the waiver of applicable procurement standards; consultation, citizen participation, and match requirements; and habitability and environmental review standards in the CARES Act’s emergency appropriations to the Department of Housing and Urban Development’s Emergency Solutions Grants program. Because these same waivers were not authorized for HUD’s Community Development Block Grant program, grant recipients may benefit from using ESG funds first and planning to use CDBG funding for future needs.

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Diligently document COVID-19 costs.

While reporting requirements for federal programs vary, state and local officials likely must track, document, and provide proof of payment for labor, equipment, materials, and supplies utilized during emergency work, for example, to seek Federal Emergency Management Agency reimbursement. Because there are many sources of federal funding that might be used for the same purposes by grantees, federal law also prohibits the duplication of benefits (see 42 U.S.C. 5155). Documenting and tracking costs related to COVID-19 is essential in ensure there is no duplication of benefits between FEMA funds and those provided by other federal agencies for similar uses, like HUD’s CDBG program, as doing so can result in improper payment of funds and de-obligation. Documentation is also typically required when invoking existing regulatory flexibilities for emergency situations.

Staff up quickly.

State and local governments are being flooded with federal resources. While acknowledging that this funding may ultimately not be enough to replace steep drops in tax revenues, an unprecedented amount of money is still flowing to state and local coffers, despite sometimes limited administrative capacity to manage these funds. At a time when unemployment is surging, states and local government agencies should make full use of federal grant program eligibilities to hire the additional staff needed to process increased funding and meet all attendant reporting and documentation requirements.

Get projects “shovel ready.”

To the extent possible, as the public health threat of COVID-19 begins to diminish, state and local officials should be prepared to help ramp up economic activity. Needed housing, infrastructure, and other projects have been halted to prevent the spread of COVID-19. State and local governments that can quickly get such projects back into development and simultaneously generate increased activity—above and beyond what had been planned before the crisis hit—will be able to economically bounce back more robustly. To that end, states and local communities should endeavor to get projects “shovel ready,” lining up the necessary approvals and completing other predevelopment activities to jumpstart new project construction.

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