Civilytics made 5 requests to Treasury in our comments on the Interim Rule this summer, and we were eager to see how they responded this month. Below we share a recap of our original comments, Treasury’s recent responses, and our takeaways.
Overall, we were not surprised (or particularly pleased) by the responses, but we do credit the process for working as intended! 👍 Treasury received over 1,500 public comments and responded to them in a 437-page document, which was honestly kind of fun to read (at least in parts!).
How does the final rule do?
👎 On transparency
We asked Treasury to publish the aid allocation estimates for NEUs, require public documentation of how funds are spent, and encourage communities to solicit public engagement in deciding how funds are spent.
Treasury responded that they received many comments about program reporting and transparency…and basically that they weren’t changing anything. They said:
Treasury will continue to issue updated guidance prior to each reporting period clarifying any modifications to requested report content and will continue to consider how reporting can best support transparency and accountability while minimizing recipient administrative burden.p. 339
Treasury notes that the interim final rule did not address the specific content and data elements required in reporting, the reporting portal or submission process, and the specific form of reporting (e.g., example templates, machine readability); comments on these topics are outside the scope of the final rule…p. 371
Let’s start with the positive. 👍 Treasury has been publishing the Interim Reports and Recovery Plans it receives — that’s positive!
But the Final Rule includes a major blow for transparency in making the “revenue loss” category more generous than before. The Final Rule adds a $10M “standard deduction” for revenue loss, allowing governments to claim this amount of lost revenue without any documentation. The Final Rule also increases the expected growth rate for local governments’ revenue to 5.2%. If revenue did not grow 5.2% over the selected time period, then the local government can use funds to make up any “shortfall.” These are blows for transparency because local governments using ARPA funds to replace “lost revenue” don’t have to provide any specifics about how they use funds — the use is simply “revenue replacement.” As a result, residents (and the federal government) have no idea how ARPA funds were spent in these communities.
It’s unfortunate that, despite receiving “many comments” about transparency and reporting, Treasury declined to increase the public’s ability to understand where these funds go. We will continue to monitor any updated guidance on reporting from Treasury, but it looks like most of the pressure to find out how money is spent will come from local residents and politicians, journalists and activists, not from the Treasury.
👎 On distributing aid equitably among smaller local governments
We asked Treasury to allocate the remaining aid so that smaller cities and towns (non-entitlement units or NEUs) receive the same amount per resident regardless of state. Treasury said:
Neither the interim final rule nor the final rule addresses eligibility or allocations issues, and comments on these topics are outside the scope of this rulemaking.p. 352
Too bad they didn’t seek public comment on the formula they created that resulted in some towns receiving $1k per resident and others receiving $100 per resident! We do understand the response, though, that this rulemaking is about how to use funds, not how much the funds are.
🤷♀️ On treating individuals who are incarcerated fairly
We asked Treasury to either require that funds allocated on a per person basis go at least in part to meet the health and safety of people who are incarcerated, or to adjust the population counts so that individuals who are incarcerated aren’t counted toward funds they will not receive. Treasury said:
Actually, this is partly covered by the response above — allocation amounts are outside the scope of this rulemaking.
On a somewhat more positive note, Treasury did specifically state that local governments cannot build a new jail or prison using ARPA funds under the justification that it will reduce public health harms. It’s a premature 🥂 though because jails and prisons can still be funded under the revenue loss provision.
Because, in all cases, uses of SLFRF funds to respond to public health and negative economic impacts of the pandemic must be related and reasonably proportional to a harm caused or exacerbated by the pandemic, some capital expenditures may not eligible. For example, constructing a new correctional facility would generally not be a proportional response to an increase in the rate of certain crimes or overall crime as most correctional facilities have historically accommodated fluctuations in occupancy.p. 199-200
👎 On applying the tax cut provision to local governments
We asked Treasury to specify that, like states and territories, cities, counties, and towns cannot use ARPA funds to pay for tax cuts. They said:
Treasury is finalizing its implementation of the [tax cut] offset provision largely without change. This approach is consistent with the text of the ARPA.p. 322
This one is a bummer. We weren’t expecting much from the comments above, but this one seemed more promising. Using funding intended to respond to a health and economic crisis of unprecedented magnitude to instead subsidize tax cuts seems clearly contrary to the legislative intent. If funding tax cuts for states is antithetical to the legislative intent, why isn’t that also true for cities and counties? Treasury never explains.
👎 On keeping the focus on lower- or moderate-income workers
We asked Treasury not to loosen the restriction that ARPA-funded premium pay go to workers who make no more than 150% of their county’s or state’s average annual wage for all occupations. Treasury did not maintain this focus. They instead said:
Under the final rule, a recipient may also show that premium pay is responsivep. 229
by demonstrating that the eligible worker receiving premium pay is not exempt from the FLSA overtime provisions. […] With this addition, the final rule provides that premium pay is responsive to eligible workers performing essential work during the public health emergency if each eligible worker who receives premium pay falls into one of three categories: (1) the worker’s pay is below the wage threshold, (2) the worker is not exempt from the FLSA overtime provisions, or (3) the recipient has submitted a written justification to Treasury.
We thought the original focus on paying premiums to low- and moderate-income workers was really laudable but we were not surprised to see this particular change made. A lot of organized police and corrections staff and supporters campaigned for this change in the comments (and probably through more direct avenues too).
That’s democracy. We got to submit comments and, if you read Treasury’s response, you can tell they actually read ours (and other people’s!). That’s something to celebrate even if none of their responses gets our 👍.