LOC News
NLC Provides Clarity on Potential ARPA Claw Back
During the LOC’s statewide call last Friday, staff advised of an attempt in Congress to claw back “unobligated” ARPA funds. This is part of House Speaker Kevin McCarthy’s effort to raise the federal debt ceiling, and if this measure passed, Congress would rescind “unobligated” ARPA funds.
Several cities asked this question: “If a city has claimed the standard allowance for revenue loss, is that considered obligated or unobligated funds?”
Here is the guidance from the National League of Cities (NLC):
In the current language of this claw back attempt, U.S. Treasury has told the NLC that obligated funds are considered funds that have been transferred from Treasury out to a local entity, so once the money has left the federal coffers, it is considered obligated under this measure.
Almost all of the funding has been sent out, so the NLC does not expect this current attempt to have any effect on local ARPA funds that cities have already received.
A minor language tweak could change the definition of unobligated funds to pin it on the recipient for unspent balances; however, it is unlikely that this sort of attempt would pass the Senate.
Under the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, recipients must obligate all funds by December 31, 2024, and expend funds by December 31, 2026.
In the final rule published by the U.S. Treasury that dictates the rules surrounding use and compliance of State and Local Fiscal Recovery Funds (SLFRF), it states: “Funds that are unobligated after December 31, 2024 must be returned to Treasury.” The final rule does not define “unobligated,” and the word only appears once in the document.
The NLC, the National Association of Counties, and the Government Finance Officers Association have all requested that Treasury publish a concrete definition of “unobligated funds,” so that local governments can have clear guidance on what is considered obligated.
Even though the current attempt to rescind local ARPA funds will not affect ARPA funding, be mindful that U.S. House members may continue to undertake this effort.
The LOC is recommending that cities spend ARPA funds expeditiously to avoid any future claw back attempts.
Contact: Lindsay Tenes, Lobbyist – ltenes@orcities.org
Last Updated 4/28/23