US local COVID aid emerges as key social policy tool as Biden’s spending plans stall

© . FILE PHOTO: A pedestrian crosses a street in the city of Bethlehem, Pennsylvania, US in Northampton County, Oct. 1, 2020. REUTERS/Brian Snyder/File photo by David Lawder WASHINGTON () – Philadelphia closes a huge budget gap opened by COVID-19 , avoiding layoffs and closing swimming pools. St. Louis hands out $500 checks to 10,000 needy families. Denver has set aside $28 million for affordable housing amid rising rent costs. With revenues still limited by COVID-19, these U.S. cities will be able to fund those initiatives thanks to a $350 billion bucket of coronavirus relief money for state and local governments that was identified Friday a year ago. As President Joe Biden’s ambitious social and climate spending plans languish amid congressional resistance and Washington’s shifting focus on the war in Ukraine, the American Rescue Plan’s State and Local Fiscal Recovery Fund emerges as the most important his government’s anti-poverty tool. Allocated on the basis of population, income and unemployment levels, about 70% of that money is already in municipal coffers. But many state and local governments are just now starting to release it. “It keeps us from getting layoffs,” said Ashley Del Bianco, Philadelphia’s chief grants officer. “It will also enable us to continue to provide some really important city services. Parks, libraries and recreation centers have suffered a lot from major budget cuts.” Philadelphia is spending its entire $1.4 billion allotment to make up for lost revenue when suburban residents stopped paying the city’s 3.45% payroll taxes while working from home instead of city offices during the pandemic. commute, said Del Bianco. The funds will add more than $250 million per year to the city’s $5.3 billion annual budget over five years. If revenues recover faster, the city will consider other uses, she added. GENERATIONAL WINDFALL Many mayors and provincial administrators have never seen such a windfall. “This is a once-in-a-generation investment in state and local governments,” said Alan Berube, senior fellow at Brookings Metro, an urban policy think tank in Washington. Final rules issued by the Treasury in January expanded permitted uses, including premium payments for public sector workers, childcare, preschool programs and affordable housing projects in pandemic-affected communities. Such needs were intended to be funded in Biden’s $2 trillion “Build Back Better” spending package, which had proposed funding for grants for childcare, education, vocational training and tax credits for green energy technologies. Although the plan stalled over objections from Democratic Senator Joe Manchin, the Biden administration is still pushing for key elements, now being marketed as “Building a Better America.” But that too faces uncertainty as midterm congressional elections loom and the Russian invasion of Ukraine distracts attention. MONEY IN HAND In the absence of long-term national social financing programs, “the US bailout is becoming an even more important tool for poverty reduction,” Berube said. Some cities began using ARP funds late last year to set up cash payment programs for low-income residents, but without longer-term funding, it’s unclear how these could be sustained. Deputy Treasury Secretary Wally Adeyemo said he sees the money as an addition to Biden’s social investment agenda, not a replacement. “They’re both trying to tackle a similar set of challenges — a classic underinvestment in our human capital and the infrastructure that makes our communities run,” Adeyemo told in an interview. ARP funding bridges a gap during COVID-19, but the government will “try to make longer-term investments to address this challenge over time,” he said. NEW RULES, NEW Spending Many local governments, especially in smaller communities, have been delayed in allocating funds due to lack of clarity about spending allowed and seeing what they could get from Biden’s $1.2 trillion infrastructure package and the social spending bill, said Vicki Vogel Hellenbrand, public sector practice leader at the Baker Tilly advisory group. “Based on our customer base, people were a little bit waiting for the final rules unless they spent the money on a fairly clear water project,” Hellenbrand said. She said the new rules ease the documentation burden on smaller cities by granting them an automatic “grant” of up to $10 million — often more than their full allocation — that can be used for revenue replacement. In Bethlehem, Pennsylvania, small businesses from barbershops to childcare providers receive ARP-funded grants from Northampton County. Michelle Thorpe, owner of Above and Beyond Learning Center, said she spent her $10,000 grant on buying a van for trips to parks and libraries. She plans to start looking for a larger space later this year. “I want to grow because there are only 19 children here. I have plans and I have dreams,” she said.

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