How the 2021 Consolidated Appropriations Act Can Help State & Local Governments

Think the 2021 Consolidated Appropriations Act (Act) doesn’t allot funding to state and local governments? Well, the answer isn’t exactly black and white.   

Since the $2.3 trillion law passed, the main concern for many state and local governments has been the absence of any additional direct aid. Sure, the $900 billion stimulus portion of the law extended the spending deadline for the Coronavirus Relief Fund, but many in the public sector had hoped for more. On the surface, the nearly 5,600-page law doesn’t appear to offer much to the nonfederal public sector, but a deeper dive into this substantial piece of legislation reveals tens of billions of dollars state and local governments can use for day-to-day operation expenses. Since much of the funding is not contingent on state contributions, states may be able to reduce their share of expenses and divert money to other needs, such as backfilling revenue losses.

While not an exhaustive list of funding provisions, this article highlights key avenues state and local governments can leverage for education, transportation, healthcare, and more.

Education

The Act provides $82 billion for the Education Stabilization Fund—a source of flexible funding for states, school districts, and higher education institutions. Here’s a breakdown of how the funds are allocated:

• $54.3B for the Elementary and Secondary School Emergency Relief Fund for repairs and improvements to school facilities. States are required to distribute at least 90 percent of funds to local education agencies based on their proportional share of Every Student Succeeds Act Title I-A funds. States may reserve 10 percent of the allocation to address issues related to the COVID-19 pandemic.
• $22.7B for the Higher Education Emergency Relief Fund. The allocation formula for these funds is different from those specified in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), so states will need to become familiar with the new allocation formula. Check with the U.S. Department of Education for more information.
• $4.05B for the Governor’s Emergency Education Relief Fund, which was established under the CARES Act for pandemic assistance. Governors must submit an application to the Department of Education to access these funds. The funds are then distributed to state agencies and institutions to meet COVID-19-related needs. 

Note: These funds require maintenance of effort (MOE) in which states must dedicate the same proportion of state funding to K-12 and higher education in fiscal year 2022 as they averaged over fiscal years 2017 to 2019. The law gives the Education Secretary broad authority to waive this requirement. 

Transportation

The Act also provides $26 billion for state and local governments to support the transportation sector’s response and relief efforts related to COVID-19. Here’s the breakdown for these funds:

• $14B is provided for mass transit to be distributed mainly through the state transportation departments to local governments. 
• $10B for highway systems, allocated to state departments of transportation with 14 percent suballocated to localities of more than 200,000 in population. These funds can be used for routine and preventive maintenance, as well as personnel costs and operations. State funds also can be transferred to public tolling and ferry agencies. 
• $2B for airports and airport concessionaires across the country. To distribute these funds, the Federal Aviation Administration has established the Airport Coronavirus Response Grant Program. The main purpose of these funds is to make up for revenues lost as a result of the pandemic, as well as provide funding for operations and maintenance. 

Healthcare

The Act also includes $69 billion to assist with public health measures. Here’s a brief breakdown of the funds that affect the public sector and how the funds are allocated:

• $9B to help with vaccine distribution. This will be administered by the CDC to help support the states in distributing and tracking the COVID-19 vaccine.
• $3B for a strategic national stockpile. This is for additional grants tacked on to funding for healthcare providers to help them meet increased expenses related to the pandemic.
• $22B for testing, tracing, and mitigation programs. These funds will go directly to states to help contain the spread of the virus. 
• $4.5B for Substance Abuse and Mental Health Services Administration to provide increased mental health and substance abuse services and support.
• $1.25B for COVID-19 research. 
• $9B to the Provider Relief Fund to help hospitals and healthcare providers receive reimbursement for healthcare-related expenses or lost revenue directly related to the pandemic.

Community Development

The Act also provides significant funding for community development and other assistance programs, which is summarized below:

• $9B for Emergency Capital Investments Program. Administered through the U.S. Department of the Treasury, this program provides low-cost, long-term capital investments to minority depository institutions and community development financial institutions (CDFI). 
• $3B for CDFIs. In addition to the funds mentioned above, these funds help CDFIs provide grants and other financial and technical assistance to CDFIs as they serve consumers, small businesses, and nonprofits in their communities responding to the coronavirus pandemic.
• $7B for development of and access to broadband. Approximately half of these funds is slated for establishing reliable deployment systems for broadband in rural areas. The Federal Communications Commission recently released a public notice seeking comment on how to implement these funds.  
• $638M for low-income water utility bill assistance. This provides grants to states that in turn will provide funds to owners or operators of public water systems or treatment facilities to reduce rates and unpaid bills for low-income households. 
• $25B in emergency rental assistance, which provides funds directly to states and some local governments to help families pay rent, utilities, and energy expenses. Funding is proportionally based on 2019 census data, with a minimum distribution of $200 million. Local governments, i.e., those with populations of 200,000 or more, may access 45 percent of their state’s allocation. 
• $2B for FEMA’s Funeral Assistance program through the Disaster Relief Fund. This program provides financial aid to those who have lost someone due to COVID-19 through the end of 2020. FEMA will administer this program, but the funds will go through the states. Note: Under the CARES Act, the funds were distributed under a cost-sharing plan in which states paid 25 percent, but that has been waived in this relief package. 

BKD Is Here to Help

The Act is a colossal piece of legislation, but it’s imperative that state and local governments understand the variety of funding available. In these unprecedented times, no one can afford to leave money on the table, which is why we’re here to help. If you have questions about how these appropriations may affect you, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.
 
Additional Resources

The Government Finance Officers Association provides a quick reference sheet that highlights the funds affecting state and local government agencies. 

In addition, the National Conference of State Legislatures also gives a helpful summary of the Act.