Critical American Rescue Plan funds deadline approaching for NC, local governments
Another key funding deadline is approaching that will matter for the progress we can make in advancing well-being across the state.
By Dec. 31, 2024, the state of North Carolina and all local governments must obligate flexible federal funds made available through the American Rescue Plan. These State and Local Fiscal Recovery Funds (SLFRF) were provided to stabilize public budgets, ensure government could meet the challenges of the pandemic, and advance community-identified priorities for a more equitable recovery.
Failure to meet this deadline will mean funds will be returned to the US Treasury, and North Carolina will miss an opportunity to make further progress on improving economic and health outcomes for every person, no matter who they are and where they live.
The latest available data on the status of funds for some local governments in North Carolina shows that as of March 2024, there continued to be opportunities to secure these dollars for communities. With the recently completed local budget cycles, more decisions may have been made, but it will still be important to ensure that these funds are obligated by the deadline.
Recent guidance from the US Treasury makes clear that an obligation means “an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment.” As analysts at Economic Policy Institute recently noted: “passing a budget that allocates SLFRF to a specific purpose – on its own – is insufficient to constitute obligation.”
Policymakers have until Dec. 31 to ensure that all funds are obligated, and that, in turn, provides opportunity for advocates in communities across the state to bring forward the projects and programs that have until now been sidelined.
State Fiscal Recovery Funds reallocated to meet obligation deadline
House and Senate budget writers proposed re-allocation of some State Fiscal Recovery Funds this year likely due to projections that these would not be obligated by the deadline. While neither House nor Senate spending plans passed, a separate bill, Senate Bill 357 changed the allocations of some State Fiscal Recovery Funds previously enacted.
The chart below details the reductions to state agencies of State Fiscal Recovery Funds that will instead be allocated as a stop-gap measure to stabilize the child-care system and to General Fund obligations.
To what specific General Fund obligations these funds will be used by the Office of State Budget & Management is unclear, and so is whether those dollars could still be at risk of being returned to US Treasury. Given the definition of obligation, firm commitments of these funds in the form of contracts or subawards will be needed to ensure that they can stay in North Carolina to work for our communities.
Moreover, this kind of swap undermines the expanded capacity that State Fiscal Recovery Funds could have provided to meet unmet needs and go beyond current diminished funding levels.
Local funding decisions about Fiscal Recovery Funds a mixed bag
Reporting from the US Treasury from nearly all NC counties is now available as of the first quarter of 2024, showing that 40 counties in North Carolina have fully obligated their funds. An estimated $624 million in Local Fiscal Recovery Funds could still be available to drive toward community priorities in the remaining 60 counties.
Since counties have now passed budgets for Fiscal Year 2025, it is possible that this data doesn’t capture budgeting decisions or obligations that have happened this year. At the same time, there remains some questions as to whether all the funds obligated or budgeted would meet the definition of obligated under the U.S. Treasury guidance.
The data that is available, however, shows that counties with higher obligation rates tend to be more rural counties across the state, which could in part be due to the critical stabilization role that these flexible federal funds played in budgets as well as the adoption of a specific purpose called revenue replacement, which allowed local governments to immediately obligate dollars to staffing and other costs.
With the picture coming into greater focus about whether local governments have obligated or additionally expended their Local Fiscal Recovery Funds, we can come together to make sure that these dollars are driven toward priorities that communities have identified and that will transform opportunity in our state.
You can help in this work by engaging with your local elected leaders to find out where these funds stand: Have they been budgeted, obligated or expended? Check out this action alert to engage your local leaders to find out more. You can share updates from your county here.
