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NC has time to change course, hear community voices on use of flexible COVID-19 relief funding

North Carolina has a once-in-a-generation opportunity with flexible American Rescue Plan dollars for big, bold investments to address the harms of the pandemic in communities across the state – and it has time to reconsider and make the right choices for North Carolinians. In March 2021, Congress and the President enacted the American Rescue Plan Act (ARPA), which includes $350 billion for state and local governments to pay for much-needed investments to respond to the COVID-19 pandemic and to begin to build back stronger communities.

In addition to the dozens of ARPA funding streams coming to North Carolina to address specific issue areas, state and local governments are receiving flexible funds (officially the State and Local Fiscal Recovery Funds), which can be used to address the specific needs identified in, and by, their communities. These funds are being administered, or managed, by the U.S. Department of Treasury, which has set out guidelines that state and local governments must follow in order to be in compliance.

There are four broad categories that the flexible funds can be used for, based on the federal government’s rules:

  • Responding to the public health and negative economic impacts of the pandemic
  • Providing premium pay to essential workers
  • Providing government services to the extent of revenue loss due to the pandemic
  • Making necessary investments in water, sewer, and broadband infrastructure

These flexible funds have been allocated to North Carolina’s state government, as well as the local governments in all of the state’s 100 counties, 26 metro areas, and more than 500 smaller cities and towns (“Non-Entitlement Units”). Click here to see a breakdown of funding going to each local government in North Carolina.

Initial decisions by the NC General Assembly represent a lack of innovation, transparency

In November 2021, the North Carolina General Assembly (NCGA) appropriated nearly all of state’s $5.4 billion in Fiscal Recovery Funds as part of the state budget, in addition to General Fund dollars generated from state taxes. Click here to see the comprehensive list of flexible COVID funding allocations they included in the final budget, as well as the prior three proposals by the Governor, House, and Senate, respectively.

Despite these appropriations, it is likely that the General Assembly will revisit their Fall 2021 allocations as early as this summer in the “short” legislative session. This is in part because the federal guidance requires that dollars must be allocated by Dec. 31, 2024, and spent by Dec. 31, 2026, and, with ample time remaining, decisions are likely to be revised.

In addition, the U.S. Department of Treasury released their final rule after the General Assembly enacted the state budget, and with it came some changes that may influence their previous decisions. Among the changes is one that clarifies that governments directing dollars to support households most impacted -- and specifically those with incomes below 300 percent of the federal poverty guideline -- are not required to submit additional documentation on those served by a program. These requirements often put a burden on those administering the program and can cause governments to steer away from supporting programs that can help those most marginalized, so this important clarification should encourage local governments to target funding to these programs.

The other major opportunity posed by the extended timeline is for the inclusion of public input. The General Assembly’s process for allocation decisions was absent any public input and was largely done behind closed doors, leaving North Carolinians to wonder whose voices were reflected in decision-making. Revisiting the allocations that were made last fall to consider more equitable approaches to funding services and supports, informed through extensive and deep community engagement, will ensure these transformational dollars reach those most marginalized in North Carolina.

Aligning federal funding sources with spending choices

The timeline for funds to be allocated and spent provides opportunities to drive more equitable investments, particularly in light of the changing state and federal funding landscapes. For example, the Infrastructure Investment and Jobs Act (IIJA) was enacted by Congress and the President around the time that North Carolina’s state budget was enacted. The robust scale of these additional federal dollars from IIJA coming to North Carolina specifically designated to infrastructure uses, anticipated to begin arriving in the state’s coffers this summer, is in addition to state-funded infrastructure programs (for example, here) designed to support communities across the state.

 

Given these other, dedicated infrastructure funding streams, state FRF dollars may be better spent on non-infrastructure uses. To be sure, many communities across North Carolina have long-overdue infrastructure needs that put low-wealth communities in peril, particularly given the escalating threats posed by climate change. However, by using funds allocated by the federal government for specific uses instead, such as water infrastructure, flexible ARPA funds can be directed to fund more transformational initiatives, provide supports to those left out in prior COVID relief efforts, and mitigate the harms of the pandemic on those most marginalized.

Decisions by the NC local governments

In addition to decisions being made by the state, all of North Carolina’s counties in addition to the metro areas and small municipalities – totaling 651 local governments – are currently making their own considerations about how to spend ARPA funds that were allocated by the federal government. Some of these local governments have planned or put into place robust community engagement processes to understand the needs, challenges, and priorities of those in their county or municipality. Others have yet to indicate a plan for public engagement or have moved ahead with decisions without public input, to the detriment of the community.

Local governments, like the state, are also operating on the extended timeline outlined by the federal government, where decisions about how to allocate funds must be made by the end of 2024 and spent by 2026. This provides ample opportunity for public engagement, consideration of equitable policies, and their implementation.

The decisions about where these critical state and local dollars go to support people and communities out of the pandemic will be a harbinger of well-being for the coming decades. Now is the time for community members, local governments, and elected leaders to establish priorities together to ensure the community’s voice, and especially those whose path out of the pandemic will be most difficult, is heard and prioritized. There is time for decisions to be reconsidered and better choices to be made.