Billions of dollars in funding from the American Rescue Plan Act (ARPA) are beginning to make their way to local governments around the country, but the money comes with strings attached. The administrative requirements mandated by ARPA have compelled some smaller governments to forego the funds entirely due to a lack of capacity. Although ARPA’s terms of spending are differ from last year’s Coronavirus Relief Funds (CRF), the experience from the CRF can shed light on what might be some major barriers for local governments as they decide how to spend their ARPA funds.
Local government budgets were hit hard in 2020 by a combination of falling tax revenues and increased spending to address the public health emergency. The $150 billion CRF, which was part of the larger CARES package, offered a vital fiscal injection to government budgets. In January 2021, CivicPulse surveyed 494 local government officials (top appointed officials and policymakers) to ask about their experiences with CRF. (A detailed analysis of our findings is available here.) We found that local governments serving smaller populations faced distinct challenges from their larger counterparts highlighting areas that could be improved for the administration of additional funding like the ARPA.
To understand local governments' difficulties in using coronavirus relief funds, CivicPulse asked these officials, "What was the most challenging aspect of making use of the coronavirus relief funds?" and coded their responses into any combination of the following ten categories: administrative process, eligibility, deadline, guidance, insufficient funding, prioritization, procurement, program implementation, other difficulties and no challenges.
An analysis of officials' responses sorted by the population size reveals that local governments serving smaller populations uniquely suffered from procurement challenges as a principal obstacle to the use of coronavirus relief funds. Twelve percent of local government officials that serve areas with 5,000 residents or fewer listed procurement as a primary challenge, while none of those serving areas with more than 25,000 residents said that procurement was a primary challenge. This suggests that the larger governments may have had more in-house capacity to manage procurement on a tight timeline, or that the contract size of governments serving larger populations may have made procurement easier.
Procurement wasn't the only challenge disproportionately seen by local governments serving small populations. Compared to those with higher populations, a larger share of smaller localities listed the administrative process associated with using relief funding as a primary challenge. Thirty percent of respondents from governments serving 5,000 residents or fewer listed the administrative process as a primary challenge, as did 26% of officials in governments serving 5,000 to 25,000 residents. Only 16% of officials from governments serving more than 25,000 included administrative process difficulties.
These differences may be explained by the capacity of local governments to adapt to change. Larger governments are more likely to have the personnel and capacity to deal with the administrative guidelines and paperwork necessary to rapidly incorporate a new funding program than their smaller counterparts.
While larger localities didn't frequently list the administrative process as a primary challenge to the use of coronavirus relief funds, they did face their own challenges. Deadline-related problems comprised the largest portion of these difficulties, with 23% of officials from local governments serving over 25,000 residents stating that the timeline was a primary challenge, compared to only 10% of officials from local governments serving fewer than 5,000 citizens.
This analysis of local governments' challenges with the CRF provides insights into potential improvements for future relief efforts. Smaller local governments may find certain aspects of spending new ARPA funds more challenging. However, the additional time period for spending the funds likely lowers the burden of procurement pressure and timeline struggles. Even with these improvements, additional assistance for smaller local governments may be needed to help them comply with administrative requirements if they do not have the staff capacity to meet federal reporting requirements.