Signed into law in March 2021, the American Rescue Plan Act establishes the Coronavirus Local Fiscal Recovery Fund which provide support to local government in responding to the impact of COVID-19 and in their efforts to contain COVID-19 on their communities, residents and businesses.
The Act does not replace or supersede South Carolina state law. Cities and towns are expected to follow state law when spending ARPA dollars.
Leveraging Local ARP Dollars
In May 2022, the SC General Assembly passed its plan to allocate a majority of the state's ARP dollars. The allocation includes $900 million to create the SC Infrastructure Investment Program, a major one-time initiative to improve water, wastewater and stormwater systems throughout the state. Learn about the SC Infrastructure investment Program.
Understanding ARP
Usage of ARP dollars is subject to the requirements specified in the Interim Final Rule published by the U.S. Department of Treasury. The Municipal Association of SC strongly encourages all cities and towns to read the entire Interim Final Rule along with the supplementary Frequently Asked Questions and consult their municipal attorneys when creating expenditure plans.
Allowable Uses
Section 603(c)(1) provide that funds may be used to:
- Respond to the COVID-19 public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel and hospitality.
- Respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work.
- Provide government services to the extent of the reduction in revenue due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency.
- Make necessary investments in water, sewer or broadband infrastructure.
The Association strongly recommends that ARP funds not be used to provide hazard or premium pay to elected officials.
- First, state law provides that council members cannot increase their own compensation "until the commencement date of the terms of two or more members elected at the next general election" after the compensation increase is approved. See S.C. Code Section 5-7-170.
- Second, the South Carolina Constitution states that governments "shall never grant extra compensation, fee or allowance to any public officer, agent, servant or contractor after service rendered." See S.C. Const. Art. III, sec. 30.
- Finally, the South Carolina Ethics, Government Accountability, and Campaign Reform Act prohibits council members for voting on any matter in which they have an economic interest. See S.C. Code Section 8-13-700. The Ethics Commission has been clear that council members have an economic interest in their own compensation.
Taken together, these provisions mean that providing hazard or premium pay to elected officials under ARP would likely violate state law.
Covered Period
The Interim Final Rule permits ARP funds to be used to cover costs incurred beginning on March 3, 2021. Funds must be obligated by December 31, 2024 and spent by December 31, 2026.
ARP Budgeting
While not required by the U.S. Department of Treasury, South Carolina law requires city and town councils to appropriate funds from the Local Fiscal Recovery Fund. This means that councils should budget their ARP funds as a part of their annual budget or through a separate ordinance. Cities may appropriate ARP dollars within an existing fund, or appropriate them into a dedicated special revenue fund exclusively for ARP.
The Municipal Association of SC has created a model budget ordinance that cities and towns can modify and adopt to comply with state law.
Reporting
Recipient governments must provide periodic reports to the Treasury Department with a detailed accounting of the use of funds. Funds can be recouped by the U.S. Department of Treasury if the recipient does not comply with the eligible uses listed in the ARP and spelled out in the Interim Final Rule.
Final Rule
On January 6, 2022, the U.S. Department of the Treasury adopted a final rule implementing the American Rescue Plan's Coronavirus State and Local Fiscal Recovery Funds.
The final rule – which took effect on April 1, 2022 – provides local governments with broader flexibility to pursue a wider range of uses to respond to local public health and economic needs --- as well as greater simplicity to focus on responding to the needs in their communities and maximizing the impact of their funds.
Treasury has released two documents to accompany the Final Rule
The U.S. Department of Treasury has released multiple resources to help local governments complete and submit required reports. These resources, which include including how-to videos, can be found at Treasury’s ARP reporting website.
The Municipal Association of SC does not have access to Treasury’s Reporting Portal, but will be available to assist as you submit your report.
National League of Cities ARP Resource
NLC created a playbook to help local leaders access implementation resources including ARP webinars and articles.