Considering COVID Recovery Funds in Your Next Municipal Budget

Right now, many cities, towns and villages are planning for their next budget cycle. This timing presents an opportunity for local governments to consider how they will incur expenses for their remaining State and Local Fiscal Recovery Funds (SLFRF), which were provided through the American Rescue Plan Act (ARPA). 

It is key to remember an expense for every SLFRF dollar must be incurred by December 31, 2024. Since many American municipalities are on a July 1-June 30 budgeting year it is important to determine now what expense(s) your municipality will incur with these dollars. If your municipality is on the July 1-June 30 fiscal year, this upcoming budget cycle will be the last full fiscal year to incur expenses with these dollars. 

What Does Incur Mean? 

The Department of Treasury has used the word “obligated” in place of “incur”. In short, local governments must determine the purpose for how each SFLRF dollar will be used by the deadline established in the ARPA legislation.  

What is the Deadline and Why is it Important? 

The key deadline by which eligible costs must be incurred is December 31, 2024. These funds have an expiration date coming up quickly, and time is running short to incur expenses with them. If a municipality has not incurred the full amount of their SLFRF award by the deadline, they risk losing the opportunity to spend their allocated dollars, and the money will be returned to the federal government. Therefore, it is important for local governments to focus on using these dollars to best serve their communities ahead of the deadline. 

These dollars were meant to be transformative for communities across the county, and it would be unfortunate to see dollars not utilized in upcoming budgets for municipalities across the nation. 

What are the Next Steps?  

If you are in the middle of your budget planning process for the next budget cycle and have not developed a plan to incur an expense with all of your SLFRF funds, now is a good time to pause in your process! We recommend taking a step back and evaluating how the allocated federal money can be used to improve your municipality and the lives of your residents. Develop a plan for incurring expenses in the next fiscal years, or budget cycles, before the obligation deadline of December 31, 2024. Remember, these dollars are meant to be transformative, and it is imperative this one-time transfer of resources from the federal government to local governments not go unused. 

The State and Local Fiscal Recovery Funds program was an essential experiment for transferring power from the federal government level to the local government level. Local leaders have proven governments can responsibly and effectively spend the unprecedented investments provided to them, and this is the last chance to maximize these funds for your community. 

About the Author

Michael Gleeson

About the Author

Michael Gleeson is the Legislative Director of Finance, Administration and Intergovernmental Relations at the National League of Cities.