How local governments are combating economic disadvantage with American Rescue Plan funds

As data continues to accumulate on how local governments are using their flexible funds from the American Rescue Plan Act (ARPA), a picture is forming around the priorities these places sought to address through the first year of the program. Last month, our analysis found that large cities had committed about 40% of the total flexible dollars available to them under ARPA’s State and Local Fiscal Recovery Funds (SLFRF) through the end of 2021—a plurality of which they invested in basic government operations.

While restoring state and local government services and basic fiscal health was a central purpose of ARPA, so too was addressing the economic needs of populations and communities that suffered the most from the pandemic. These included lower-income households and people of color who faced higher rates of unemployment and a lack of basic necessities such as food and housing, as well as historically disinvested communities that saw higher business closures, declines in public safety, and degraded infrastructure. Other statutory SLFRF priorities included public health responses to the pandemic, investments in water and sewer projects, and premium pay for frontline workers.

The latest data from our Local Government ARPA Investment Tracker—a joint project with the National League of Cities and National Association of Counties—sheds light on the degree to which large cities and counties are using their funds to address the needs of these impacted populations and communities. Large cities and counties (those with populations of at least 250,000) report on individual SLFRF-supported projects to the Treasury Department, and the Tracker places each project into one of seven spending groups and one of 41 spending sub-groups, based on its purpose.

This analysis classifies 19 of those sub-groups as principally related to addressing the needs of impacted or historically disinvested populations and communities.[1] It also includes projects outside these categories that recipients classified as providing “services to disproportionately impacted communities” per Treasury’s own reporting system, such as Buffalo, N.Y.’s investment in a low-income neighborhood park, San Diego County’s provision of public transportation subsidies for lower-income young people, or Washington County, Minn.’s investment in new staff capacity to better address socioeconomic disparities in health outcomes.[2]

This approach cannot fully capture the desired intent or practical effect of each city and county’s spending plans. For instance, several cities (e.g., Chicago, San Francisco, Tampa, Fla.) have made generous use of the SLFRF’s revenue replacement provisions. That classification may allow them to reinvest in programs and services that benefit lower-income households and communities, though not necessarily in ways that are apparent in their project reports to Treasury. Moreover, other types of SLFRF investments that don’t by definition address economic disadvantage—say, premium pay for city/county workers, or public goods like water/sewer upgrades—could still combat economic disadvantage, depending on their implementation details. Still, this analysis offers a useful benchmark for where the needs of these populations and places stood within cities’ and counties’ initial prioritization.

A little more than one-quarter of budgeted project dollars explicitly address economic disadvantage

As our previous analysis noted, large cities and counties had collectively committed $25 billion, or 41%, of their total SLFRF funding ($62 billion) to projects as of the end of 2021. Of that $25 billion, the 329 jurisdictions in our Tracker had budgeted 28% ($7 billion) toward projects primarily intended to benefit economically disadvantaged households and communities.

The share of funding budgeted toward these uses was somewhat higher in large counties (34%) than large cities (23%). This may reflect the fact that several large cities devoted a substantial share of their funds toward revenue replacement, without yet indicating specific downstream uses of those dollars. Yet it also highlights how many counties made substantial early SLFRF commitments toward areas such as services for homeless individuals and families, nutrition and food assistance, and direct payments to impacted households. These activities align with counties’ primary responsibility in most parts of the country for delivering social and human services.

Efforts to address homelessness and keep small businesses afloat figured prominently among early uses of the funds

Large cities and counties collectively devoted significant early SLFRF resources toward a subset of efforts aimed at addressing economic disadvantage. The most common of these were projects to support individuals and families facing homelessness ($951 million) and rental assistance that helped lower-income and economically impacted households avoid homelessness ($517 million). Assistance for small businesses ($927 million) was also a significant focal area for cities and counties in ARPA’s first year; many of those investments focused on particularly hard-hit small and disadvantaged businesses, augmenting the broad financial support available through the federal Paycheck Protection Program.

Beyond these priorities, large cities and counties supported a diverse portfolio of equity-oriented projects through the end of 2021. Projects in affordable housing, broadband, mental health, nutrition and food assistance, and adult and youth workforce development all accounted for between $300 million and $500 million in total SLFRF commitments. Also significant were other programs and services for disproportionately impacted communities ($548 million), such as investments in parks, public safety, public transportation, environmental quality, and trauma-informed care for lower-income residents and neighborhoods.

A diverse range of places made significant commitments to combating economic disadvantage with ARPA dollars

The Local Government ARPA Investment Tracker spotlights how particular cities and counties have used SLFRF dollars thus far to specifically address the needs of lower-income households and communities. Because some cities and counties had selected few or no SLFRF projects through the end of 2021, this section focuses only on the jurisdictions (180 of 329 total) that had committed at least 20% of their total SLFRF allocation at that time (about half the city/county average).

A geographically diverse group of cities immediately stand out for having devoted at least 80% of their budgeted funds through 2021 to addressing economic disadvantage: Madison, Wisc.; Riverside, Calif.; Columbus, Ohio; St. Louis, Mo.; and San Jose, Calif. Three counties crossed this threshold as well: Nassau County, N.Y. (outside New York City); Clackamas County, Ore. (outside Portland); and Washoe County, Nev. (the county containing Reno). This was not the result of one large project skewing their numbers; several of these cities and counties had budgeted upward of two dozen discrete projects, many focused on the needs of lower-income populations and neighborhoods.

Beyond those communities, another 26 cities and counties had committed at least half of their budgeted SLFRF dollars toward these uses. They included several places in California and Washington state, as well as in Minnesota (Minneapolis and Saint Paul); Arizona (Phoenix, Mesa, and Maricopa County); Virginia (Chesterfield and Prince William counties); and other Southern states (Nashville, Tenn.; Fort Bend County, Texas; Gwinnett County, Ga.; and Orange County, Fla.).

Local governments can use SLFRF dollars to advance equitable outcomes in a variety of ways. The efforts profiled here do not represent the entire picture, but offer initial evidence that large cities and counties in general—and several places in particular—heeded ARPA’s call to address the needs of households and communities struggling to overcome economic disadvantage.

With many cities and counties not yet having committed their second round of SLFRF dollars (received in May 2022), and having addressed immediate government operations needs with the first round, significant opportunities lie ahead to ensure that local ARPA investments promote an equitable recovery.

Endnotes

1. Those spending sub-groups are: Affordable Housing, Broadband, Direct Payments or Subsidies, Eviction Prevention, Homelessness, Mental Health, Nonprofit Support, Nutrition and Food Assistance, Other Community Aid, Other Housing, Refugees and Migration, Rental Assistance, Small Business Support, Substance Abuse and Addiction, Veterans, Violence Reduction and Prevention, Workforce Development, Youth and Family Support, and Youth Workforce Development. Although investments in broadband and small business support are not prima facie efforts to combat economic disadvantage, reviews of project descriptions suggest that in practice, cities and counties tended to focus these investments on particularly hard-hit and/or disadvantaged small businesses, and communities and households currently underserved by broadband.
2. Treasury changed its reporting scheme in spring 2022, so future analyses on this subject may refer to a different set of Brookings/NLC/NACo spending sub-groups and/or Treasury spending categories.