Minnesota local governments to receive $2.1 billion from federal COVID relief package

On March 11, President Biden signed the American Rescue Plan (ARP) into law, which authorizes $1.9 trillion for coronavirus relief from the federal government. Included in the ARP is hundreds of billions of dollars in assistance for states, local governments, tribal nations, and U.S. territories. For Minnesota, it means approximately $2.6 billion for the state and an additional $2.1 billion for cities, counties, and townships.

In contrast to the CARES Act funds distributed last year to local governments, the ARP sends direct payment to a larger group of cities through a formula that relies on the community block grant program. Cities that do not get money that way will receive funds on a per capita basis through money sent to the state for distribution. Unlike the previous CARES Act funds, Congress was much clearer about how states should distribute ARP monies to local governments. This is good news as it should eliminate the need for the state legislature to work through how to distribute money, an effort that delayed distribution of dollars for several months last spring.

Additionally, the uses and the timeline for spending the money is much more flexible than the CARES Act. Uses fall into several broad categories:

• Responding to the public health emergency and its economic impacts including households, businesses, and non-profits, as well as industries such as tourism and travel
• Responding to workers who provide essential services
• Provision of government services to the extent that reduction in revenue of the local government relative to revenues collected in the previous fiscal year
• Necessary investments in water, sewer, and broadband infrastructure

One difference from the CARES Act is that dollars for local governments will be sent out in two different “tranches.” Under the legislation, local governments should receive their first tranche of money within 90 days. The second tranche would then be distributed no earlier than 12 months after the first tranche is received. Each tranche will represent half of the funds that a city can expect to receive.

As with the CARES Act funding, we anticipate that the U.S. Treasury will issue further guidance on specific questions states and local governments might have when it comes to spending these funds. We will pass information along to our members as we learn more and get further clarification on how this money will be distributed and may be spent.