In the spring of 2021, Congress passed the American Rescue Plan Act (ARPA) to address the ongoing economic and health impacts of the COVID-19 pandemic. In addition to historic reductions in child poverty through the expanded Child Tax Credit, ARPA’s Fiscal Recovery Funds to states and localities were among the most impactful parts of the legislation. In West Virginia, ARPA Fiscal Recovery Funds totaled $1.3 billion to the state government and $677 million total to cities, municipalities, and counties. These funds are potentially transformative for state and local governments and the residents they serve, with broad allowable uses including replacing lost revenue, responding to the health and economic impacts of the pandemic, providing premium pay for essential workers, and making investments in water, sewer, and broadband infrastructure.
West Virginia and many localities received ARPA Fiscal Recovery Funds in two installments, with the first payment coming in May 2021 – much of it already obligated to services and projects. Earlier this year, in May 2022, the state and localities received the second round of funding. This post will review what state lawmakers spent the first half of its ARPA Fiscal Recovery Funds on and what their priorities should be for the remaining funding.
Most of West Virginia’s first $677 million in Fiscal Recovery Funds was allocated in the first half of 2022. According to the West Virginia Auditor’s Opengov website, $665 million has been spent as of July 6, 2022.
During a special session just one day prior to start of the regular legislative session, the West Virginia Legislature voted on a suite of bills to provide economic incentives to Nucor, a steel production company, to locate a plant in the state. In addition to up to $1.3 billion in tax breaks, legislators approved a plan to utilize $315 million in ARPA Fiscal Recovery Funds as a cash incentive. Since cash incentives to industry do not fall under any of the allowable uses of ARPA Fiscal Recovery Funds, some creativity was needed. According to contemporaneous reporting, “The legislation would cut the budget of various state departments and send that money to the state Department of Economic Development to be used in the deal with Nucor. The money taken away from the departments would be replenished by the ARP money.”
Additionally, in an April special session, lawmakers approved a bill to allocate $250 million in ARPA Fiscal Recovery Funds to a grant fund within the West Virginia Water Development Authority to be used to provide matching grants to local governments for water and sewer infrastructure projects.
To date, West Virginia has spent nearly half of its total ARPA Fiscal Recovery Funds. Nearly 20 percent was spent on water and sewer infrastructure, more than 10 percent was spent indirectly on a cash incentive for Nucor Steel. While somewhat difficult to track, the remaining funding spent to date appears to have been replacing funding for eligible state costs, which likely falls under the “replacing lost revenue” bucket of allowable expenses.
That leaves West Virginia with about $689 million remaining and two major allowable uses for ARPA Fiscal Recovery Funds untouched: responding to the health and economic impacts of the pandemic and providing premium pay to essential workers. Both of these areas of potential investment for West Virginia’s remaining ARPA funds could be incredibly impactful and transformational for our state’s residents. While public input would be the best way to identify what West Virginians would like to see the remaining funds spent on, there exists the opportunity to immediately address some long-identified needs for West Virginians.
Within the health and economic impacts bucket, the U.S. Treasury has outlined eligible projects that would help households and communities, including but not limited to:
Each of these eligible expenditures has been identified as a need in West Virginia by state policymakers – in particular, Workforce West Virginia leadership identified child care and job readiness as two significant barriers to work and economic mobility earlier this year. Additionally, health care and broadband access, housing costs, and paid leave are also high among needs identified by both lawmakers and residents of our state.
Premium pay for essential workers could also help address economic security among West Virginians whose work has helped keep our state and economy afloat throughout the pandemic, while also serving to make industries more appealing in a tight labor market.
Lawmakers have already prioritized business investments with the first half of ARPA funds. With our remaining Fiscal Recovery Funds likely to be allocated in the upcoming months, policymakers should focus on the needs of residents in our state. Further, targeting these projects to those communities and populations disproportionately impacted by the pandemic would help ensure more equitable outcomes with these limited resources. It is not too late to do the right thing.
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