By David Lawder

WASHINGTON, (Reuters) – Philadelphia has filled a huge budget gap created by COVID-19. This will allow it to avoid layoffs as well as the closure of swimming pools. St. Louis will give $500 checks to 10000 families in need. Denver, amidst spiralling rental prices has put aside $28million for housing affordable units.

These U.S. cities have the opportunity to fund these initiatives despite COVID-19’s impact on revenues. This is thanks to $350 billion of Coronavirus Aid money that was enacted last Friday for both state and local governments.

While President Joe Biden’s social and climate spending plans continue to languish in Congress resistance and Washington shifting its focus on the conflict in Ukraine, American Rescue Plan’s State and Local Fiscal Recovery Fund emerges as Washington’s most powerful tool for combating poverty.

The money has been allocated according to population, income and levels of unemployment. Around 70% of it is currently in the municipal treasuries. However, many local and state governments have just begun to spend this money.

Ashley Del Bianco (Chief Grants Officer for Philadelphia) stated, “It will allow us not to have layoffs.” “It will also enable us to keep offering key city services.” Largely, parks, libraries, and recreation centers were affected by major cuts in funding.

Philadelphia has committed its full $1.4Billion allocation to making up the revenue lost when suburb residents were unable to pay the 3.45% wage tax. This was because they preferred to work from their homes rather than commute to the city, Del Bianco explained.

This will bring more than $250 millions per year to the $5.3 billion city budget for five years. The city may consider using the funds for other purposes if revenue recovers faster.

GENERATIONAL WINDFALL

Many county and municipal officials have not seen such a large cash flow.

Alan Berube is senior fellow at Brookings Metro in Washington.

In January, the Treasury issued final rules that expanded permissible uses. These included premium pay for public sector workers and childcare programs, preschool programs, affordable housing, and pre-school programs.

These needs would be covered by Biden’s $2 Trillion “Build Back better” spending plan. It included funding for education and training, as well as tax credits to support green energy technology.

Despite objections by Democratic Senator Joe Manchin, Biden’s administration continues to push for important elements. They are now referred to as “Building a Better America.” This too faces uncertainty with midterm congressional elections approaching and Russia’s invasion in Ukraine distracting attention.

MONEY in your Hand

Berube stated that the American Rescue Plan is an important tool for poverty relief in the absence of national long-term social financing programs.

Several cities began using ARP funds late last year to establish cash payments programs for residents with low incomes. However, without long-term funding it’s unclear how they can continue.

Wally Adeyemo, Deputy Treasury Secretary, stated that he sees the money not as an alternative to Biden’s social investment agenda but rather as a complement.

Adeyemo stated that they are both working to tackle a similar problem – a classic lack of investment in our human resources and infrastructures that make our communities work.

He said that the ARP funding will bridge a COVID-19 gap, however, the administration would “try to make long-term investments which would address this problem over time.”

NEW RULES, NEW SPENDING

Many local governments, particularly those in small communities, resisted the decision to commit funds because of uncertainty over allowable spending. Vicki Hellenbrand, a public sector lead at Baker Tilly said that this was due to a lack of clear guidance and the possibility of getting a social spending bill and $1.2 trillion from Biden.

Hellenbrand explained that, “Based upon our client base,” unless people wanted to spend money on clear water projects, there was a lot of waiting to hear the final rules.

According to her, the new rules reduce paperwork burdens in smaller towns. They allow them an annual “allowance” up to $10 million. This is often higher than their whole allocation and can be used as revenue replacement.

Northampton County has awarded grants of ARP funding to Bethlehem’s small business owners, including barbershops and childcare providers.

Michelle Thorpe is the owner of Above and Beyond Learning Center. She said that she used her $10,000 grant to buy a van to take people on trips to libraries and parks. In the latter part of this year she will start to look for bigger spaces.

Because there are only 19 of us, I’m determined to succeed. “I have goals and plans,” she stated.