The $1.9 trillion American Rescue Plan Act (ARPA), signed into law by President Joe Biden in early March, was intended to help states and local governments boost their economies out of the pandemic slump. However, Utah’s already rip-roaring economy and low unemployment rate have caused state and local leaders to proceed with a cautious approach toward this tranche of federal money.
After six months, what is the status of the roughly $1.7 billion allocated to Utah’s state government and the $1.1 billion appropriated to counties and cities throughout the Beehive state?
STATE LEGISLATURE APPROACH
ARPA is one of the most expensive single bills in US history and was pitched by President Biden as a vital pandemic relief package to “go big” in order to boost the flagging economy. The bill “is about giving the backbone of this nation – the essential workers, the working people who built this country, the people who keep this country going – a fighting chance,” Biden said.
The health and economic consequences of the pandemic affected each state differently. Utah fared well on both fronts in comparison to the rest of the country. Utah ranks near the bottom in COVID fatalities per capita, and according to Utah’s Department of Workforce Services, the state estimates a 2.7% unemployment rate, the second-lowest in the nation.
Utah House Speaker Brad Wilson spoke with Utah Political Underground before May’s interim session expressing his concern with pumping Utah’s economy with federal money. “It’s probably more prudent to move a little slower than how some other states are spending the money,” he said. “There’s a tremendous amount of uncertainty coming from the federal government relative to additional spending packages in the near future.”
The legislature moved to approve initial spending on only $571 million in May’s interim session and organized the rest into issue priorities to be allocated in 2022’s regular legislative session. Wilson feels that sideling most of the money until a regular session will give state legislators more options. “We are determined to use this opportunity in a way that catapults us over the next decade or more and not just celebrate the spot the state is in right now,” he said.
State leaders’ concerns in the spring with rising inflation appear prescient after surveying the economic outlook today. Consumer prices rose 5.4% in July from a year earlier according to the U.S. Labor Department, making it the biggest inflation spike in decades.
Federal Reserve Chairman Jerome Powell will head an annual conference later this week to debate what the Fed should do about the high inflation. He’s expected to unfurl the Fed’s approach to inflation in a speech this Friday and clarify the central bank’s stance.
GOVERNOR SPENCER COX’S ARPA LEADERSHIP
Governor Spencer Cox is mirroring the state legislature’s cautious approach to ARPA money spending. Last June, the Governor discontinued a federal unemployment program funded by pandemic-related federal stimulus money two months earlier than it was scheduled to end.
“I believe in the value of work,” Cox said in a written statement. “With the nation’s lowest unemployment rate at 2.9% and plenty of good-paying jobs available today, it makes sense to transition away from these extra benefits that were never intended to be permanent.”
The governor’s desire to be self-sustaining motivated his move to end federal benefits early. And this past week he defended Utah’s right to be self-governing as well.
Last week, U.S. Education Secretary Miguel Cardona sent a letter to Governor Cox and Dr. Sydnee Dickson, superintendent for the Utah Board of Education, warning Utah’s laws prohibiting school districts from unilaterally mandating masks could be in violation of the American Rescue Plan Act.
Secretary Cardona cautioned that following an investigation, federal sanctions could block millions of federal monies allocated to the state to help back-to-school measures. “Utah’s actions to block school districts from voluntarily adopting science-based strategies for preventing the spread of COVID-19 that are aligned with the guidance from the Centers for Disease Control and Prevention (CDC) puts these goals at risk and may infringe upon a school district’s authority to adopt policies to protect students and educators as they develop their safe return to in-person instruction plans required by Federal law,” Cardona wrote.
Governor Cox responded forcefully to these threats to withhold federal money from the state. “This letter from the U.S. Department of Education is extremely unhelpful,” Cox said while noting the wide praise for Utah’s approach to safely keeping the school open last year. “The last thing we need is threats from out-of-touch bureaucrats at the U.S. Department of Education,” Cox wrote in part in his statement provided to Utah Political Underground.
COUNTY GOVERNMENTS CAUTIOUS OF “FREE” FEDERAL MONEY
These negative interactions with the federal government demonstrate a concerning appetite among federal bureaucrats. Peter Brown, the ARPA Program Coordinator for Utah County, is also alarmed over what he sees as a permeant federal-dollar-dependency by local governments.
“I’ve been at the tip of the spear of this federal dollar bulwark that’s getting set up inside local governments that could be used to control or become something that local governments can’t do without,” Brown said.
Each county received a substantial amount of federal money during the pandemic. For example, Utah County received roughly $111 million in 2020 from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a Trump Administration pandemic relief bill passed under a bipartisan coalition in Congress. Early this spring, Utah County received half of the $126 million allocated to them in federal funds from ARPA, each state, county, and city will receive the other half next year respectively.
To put these tranches of federal money in perspective, Utah County’s yearly general fund budget for each of the past few years is approximately $100 million.
These dumps of federal money on local governments have become conventional and routine, according to Brown. The difference, however, is found in the strings that come attached with each subsequent batch of federal money.
“The CARES Act money was sent with less strings to help mitigate the challenges of the pandemic,” Brown said. “And I think that bill was more precise in its approach, and we used enough of it to make a difference for Utah County. But ARPA is a little bit of a different animal.”
Brown says the county is still determining what is the best use of the $126 million of ARPS funds earmarked for Utah County. Additionally, Brown says the Treasury Department is still finalizing the guidance of how the funds can be used. A violation could result in the Federal government requiring a full refund of ARPA funds from the county.
The other hesitation is the Federal government’s encouragement to increase services. “There’s a lot of provisions in the bill to allow local governments to expand social programs that aren’t necessarily related to COVID-19,” Brown said.
He sees a proper way to implement programs if public officials see a need for them. But Brown is worried that a careless approach could lead to fiscal problems for the county in the future. “Where we get nervous is that once you start something like that, then can you ever end it? “ Brown questioned.
Utah County Commissioner Bill Lee shares this concern. “We have to be careful with Federal money,” Lee said. “It’s like a slow drug that can become addicting, requiring more and more money from Washington, D.C. to function.”
[Editor’s Note: Commissioner Bill Lee is the father of this article’s author, Josh Lee]
Many state and local government officials have voiced concern over not becoming dependent on one-time federal money. Despite this nearly universal acknowledgment of potential fiscal danger, Lee has seen this temptation manifest itself in subtle ways.
The county purchased new computers last year with CARES Act money so county employees could work safely from home. The unintended consequence to the county budget was that many of the county departments didn’t consider the ongoing cost of maintaining the computers, i.e. monthly software licensing and IT personnel costs.
The county departments intended for the cost to be absorbed by CARES Act money, “but that money doesn’t last forever,” Lee said. “So, we wind up with computers that aren’t supported on the county’s system.” The county is left with deciding if they should spend more of their budget to maintain these computers in the future.
Commissioner Lee notes that in other Federal emergency legislation that allocates monies to local governments to obtain resources to respond to a disaster, the Federal government requires those resources, whether they be computers or a backhoe, etc., to be sold once the emergency has passed. “This is not the case with CARES Act or ARPA money,” Lee said.
He says this small but illustrative example of the computers is what worries him when considering the additional health welfare service programs, the Federal government is encouraging through ARPA.
Lee is also concerned with how all this affects the national debt. “This money they are sending us is not in the Federal coffers. It’s on loan from our grandkids,” he said. “Because of this, I feel we need to use this generational money for infrastructure projects that will benefit the county for generations into the future. To do otherwise would be irresponsible.”
Peter Brown views the Federal government’s push to expand health and welfare programs as too political. “I’ll be frank, when the Trump Administration’s Treasury Department sent us information on the CARES Act guidelines, it was politically neutral and concerned with managing the pandemic,” he said. “But since Biden has been in office, and since the passage of ARPA, they are treating us as if we’re some sort of extension of the Biden Administration and its goals and initiatives.”
Brown says the Biden Administration is “constantly inviting us to listen to the White House,” and explaining how local governments’ expansion of these social programs is important to the Administration’s initiatives.
“I get what one might describe as campaign emails from the Treasury Department encouraging us to buy into programs and initiatives,” Brown said. “They aren’t political in terms of advocating for the Democrats over Republicans, but in terms of pushing programmatic initiatives that they want to achieve to bring a greater expansion of the social welfare state.”
Brown also expressed his concern as a citizen and how other citizens should ensure their local government officials are carefully managing these Federal funds. “I am worried that we are spending our children’s future and that we’re creating a possible inflation or hyperinflation environment that could ruin our economy,” he said. “If people become dependent on these programs funded by Federal dollars, then local governments will have no choice but to ask D.C. for more money or raise local taxes, or both.”
CITY GOVERNMENT NAVIGATION OF FEDERAL MONEY
Salt Lake City Councilmember Chris Wharton told Utah Political Underground that while he too is worried about haphazardly creating financial liabilities for the city with Federal money, he is confident that they are using the money properly.
“The biggest part of the ARPA money we’ve received so far has gone to general fund reimbursement,” Wharton said. “These are programs that the city-funded that are now eligible under ARPA.” These programs included emergency assistance for small businesses, repairs to city buildings, Youth and family services, and programs to improve outdoor areas like trails and city parks.
Wharton acknowledges that funding these services and programs through Federal funds and not an ongoing revenue stream might put them at risk for the future, but he says the city feels confident they will be able to continue these programs. “We will have these discussions going forward to make sure we aren’t funding a program unless we have plans on how we are going to supplement the revenue after ARPA funds are no longer available,” he said.
These discussions and concerns are being raised all over the state. The Government Office of Planning and Budget (GOPB) published a report estimating the amount of ARPA funds each city and count can expect. Salt Lake City will receive roughly $85 million from the federal government before the end of next year. Even one of Utah’s smallest cities on the other end of the valley, White City Township with a population of 5,000 people, is expecting to receive nearly $700,000 from the federal government.
Cites could decline or refuse the federal funds. GOPB provided a report to Utah Political Underground showing that six cities formally declined ARPA funds. The list of these cities consisted of mostly small and rural communities that were slated to receive on average less than $50,000 each.
Charleston Town in Wasatch County is one of the municipalities that declined the ARPA funds. Charleston Mayor Brenda Kozlowski told Utah Political Underground that they simply didn’t need the money.
“The pandemic didn’t affect the town or businesses in the town as much as other places,” Kozlowski said. “We turned the money down because we want the money to go to places that really need it.”
