Biden Administration Tweaks COVID Aid Rules, Funds Can Be Used on Wider Array of Projects

The Biden administration announced alterations this week to the rules governing how $350 billion in federal COVID aid can be spent, widely increasing the variety of projects state and local governments can spend the money on.

Under the rules announced by the Treasury Department on January 7, 2022, local and state governments will be allowed to spend their remaining amounts of federal aid on any government service without being required to prove the service lost revenue during the pandemic.

The $1.9 trillion American Rescue Plan signed last year was meant to provide financial aid to the governments that may have lost revenue from various services affected by the pandemic and help those governments support their communities with other long-term projects.

"As the Delta and Omicron variants have illustrated, pandemic response needs will continue to evolve," Deputy Treasury Secretary Wally Adeyemo said in a statement when the agency released its rules. "These funds ensure that governments across the country have the flexibility they need to vaccinate their communities, keep schools open, support small businesses, prevent layoffs, and ensure a long-term recovery."

State and local governments will now be able to claim up to $10 million in revenue lost during the pandemic without the need to prove where those losses came from.

Joe Biden, State Local Government, COVID Aid
The Biden administration also announced Friday relaxations to rules governing how local and state governments can spend federal pandemic aid funds. Above, President Joe Biden delivers remarks on the December jobs report at the White House on January 7, 2022, in Washington, DC. Win McNamee/Getty Images

The rules also allow spending on more types of construction and a wider range of high-speed internet projects, among other things.

But some city and county officials had complained that the Treasury's initial guidelines, issued last May, were too rigid. In addition to pressing the Treasury for changes, local government groups also had been lobbying Congress to intervene with relaxed criteria.

The Treasury said it was responding to the feedback by allowing "broader flexibility and greater simplicity in the program."

Federal money used to replace lost revenue comes with maximum flexibility, meaning it can go toward projects such as road repairs that would not otherwise be eligible. That $10 million threshold covers the entire allotment for many smaller cities and for about 70 percent of counties.

"It really allows for counties to be able to use the funding in ways in which they know can best support their communities and residents," Eryn Hurley, deputy director of government affairs for the National Association of Counties, said Friday.

Local officials also had pushed for greater flexibility on infrastructure spending, which is generally limited to water, sewer and broadband internet.

The final rules allow money to be used for culvert repairs along roads and to rehabilitate dams and reservoirs that supply drinking water. Funding for broadband can be used to improve cybersecurity and provide faster connections in areas that already have service—opening the way for more internet improvements in cities, instead of primarily rural areas.

Treasury's initial rules focused on areas that lack reliable cable or wire internet speeds of at least 25 megabits per second for downloading and 3 Mbps for uploading. The final rules encourage entities to focus on areas lacking download speeds of 100 Mbps and upload speeds of 20 Mbps.

The rules also clarify that the money can go toward construction of affordable housing, childcare facilities, schools, hospitals and other projects. But some things generally remain off limits, including prisons, stadiums and convention centers.

The rules also presume an expanded set of households have been disproportionately affected by the pandemic, allowing a greater array of services to them.

Governments also will be able to use the federal aid to rebuild their workforce to levels above their pre-pandemic staffing and can provide premium pay to a broader share of workers.

The Associated Press contributed to this report.

COVID relief fund aid rules have been relaxed to include a broader range of projects, including funding for broadband that can be used to improve cybersecurity and provide faster connections in areas that already have service—opening the way for more internet improvements in cities, instead of primarily rural areas. Above, a free Wi-Fi hotspot beams broadband internet from atop a public phone booth on July 11, 2012, in New York City. John Moore/Getty Images