Alabama counties seek rule change for use of federal COVID funds

Alabama counties are asking the U.S. Treasury Department to allow a second way to calculate tax revenue losses caused by the COVID-19 pandemic, an option they say is needed to effectively use federal funds from the American Rescue Plan.

Sonny Brasfield, executive director of the Association of County Commissions of Alabama, sent a letter last week to the Treasury Department making the request.

Read Brasfield’s letter.

The Treasury Department accepted public comments through last Friday to help develop final rules for state and local governments to use their allocations from the American Rescue Plan.

The Treasury Department received other comments from Alabama, including a letter from Department of Corrections Commissioner Jeff Dunn asking whether Rescue Plan funds could be used to build state prisons. Alabama lawmakers and Gov. Kay Ivey had previously said that was under consideration.

Read Dunn’s letter.

The American Rescue Plan, passed by Congress and signed into law by President Biden in March, provides $350 billion nationally to help state and local governments recover from the pandemic and its economic effects.

Alabama will receive about $2.1 billion for state government, $951 million for counties, and $779 million for municipalities.

The list of how state and local governments can use the money within the guidelines set by the law and Treasury Department guidelines is expansive:

  • The public health response to the pandemic, such as vaccinations, testing, capital investments to modify public buildings, payroll costs associated with the pandemic, and others.
  • The negative economic impact on households, small businesses, nonprofits, and affected industries. For households, that could include help with mortgages, rent, utilities, food, internet access, and eviction prevention.
  • Services to disproportionately impacted communities, such as early learning, aid to high-poverty districts, mental health services, child care, foster care, affordable housing, and community violence intervention.
  • Premium pay for public sector employees and for private sector employees through grants.
  • Sewer, water, and broadband internet infrastructure systems.
  • Replacement of tax revenues lost because of the pandemic.

Brasfield’s letter to the Treasury Department concerned the replacement of revenue that counties lost because of the pandemic and the shutdowns and restrictions on businesses and economic activity.

The Treasury Department’s proposed guidelines call for governments to compare their overall tax revenues in the last full budget year before the pandemic to overall revenues during the pandemic. They can add an anticipated year-over-year revenue growth factor in calculating those differences.

In his letter, Brasfield asked that counties have the option of calculating before and after revenues for individual taxes, rather than overall revenues. Brasfield noted that many taxes in Alabama are earmarked for specific purposes. For example, fuel taxes are generally earmarked for roads, and lodging taxes for tourism-related programs. Before-and-after comparisons of overall tax revenues won’t account for declines in some earmarked taxes and the loss of revenue for the programs they support, Brasfield said.

“Here in Alabama, because we earmark much more of our money than many other states, this process to sum all of the funds together really puts us at a big disadvantage,” Brasfield said. “What we asked for is that each levied tax be accounted for separately.”

Brasfield said he wrote the letter after a meeting with officials from the Treasury Department earlier this month. Brasfield said those officials encouraged counties to make suggestions about how they could improve the rule.

The lost-revenue category of the American Rescue Plan funding is important because of the flexibility it offers. State, county, and municipal governments can use it for anything they normally fund in their budgets.

State, county, and municipal governments have some time to sort out the rules and their options.

Treasury Department guidelines say that American Rescue Plan funds can be used for expenses incurred from March 2021 through the end of 2024. Governments have until the end of 2026 to spend the money.

“Our message has been, ‘Let’s be careful, let’s be right, let’s not be fast,’” Brasfield said.

The Association of County Commissions of Alabama is helping counties develop their plans for using the American Rescue Plan funds through a program called Investing in Alabama Counties.

“We’re trying to use our time wisely, doing the needs assessments, putting together a software plan to be able to help counties manage all their projects, and provide accountability on all that from a public standpoint,” Brasfield said. “So, we’re working, but in terms of expending money, our message to the counties has been let’s be careful and let’s not be fast.”

County commissions will have the final say, within Treasury Department guidelines, for how counties use their shares of the money. The same goes for city and town councils on the municipal funding and for the Alabama Legislature on the state share.

Governments are receiving half their money from the American Rescue Plan this year and half next year.

Twenty-one Alabama cities, generally the state’s largest cities and others that are the largest in their metropolitan areas, are receiving money directly from the Treasury Department.

Alabama’s other municipalities, about 400 in all, apply to the state for their American Rescue Plan funds. Greg Cochran, executive director of the Alabama League of Municipalities, said about 90% of those municipalities have claimed their funds from the state.

“Most of our communities are continuing to evaluate the best way to utilize these funds,” Cochran said.

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The League of Municipalities has worked to be a source of information for its members, Cochran said, providing resources such as an overview of the program guidelines and frequently asked questions.

The Birmingham City Council approved Mayor Randall Woodfin’s proposal to use a portion of the city’s American Rescue Plan funds to pay bonuses up to $5,000 to all of the city’s 3,500 employees, including 1,100 in the Birmingham Police Department. The total cost of the one-time premium payments will be $16.8 million. The city is receiving a total of $148.8 million from the American Rescue Plan.

Mobile Mayor Sandy Stimpson has proposed a plan for spending Mobile’s $58.2 million in American Rescue Plan funds. Stimpson’s plan awaits consideration by the Mobile City Council. Stimpson’s plan includes a $5,000 bonus for full-time city employees and $2,500 for part-timers. It also includes $14 million for affordable rental housing; $8 million to convert a downtown building that was a Gayfers department store to affordable housing, $5.1 million for gun violence prevention, and others.

Huntsville has not committed any of its $35 million in Rescue Plan funds. Mayor Tommy Battle has said the city will be cautious about those decisions.

Department of Corrections Commissioner Dunn, in his letter asking whether American Rescue Plan funds could be used to build prisons, wrote that inmates are a population disproportionately affected by the pandemic, one of the categories of initiatives allowed for the money. Dunn wrote that new prisons would offer improved medical care, mental health care, and educational services.

Brasfield said was hopeful that the state could use a portion of its share to reimburse counties for holding state inmates in county jails during the pandemic. The Department of Corrections has restricted intake of inmates from the counties because of the risk of spreading COVID-19.

Brasfield said counties normally have about 250 to 300 state inmates in county jails at the end of each month but had more than 3,000 last month. He said the National Association of Counties has asked the Treasury Department about reimbursement for those costs.

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