New Jersey has received more than $ 6 billion in federal COVID-19 relief funding, and like other federal aid programs, there is a long list of things money can and cannot be spent on. .
Gov. Phil Murphy has yet to say exactly how the state plans to use its share of American Rescue Plan Act funding under these rules.
But the governor recently said he had “good conversations” with lawmakers, who have already indicated they want to play a role in securing the last installment of federal aid.
Discussions are underway as Murphy and his fellow Democrats who control both houses of the state legislature prepare to also negotiate the next annual budget as the start of the state’s fiscal year approaches. July 1.
While there is no specific deadline for deciding how to use federal aid funding, the state must spend its share of the aid money by December 31, 2024, in accordance with rules issued with help.
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Here’s a breakdown of some of the history and rules for federal aid, as well as an overview of best practices and what other states are already doing with their share of federal funding.
Where does the federal money for the American Rescue Plan Act come from? The American Rescue Plan Act of 2021, worth $ 1.9 trillion, was enacted by President Joe Biden on March 11. The relief plan funded, among other programs, a new round of stimulus payments to individuals. He also extended improved federal unemployment benefits.
The US bailout has also set aside $ 195 billion to fund the Coronavirus State Fiscal Recovery Fund. This money arrives at the states in addition to aid sent to fund other more specific goals, such as the $ 2.7 billion currently available for New Jersey schools. Part of the state recovery fund has been distributed equally among states. Another part was provided to states based on the number of unemployed they had at the end of last year. New Jersey received $ 6.24 billion in American Rescue Plan Act funding on May 19, according to state treasurer Elizabeth Maher Muoio.
What is the American Rescue Plan Act money can be used for: More generally, federal funding should be used to support the public health response to the coronavirus pandemic and to lay the groundwork for a “strong and fair” recovery from an economic downturn triggered by the health crisis, according to a file. information released by the US Department of the Treasury.
Specifically, the interim federal rules issued by the Treasury allow the funds to be used to provide support to households, small businesses, affected industries, and essential workers, among other areas. Providing a risk premium to essential workers, replacing income lost due to the pandemic and funding investments in infrastructure such as water, sewage and broadband are among other specific uses allowed, according to the interim rules.
What federal money can not be used for: While federal guidelines stress the need to give states flexibility in where to best use relief dollars, some uses are directly prohibited. These include funding civil servants’ retirement payments and compensating for lost earnings caused by tax cuts adopted after March 3, 2021, according to a summary drafted by the National Conference of State Legislatures. Under the interim rules, funding deposits in “rainy day funds, financial reserves or similar funds” to prepare for the next economic downturn or using relief dollars to pay off existing debt is not. no longer allowed.
What other states are doing: So far, at least seven states have allocated some of their federal funding to either budget legislation or stand-alone bills, according to the National Conference of State Legislatures. Bills are pending in several other states, the group said.
Federal funding has also provided states with greater overall fiscal flexibility. Spending trends to date include allocations for public health initiatives, funding for bonuses for essential workers and compensation for lost income, the group said. Some states have also announced plans to use at least some of their federal funding to replenish UI funds that have been under heavy strain over the past year.
Best Practices: The pandemic has strained state budgets, and federal aid will provide much-needed relief. But some are also worried that it might tempt the state’s policymakers to fall into bad budget habits, such as using the relief dollars to create recurring obligations with what is in fact a single source of income.
Instead, states should “plan ahead and act responsibly,” wrote Josh Goodman, state fiscal policy expert at The Pew Charitable Trusts, in a recent report. Goodman suggested that states use their federal dollars to “meet the immediate challenges of the pandemic,” as well as to “position their budgets and economies on a stronger footing once federal aid ends.”
“States need to be careful about using ARPA money to create new, ongoing programs. However, if the current spending is less than what a state is likely to bear, then using a portion of federal dollars for ongoing spending is a reasonable choice, ”Goodman wrote.
What is Murphy Is saying: Responding to questions at a recent news briefing, Murphy said he and lawmakers share a goal of addressing the “inequities this virus has uncovered” in New Jersey. Murphy also cited the need to strike a balance to ensure that funding is not used to create longer-term liabilities that will eventually need to be funded by the state itself.
“It’s extremely important to find that right balance,” said Murphy. He did not say when there would be a decision on how New Jersey will use federal dollars, citing the interim nature of the federal guidelines.
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