Cities and counties in Kentucky are in the process of receiving the first half of over $1.8 billion in total monies from the Coronavirus Local Fiscal Recovery Fund (Local Recovery Fund) included in the American Rescue Plan (ARP). The second distribution of the remaining half will come in about a year. How local governments spend these funds will have a significant impact on whether Kentucky emerges from the pandemic stronger and in a better position to address longstanding issues.
It is therefore vitally important for local governments to prioritize transparency and collaboration in planning for how the monies will be spent. Taking time and opening avenues for community involvement will help ensure uses address both the short-term needs and long-term interests of local communities.
Significant monies are coming to cities and counties
Communities have an opportunity to make meaningful investments in their recovery and prosperity through ARP funds. To provide some context for their magnitude, the average amount counties will receive from the ARP distribution is 24% of their total annual receipts from all sources, with a range of 7% to 64%. Compared to annual county tax revenues alone not including other sources, the average amount counties will receive is 52% of tax revenues, with the ARP distribution actually exceeding annual tax revenues in 68 of Kentucky’s 120 counties.
Distributions will be made to local governments based primarily on population, with direct distributions to all 120 counties and the 9 largest cities, and distributions to Kentucky’s 410 smaller cities through the Department for Local Government. The map below reflects the total amount each unit of local government can expect to receive. Cities and counties have until December 31, 2024 to allocate the funds, and until December 31, 2026 to spend them.
Community input is crucial for effective investment
Because of their limited jurisdictional boundaries and ability to directly engage with citizens, local governments are uniquely situated to make investments with Local Recovery Funds that respond directly to specific concerns and needs in communities. In determining how to best invest Local Recovery Funds, Kentucky cities and counties should follow Treasury guidance “to engage their constituents and communities in developing plans to use these payments, given the scale of funding and its potential to catalyze broader recovery and rebuilding.”
Citizen input is crucial in understanding the impacts of COVID-19 – how people have been harmed and what they need to move forward. It is also key to identifying strategic investments in the community. To assess the greatest needs and most effective solutions, local governments can design inclusive processes that seek out the input of people most harmed by the COVID-19 economic fallout, including people of color and low-income families and individuals. For instance, an inclusive process recognizes that traditional means of seeking input such as surveys or website responses may not reach all impacted groups.
Some local governments are using neighborhood meetings, surveys, and advisory committees focused on specific neighborhoods, businesses and communities to gather input to inform decisions. In fact, some Local Recovery Fund money can be used to ensure success through community involvement starting early on in the process: to facilitate community input, prioritize needs, plan expenditures and establish measurable goals and outcomes.
Local governments should also be transparent in reporting on the expenditure of funds, reviewing and evaluating outcomes, and making adjustments as warranted based on data.
Funds should be targeted to communities’ greatest needs
Because of a variety of preconditions as well as various impacts from the pandemic, Kentucky’s cities and counties have differing needs in the recovery from COVID-19. Within communities, because of longstanding and deep-seated racial and economic inequities that were made worse by the pandemic, recovery planning must focus on equity. Treasury guidance provides significant flexibility to local governments, presenting a unique opportunity to develop specific, tailored and targeted plans.
ARP establishes four broad areas in which investments can be made, which include:
- Responding to the pandemic and its negative economic impacts;
- Providing premium pay to essential workers;
- Restoring cuts to public services caused by pandemic-induced revenue losses and avoid additional cuts; and
- Investing in water, sewer or broadband infrastructure.
Local communities may also identify other needs, particularly in the area of public health, as long as they are related to the effect of COVID-19 on public health, now or in the future. The Treasury guidance provides that other types of expenses could be permissible, making good planning all the more important. Local governments cannot use Local Recovery Funds to offset tax cuts or to make deposits in pension funds or rainy day funds.
Given the amount of money available, and the extended time over which local governments have to spend the money, the following areas of focus are important to consider:
Helping people in need
Many Kentuckians are still struggling with the economic harms of the COVID-19 pandemic, with more than 1 in 4 Kentucky adults reporting difficulty covering usual household expenses. The 2021 General Assembly focused state-level ARP spending on infrastructure and relief for corporations, making it critical that cities and counties first prioritize direct, immediate relief to individuals and families who need it most. Treasury guidance encourages that local governments should “provide assistance to those households, businesses, and non-profits in communities most disproportionately impacted by the pandemic.”
Local governments can help stabilize households to begin building a robust recovery. Some options include:
- Creating an outreach program to make sure people know about the public benefits that are available to them and how to apply;
- Identifying and filling in gaps for community residents still struggling to meet basic needs by providing cash and other emergency aid and direct assistance;
- Identifying other barriers that people may face such as outstanding debt for housing, utilities, the need for car repairs, limited access to food, auto insurance, and health coverage, and design creative programs to help people effectively address these issues;
- Partnering with local community organizations to ensure relief reaches communities with less information about or access to services, including immigrants, low-income neighborhoods, Kentuckians with disabilities and communities of color.
Stabilizing local finances
The need to stabilize government finances and replace lost tax revenue will vary significantly from community to community depending on the tax base, employment loss and other factors. Since local governments provide essential services directly or by contracting with local providers, restoration of those services and capabilities is crucial to local recovery.
Making strategic investments for the future
Local Recovery Funds provide the opportunity to identify and pilot transformative investments that have a long-term impact on the conditions for communities to be healthy and weather crises. With an emphasis on addressing the greatest disparities for the most positive impact, potential directions include:
- As an alternative to policing, human-centered approaches to mental health and to substance use disorders like crisis intervention teams, increased use of social workers and behavioral health professionals, school-based social services and comprehensive support systems that can help communities become healthier and safer;
- Investments in housing services to support healthy living environments, remediation of lead paint and other hazards, and evidence-based community intervention programs;
- Equity-enhancing infrastructure projects that build off of state investment to further address affordability and health-related physical infrastructure challenges, including ways to make broadband not just accessible but also affordable and investments that are needed to make drinking water affordable to people with low incomes and safe from lead and other environmental toxins.
Local Recovery Funds provide Kentucky’s local governments with a unique and unprecedented opportunity to both recover from COVID-19 and build shared prosperity. The decisions and plans made now by the governing bodies of our cities and counties about how to invest Local Recovery Funds over the next three years will be instrumental in determining which direction our Commonwealth moves for generations to come.