By Shelby Harris, originally published by Carolina Public Press. Carolina Public Press is an independent, in-depth and investigative nonprofit news service for North Carolina.
Just before President Joe Biden inked the American Rescue Plan Act into law in March 2021, he said the purpose of the multitrillion-dollar pandemic recovery funding was to give “working people and middle-class folks — the people who built the country — a fighting chance.”
Roughly $232 million in ARPA funding touched down in Western North Carolina beginning in May 2021. More than 1 million people live in the region, which contains some of the most rural and hard-to-reach areas of the state — a combination that gives every federal dollar increased importance.
About 24% of the region’s ARPA funds went to city and town governments. The vast majority, about $177 million, or about 76%, has gone directly to the region’s 18 county governments so far.
Decisions about where to spend the money were left up to 92 county commissioners across the region who have collectively approved moving nearly 30% of the region’s total ARPA funds back into local governments’ operating budgets to fund things such as staff salaries, grant matches and administrative costs.
‘A pretty big leeway’
To start, you must understand where ARPA funding can be spent, according to federal guidelines.
Every town or county has four buckets to place their ARPA funding into, according to the U.S. Department of the Treasury: premium pay, public health/economic recovery initiatives, infrastructure improvements and revenue loss.
While the first three categories leave little room for flexibility, the “revenue loss” bucket gives local governments ample freedom with the federal dollars.
“Basically, states and localities have a ton of flexibility that was built in by creating this revenue loss provision,” said a Treasury official who asked not to be named.
“As long as they are reporting that to us — where the funds are coming from — they have a pretty big leeway.”
Officials in all but one of the 18 westernmost North Carolina counties have elected to claim at least some of their ARPA allotments as revenue loss. Swain County chose to use ARPA solely for employee premium pay.
According to Treasury data from July 2022, more than $52 million of the region’s ARPA funds were designated as “revenue loss.”
A large portion of the region’s funds deemed revenue loss — $24.7 million — has been pledged to pay county staff salaries.
That doesn’t include $12 million more in ARPA funds that are being used to fund governmental administrative costs, premium pay and employee vaccine incentives.
Using ARPA for “premium pay,” or one- or two-time bonuses, is different from using the funds for salaries, which would have to be paid through a different county funding source if the government didn’t have the cushion provided by the federal recovery dollars.
While using ARPA to pay county staff salaries might not seem like an appropriate way to spend COVID recovery funds, it can help rural counties compete to get employees.
“The ARPA funds have helped with employee retention as Clay County has utilized the funds to pay competitive salaries,” Clay County Manager Debbie Mauney said.
It also gives local governments a financial cushion — allowing new projects to be funded with money that would typically be allocated toward salaries.
“What we’re technically doing is we’re utilizing ARPA funds for our general operations, which is going to free up other other dollars for these types of expenditures,” Jackson County Manager Don Adams said about the decision to claim the county’s $8.5 million in ARPA as revenue loss.
In Jackson County’s case, ARPA “freed up” enough room in the budget for the county to build a domestic violence shelter and buy body cameras and tasers for Sheriff’s Department deputies.
Yancey County is going a similar route. Officials have declared revenue loss and are using ARPA funds to pay the salaries of workers in departments hit hardest by the pandemic.
Doing this, Yancey County Manager Lynn Austin said, will enable the county to take out a smaller loan on a new project to extend water service to Little Leaf Farms, a proposed 96-acre hydroponic lettuce farm that will create as many as 100 jobs in Yancey County.
Governments can claim as much as $10 million of ARPA funds as revenue loss even if they did not see a dip in revenue, which has been the case in much of Western North Carolina, where the tourism industry stayed vibrant during the pandemic, keeping economies steady.
Macon County Manager Derek Roland, when making the recommendation to use all the county’s ARPA funds on premium pay for county employees, said the pandemic has had the “opposite effect that everyone has anticipated.”
“There’s a chicken in every pot and a Cadillac in every garage,” Roland said during the October County Commission meeting.
Macon County officials have since backtracked and claimed the county’s ARPA as revenue loss and using the freed-up funds on employee bonuses and broadband expansion.
Social needs addressed through ARPA
While COVID-19 may not have plunged WNC’s county governments into financial turmoil, the region has not been bereft of pandemic-induced hardships.
Many nonprofit organizations, for example, reported an increased need for their services.
Babies Need Bottoms, WNC’s only diaper bank, distributed more than 187,000 diapers in 2020 — a 393% increase from the previous year.
“All of the sudden, people are having to find services for the first time,” Babies Need Bottoms Co-Director Alicia Heacock said about what she witnessed as the pandemic unfolded.
“(People) are not able to work. They can’t afford their other basic needs.”
Babies Need Bottoms received $50,000 of Buncombe County’s ARPA funds to keep up with demand as the pandemic ebbs and flows.
Nonprofits are eligible for ARPA money only if their governments open applications for the funding — something only Buncombe County and the city of Asheville have opted to do, collectively allocating more than $37 million to community nonprofits.
Funding nonprofits with ARPA is acceptable under Treasury guidelines as they fall into the “public health” bucket, which includes physical health initiatives such as vaccine clinics as well as projects intended to mend the social issues exacerbated by COVID-19, such as expanding domestic violence resources.
Not all federal relief dollars have been spent
As of July, only about $23.6 million, or 13%, of WNC counties’ ARPA funds had been spent. Only about $80 million, or 45%, had been allocated, according to Treasury data.
All ARPA funds must be allocated by December 2024 and spent by December 2026, a seemingly achievable deadline considering nearly half the funds given to WNC counties were appropriated within 16 months of ARPA being first distributed.