Nevada finally receives U.S. Treasury spending guidance for billions in coming federal aid

The U.S. Treasury has finally unveiled long-awaited guidance on how Nevada, other states and large municipalities can spend the $350 billion in COVID funding allocated through the federal American Rescue Plan, including whether it can be used for addressing revenue shortfalls as well as funding water and broadband infrastructure, but bars states and localities from funding tax cuts.

Nevada’s state government is poised to receive a $2.7 billion allocation, with billions more coming to municipalities and counties as part of the federal legislation signed in March. The state has generally known the expected dollar figure for several months, but the guidance released Monday finally gives Nevada and other states detailed instructions as to how the money can be used.

In a press call on Monday, White House and Treasury officials stressed that the incoming funds were aimed at giving states broad flexibility to respond to economic challenges related to the pandemic, with a specific focus on restoring government functions that were cut or curtailed due to sharp decreases in tax revenue last year.

“State and local governments have cut over 1 million jobs,” said Deputy Treasury Secretary Wally Adeyemo, one of a group of senior administration officials who briefed reporters on a call Monday.

As a result of the pandemic, they suffered “unprecedented strains, forcing many to make untenable choices between laying off educators, firefighters and other frontline workers or failing to provide services that communities rely on,” Adeyemo continued.

In addition to the $2.7 billion of funds coming to the state directly, Clark County is set to receive $440 million, Washoe County will receive $91.6 million, and the city of Las Vegas will receive $130.5 million.

Release of the guidance may prove a boon to state lawmakers, who have opted to avoid making major budget commitments so far during the state’s 120-day legislative session as to avoid any potential overlap with the state’s coming influx of federal COVID relief dollars. But developing a plan on how to spend the money with just 22 days left in the session may end up being too difficult and could require a later special legislative session — especially as the state’s better-than-expected recent Economic Forum forecasted last week that the state will have enough in tax revenue to avoid any major budget cuts.

Legislative leaders and Gov. Steve Sisolak have largely kept mum on plans for the federal funds, beyond vague statements that the dollars will be used to address systemic problems and help “transform” the state. One concrete action already taken was lawmakers in April granting preliminary approval to hire more than 300 currently vacant state employee positions through use of the federal dollars.

In a statement released Monday, Sisolak pointed to a previously-released framework highlighting priority areas for the coming federal funds, while saying it was "critical that we take the time to analyze the guidance in detail so we can ensure these funds are spent in accordance with eligibility guidelines and in the most effective manner for Nevada residents."

"This is our foundation to ensure this federal funding is used in a strategic manner focused on a strong recovery with long lasting impacts for Nevada families and our economy," the governor said in a statement.

The federal guidance released Tuesday gives states and municipalities broad categories of acceptable uses of the federal dollars, but the Treasury also emphasized that states and municipalities have “broad flexibility to decide how best to use this funding to meet the needs of their communities.” Categories include:

— Public health response, a large category including measures aimed at containing and mitigating the spread of COVID, from vaccine and testing programs to PPE, development of alternative care facilities, public health data systems and capital and ventilation improvement investments in public facilities. The category also covers behavioral health needs — including mental health, substance abuse and other services, as well as hotlines, crisis intervention and other related services. Governments can also cover payroll and covered benefits of any public health or healthcare worker for those primarily devoted to COVID-19 response.

— Economic impacts, a broad category of assistance for individuals, small businesses, affected industries and the rehiring of public service staff. This can include aid and job training to unemployed workers or households facing food, housing or other financial insecurity, or survivor’s benefits for family members of COVID-19 victims. Funding can also be used to establish a “broad array” of loan, grant, in-kind assistance and counseling programs for small businesses, as well as “speeding the recovery of the tourism, travel and hospitality” sectors. The federal dollars can also be used to rehire public sector staff and replenish unemployment insurance trust funds back to pre-pandemic levels, as well as build up internal capacity for government systems in areas including data analysis, targeted outreach or technology infrastructure.

— Assisting “hardest-hit” communities, allowing for a “broad range of uses to address the disproportionate public health and economic impacts.” It includes funding for community health workers, public benefits navigators, investments in housing and neighborhoods (services for individuals experiencing homelessness, affordable housing development and housing vouchers), educational services including tutoring and after school programs, as well as additional funds to high-poverty school districts, and new or expanded high quality childcare services. These types of services need to be targeted to qualified low-income Census Tracts, families living within those areas, by a tribal government or to other populations or geographic areas disproportionately affected by the pandemic.

— Replacing lost public sector revenue, through use of a Treasury methodology comparing shortfalls in actual tax revenue to expected revenue had the pandemic never happened. Once a shortfall in revenue is identified, states and municipalities will have “broad latitude” to use that funding to support “government services.”

— Provide premium pay to eligible “essential workers” who were physically present at their jobs during the pandemic, including staff at nursing homes and hospitals, farm, food production, grocery store and restaurants, janitors and sanitation workers, public health and safety staff, truck drives, transit staff and warehouse workers, childcare workers, educators and school staff, and social service staff. Funding can either be used for direct payments or grants to private employers, with an encouragement to offer retrospective premium pay. It also recommends that low-income workers be emphasized for premium pay, with a soft ceiling of no more than 150 percent of the state or county annual wage without specific justification.

— Water, sewer and broadband infrastructure, including drinking water or wastewater treatment plans and related infrastructure, as well as expanding broadband service into unserved or underserved areas.
The guidance also lays out several ineligible uses of the coming federal relief dollars, including to make up any reduction in revenue occurring from any law change from March 3, 2021 to the end of the fiscal year — essentially not allowing states to cut taxes and offset lost revenue through the federal dollars. The senior administration officials stressed that tax cuts could not be subsidized by the funding.

“If a state or territory cuts taxes, they must demonstrate how they paid for the tax cuts from sources other than Coronavirus State Fiscal Recovery Funds,” they said in a press release.

States and municipalities are also prohibited from using the funds to make deposits (defined as “extraordinary contributions”) to a state pension fund for the purpose of reducing accrued, unfunded liabilities, though they can use funds to cover “routine payroll” payment contributions for workers whose salaries can be covered through the funds.

Other ineligible uses include funding of debt service, legal settlements or judgements, or deposits to rainy day funds or financial reserves. It also doesn’t cover infrastructure projects outside of water, sewer and broadband.

— This report was used with permission of The Nevada Independent. Go here for updates to this and other stories.