What the American Rescue Plan Act Means for Wisconsin Municipalities

Last Thursday, President Biden signed into law the latest federal COVID relief package, known as the American Rescue Plan Act, which contains an historic investment in local government. Below are the highlights of the municipal aid included in the Act:

  • The local government portion of funding is $130.2 billion, equally divided between municipalities and counties.

  • The $65.1 billion to be allocated directly to cities, towns and villages under the Act will be distributed differently based on the size of the community.

  • Metro Cities: $45.5 billion of the $65.1 billion will be allocated to municipalities with more than 50,000 residents. Funds will be made available directly by the U.S. Treasury. Grant amounts will be calculated by using the CDBG formula that measures population + poverty + housing instability.  

  • Small Municipalities: The remaining $19.6 billion will be distributed to municipalities with less than 50,000 residents through the states according to a per capita formula. States that fail to sub-allocate funds that small municipalities are entitled to under the American Rescue Plan Act will be penalized by the U.S. Treasury department, which is authorized to claw-back payments made to states under the American Rescue Plan by an amount equal to the funding not allocated to municipalities as required by the law. These safeguards and penalties are designed to discourage state interference or additional state mandates on the use of these funds. 

  • Small Municipalities Cap on Grant Amount. The American Rescue Plan Act includes a provision stating no municipality with less than 50,000 residents can receive a grant that is larger than an amount equal to 75% of its pre-pandemic budget, regardless of whether the estimates indicate an amount greater than that figure. Note: This cap is not accounted for in the aid estimates that Congress has provided because data on small municipality budgets is not systematically collected by any federal entity. It is anticipated that the Treasury Department will provide a way for small municipalities to certify what that cap amounts to for the municipality.  

  • Timing of payments. Payments to local governments will be made in two tranches - the first to be made within 60 days of enactment and the second payment one year later. Funds must be spent by end of calendar year 2024.

  • Eligible use of the funds include:

  1. Revenue replacement for the provision of government services to the extent the reduction in revenue was due to the COVID-19 public health emergency relative to revenues collected in the most recent fiscal year prior to the emergency.
  2. Premium pay for essential workers.
  3. To to respond to the public health emergency caused by the COVID–19 pandemic or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.
  4. Investments in water, sewer and broadband infrastructure.
  5. Funds can be transferred between jurisdictions or to non-profit partners.

  • Restrictions on eligible uses: Funds cannot be used to directly or indirectly offset tax reductions or delay a new tax or tax increase. Funds cannot be deposited into any pension fund. 

Committee Vote Planned on Continuation of Personal Property Aid after TID Closes

The Assembly Ways and Means committee has scheduled a vote on AB 56, a League initiated bill making it clear that personal property aid payments made to a TIF district continue after the district closes but transfer to the municipality and other taxing jurisdictions. The committee vote is scheduled for March 18th at 10:00 a.m. Committee members appear to be supportive of an amendment the League supports that Rep. Dave Steffen (R-Howard) plans to offer making the change to personal property aid payments retroactive to when the aid program was created four years ago.

Joint Finance Committee Announces Public Hearings on the State Budget

The Legislature's budget writing committee announced last week it will conduct public hearings on the 2021-23 state budget on the following dates:

  • Friday, April 9, 2021 UW-Whitewater, Whitewater, WI
  • Wednesday, April 21, 2021 The Hodag Dome, Rhinelander, WI
  • Thursday, April 22, 2021 UW-Stout, Menomonie, WI
  • Wednesday, April 28, 2021 Virtual
Each hearing will begin at 10 am and conclude at 5 pm. The format will be similar to past hearings. Management at each of the venues will monitor capacity. Those wishing to testify at the virtual hearing will be required to register in advance, details to come on the registration process. A portal is available for individuals to provide written comments: www.legis.wisconsin.gov/topics/budgetcomments as well as an email address budget.comments@legis.wisconsin.gov.

League staff will soon reach out to local officials located in Joint Finance Committee member districts and communities hosting state budget hearings to provide talking points on shared revenue, transportation aids, and other state budget issues affecting municipalities.