Coronavirus State and Local Fiscal Recovery Funds: Final Rule Clarifies and Provides Flexibilities

February 16, 2022

Community action agencies (CAAs) that receive Coronavirus State and Local Fiscal Recovery Funds (SLFR) now have additional flexibilities to use those funds to serve clients who have been impacted by the economic effects of the pandemic. On January 27, 2022, the U.S. Department of Treasury (“Treasury”) published its Final Rule governing the use of SLFR funds (the “Final Rule”).

Established under the American Rescue Plan, the SLFR program made $350 billion available to state, local, and tribal governments to provide assistance to families and businesses impacted by the pandemic, provide and maintain public services, and invest in long-term growth and opportunities to aid pandemic recovery. Many CAAs receive SLFR funding from their state, local, or tribal government to deliver services to clients impacted by the COVID-19 pandemic.

Last May, Treasury released an Interim Final Rule governing the use of SLFR funding. Though the Interim Final Rule took immediate effect, Treasury accepted comments from the public and has now published a Final Rule that incorporates feedback it received. The Final Rule will take effect on April 1, 2022, but Treasury has indicated that recipients can take advantage of the flexibilities in the Final Rule now. This means that CAAs can begin using SLFR funds as allowed by the Final Rule at this time.

The Final Rule makes a number of changes to the Interim Final Rule. For CAAs, the most relevant changes relate to who is eligible to receive SLFR-funded services, and how SLFR funds may be used for public health and economic impacts programs.

Eligible Beneficiaries of SLFR Funding

An individual, household, or community must be impacted by the pandemic to be eligible for SLFR-funded programs and services. SLFR funding can be used to provide certain services to those “impacted” by the pandemic, and additional services to those “disproportionately impacted” by the pandemic. The Final Rule clarifies what it means to be “impacted” and “disproportionately impacted” by the pandemic.

Under the Final Rule, recipients may presume that low-income households are “disproportionately impacted” by the pandemic. The Final Rule defines a “low-income household” as having income at or below 185 percent of the Federal Poverty Guidelines (FPG), or at or below 40 percent area median income for its county. Further, a “moderate-income household” is presumed to be “impacted” by the pandemic. “Moderate-income household” is defined as one having income at or below 300 percent of the FPG, or at or below 65 percent area median income for its county.

Treasury also included categorical eligibility in the Final Rule. This means that it will allow eligibility determinations to be made based on a beneficiary’s eligibility for other federal programs. For purposes of categorical eligibility, a household is considered “impacted” if it qualifies for:

• Children’s Health Insurance Program (CHIP);
• Childcare Subsidies through the Child Care and Development Fund (CCDF) Program;
• Medicaid;
• National Housing Trust Fund (HTF), for affordable housing programs only; or
• Home Investment Partnerships Program (HOME), for affordable housing programs only.

A household is considered “disproportionately impacted” if it qualifies for:

• Temporary Assistance for Needy Families (TANF);
• Supplemental Nutrition Assistance Program (SNAP);
• Free and Reduced-Price Lunch (NSLP) and/or School Breakfast (SBP) programs;
• Medicare Part D Low-income Subsidies;
• Supplemental Security Income (SSI);
• Head Start and/or Early Head Start;
• Special Supplemental Nutrition Program for Women, Infants, and Children (WIC);
• Section 8 Vouchers;
• Low-Income Home Energy Assistance Program (LIHEAP);
• Pell Grants; or
• For services to address educational disparities, Treasury will recognize Title I-eligible schools as disproportionately impacted and responsive services that support the school generally or support the whole school as eligible.

Households may also be considered disproportionately impacted if they reside in Qualified Census Tracts or the U.S. territories, or if they receive services provided by Tribal governments.

Allowable Uses of SLFR Funding

The Final Rule expands upon the allowable uses of SLFR funding contained in the Interim Final Rule. In this section, the single asterisk (*) denotes uses of SLFR funds added to the Final Rule that were not specified in the Interim Final Rule. The double asterisk (**) denotes uses of SLFR funds that were allowable under the Interim Final Rule for those “disproportionately impacted” and are now allowable under the Final Rule for those “impacted” by the pandemic.

Under the Final Rule, allowable projects for “impacted” households and communities include:

• COVID-19 prevention and mitigation, including: vaccination programs and incentives; testing programs; contact tracing; isolation and quarantine; mitigation and prevention practices in congregate settings; acquisition and distribution of medical equipment for prevention and treatment of COVID-19, including personal protective equipment; COVID-19 prevention and treatment expenses for public hospitals or health care facilities, including temporary medical facilities; establishing or enhancing public health data systems; installation and improvement of ventilation systems in congregate settings, health facilities, or other public facilities; and assistance to small businesses, nonprofits, or impacted industries to implement mitigation measures
• Costs to medical providers or to individuals for testing or treating COVID-19
• Behavioral health care
• Preventing and responding to increased violence resulting from the public health emergency, including community violence intervention programs, or responding to increased gun violence resulting from the public health emergency
• Food assistance and food banks
• Emergency housing assistance
• Health insurance coverage expansion*
• Survivor's benefits
• Jobs and job training programs
• Financial services for the unbanked and underbanked*
• Burials, home repair, and home weatherization
• Internet access programs
• Cash assistance
• Paid sick, family, and medical leave*
• Assistance accessing and applying for public benefits or services**
• Childcare and early learning services**
• Assistance to address learning loss for K-12 students**
• Programs or services to support long-term housing security, including development of affordable housing and permanent supportive housing**

• Certain contributions to an Unemployment Insurance Trust Fund

Under the Final Rule, the following additional projects are allowable for “disproportionately impacted” households and communities:

• Pay for community health workers to help households access health and social services
• Remediation of lead paint or other lead hazards
• Primary care clinics, hospitals, integration of health services into other settings, and other investments in medical equipment and facilities designed to address health disparities
• Housing vouchers and assistance relocating to neighborhoods with higher economic opportunity
• Investments in neighborhoods to promote improved health outcomes
• Improvements to vacant and abandoned properties, including rehabilitation or maintenance, renovation, removal and remediation of environmental contaminants, demolition or deconstruction, greening/vacant lot cleanup and conversion to affordable housing*
• Services to address educational disparities, including assistance to high-poverty school districts and educational and evidence-based services to address student academic, social, emotional, and mental health needs
• Schools and other educational equipment and facilities*

The Final Rule allows recipients to now use SLFR funding for certain capital expenditures* in response to pandemic-related public health or negative economic impacts. As a result, recipients may be able to use SLFR funding in support of certain projects involving affordable housing, childcare facilities, schools, and hospitals.

Under the Final Rule, premium (hazard) pay for certain employees may also be an allowable use of SLFR funds for CAAs involved in programs designated "essential critical infrastructure" by local authorities, such as home-based health care or assistance, transportation, or educational work. CAAs should consult with the state or local entity granting SLFR funds to determine the allowability of premium pay for employees.

A CAA that currently receives SLFR funds and wishes to expand or revisit its use of such funding in light of the Final Rule should reach out to the state or local entity overseeing the funding as to the process for doing so.

To read Treasury’s overview of the Final Rule, click here.

To read the full Final Rule, please see the Federal Register here.

This news flash is part of the Community Services Block Grant (CSBG) Legal Training and Technical Assistance (T/TA) Center. It was created by Community Action Program Legal Services, Inc. (CAPLAW) in the performance of the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services Cooperative Agreement – Award Number 90ET0467-03-C3. Any opinion, findings, conclusions, or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Health and Human Services, Administration for Children and Families.

The contents of this news flash are intended to convey general information only and do not constitute legal advice. Any communication through this publication or through CAPLAW’s website does not constitute or create an attorney-client relationship. If you need legal advice, please contact CAPLAW or another attorney directly.