North Carolina, its public schools and local governments are getting almost a $13 billion shot in the arm, figuratively speaking, with the passage of the American Rescue Plan (ARP) on March 11.
The money is the first direct financial assistance provided to municipalities since the onset of the pandemic.
The state will get the lion’s share of the funding, signed into law by President Biden last week. In total, North Carolina will get about $5.2 billion, while counties will get $2 billion and local governments will receive $1.3 billion.
That funding doesn’t include what’s going to public schools. The state and its 115 districts stand to receive $3.6 billion, according to calculations released Thursday by the U.S. Education Department.
Here locally, early estimates released by Congressional staff indicate Moore County alone may receive about $19.57 million. Combined with individual allocations to the area’s 11 municipalities, the new stimulus funding will tally up to around $34.5 million. And that’s before Moore County Schools learns what it is getting.
How this money will be spent is an important consideration that local elected leaders will likely wrestle over with fiscal year 2022 budget planning well underway. The county and towns will start rolling out their budgets within the next six weeks.
County Manager Wayne Vest said it was too early to predict any specifics but said he would prioritize “that we get equal value in return” on any investments.
The $1.9 trillion ARP provides limited guidance on how the funding can be used. Overall thus far, it would seem to come with few strings attached. Previous pandemic-relief, including the $2.2 trillion CARES Act, limited spending to expenses related to health impacts but provided little relief to local governments from revenue losses.
The ARP includes $1,400 stimulus checks for many Americans, in addition to extending federal unemployment benefits and money for vaccine distribution. Republicans in the House and Senate said the plan was not targeted enough and that it was the first economic stimulus package passed during the pandemic that did not receive bipartisan support. Indeed, the ARP passed both houses without a single Republican vote.
For a town like Southern Pines, which relies on sales taxes to provide around 28 percent of its annual budget revenue, the onset of the pandemic and resulting business closures and restrictions created a sense of panic during budget planning last spring.
However, thanks to some unexpectedly good timing, a North Carolina law requiring businesses to collect and remit sales tax for online purchases began Feb. 1, 2020. As a result, the impact on sales tax revenue losses was far less than anticipated.
“We all got very fortunate,” said Southern Pines Town Manager Reagan Parsons who, nevertheless, was also circumspect when asked how the infusion of ARP funds will benefit the town. Southern Pines is in line to receive around $4.3 million.
“We are all trying to get an idea of what the strings attached will be. There is general language on what it can and can’t be spent on, but right now we don’t really know,” Parsons said. “I have never seen a federal program without a lot of rules attached and, so far, those have not been released.
The guidance out there is very gray and wide open.”
Parsons said he expects more guidance will be announced and said there may be broader avenues where funding will be helpful. While sales tax revenues have been better than expected, he explained the town saw a considerable revenue loss on its utility side.
“Clearly (ARP) is a federal attempt at one size fits all. That is very difficult to do over 50 states. North Carolina has done well, in general, because we are funded in different ways. But other states where revenue is driven by income or wage taxes, if your unemployment spikes like what has happened, those states have been hurt a lot,” Parsons said.
According to current ARP guidance, investments in water and sewer infrastructure could be funded with allocations, potentially opening up some interesting discussions as residential and commercial growth have increased pressure on existing resources in Moore County.
ARP funding can also be used to improve broadband infrastructure. That could potentially fill in any gaps left after other federal grant-funded programs are completed in the more rural stretches of Moore County.
State and local governments also have the option to transfer funds to private nonprofit groups, public benefit corporations involved in passenger or cargo transportation, and special-purpose units of state or local governments, but only as allowed under state law and state constitutional provision.
Pinehurst, Moore County’s largest municipality, is set to receive the largest outlay of stimulus funding, estimated at $4.86 million. Village Manager Jeff Sanborn said that “sounds like a lot, but at the end of the day, we may not have a lot of qualifying uses for it at the local government level.”
He said there are provisions for revenue offsets pre-COVID and post-COVID, “so we may be able to use some of that for things like the Fair Barn, the horse tracks, parks and recreation programs, and maybe sales tax.”
Like other areas, Pinehurst’s sales tax revenues have come in higher than were anticipated. But otherwise, Sanborn said there may not be a lot of significant potential to use the funding for municipal needs.
“I would differ in my interpretation from most other people who have responded so far, in thinking that there are no strings attached to this. I think there are a lot of strings attached, and that it’s very constrained,” he said.
Aberdeen Town Manager Paul Sabiston said, like everyone else, the town is happy to receive the money but looking for more guidance on how it can be spent. The town is expected to receive around $2.34 million.
“We’re hoping we’re able to spend it on general infrastructure, in addition to normal costs for the water and sewer system — the type of projects that would normally take years to fund. This money is meant to stimulate the economy; we want to get the money into our local economy,” said Sabiston.
“We haven’t had real conversations about it yet and we don’t have all the information, so I don’t want to say anything too concrete. But it could be used for park development, small and large; downtown area expenditures, like parking or finishing sidewalks,” he added.
In addition, Sabiston said the funding could also support downtown businesses “by making a more attractive venue for them.”
The town of Carthage is set to receive $750,000, or what would normally be about 20 percent of its operating budget. Town Manager Thomas Robinson said that the decision will be made by the town’s Board of Commissioners, but there are several areas these funds could go.
“We’ve got a lot of needs, particularly needs for streets that we’re way behind on where we should be on paving streets,” Robinson said, adding that following guidelines set out for spending will also be a factor on how it is spent.
Socking it away in savings is another option for the town.
“We’re about 33 to 35 percent fund balance to the general fund. We set a goal to have it at least at 50 percent. Most jurisdictions our size have it around 75 percent,” Robinson said. “We’re in good shape financially, but not where we would like it to be trying to take care of the needs of the town.”
The first half of the funding will come to the town in the middle of June. That happens to fall late in the budget planning process and close to the end of the fiscal year. Budget planning will also include the influx with the idea of the funds being available for the start of the new fiscal year.
“When doing our budget and looking at our capital needs, we will look at that and have that considered with the other needs we’ve got and the revenues we have available to meet the needs of our citizens,” Robinson said.
Robinson also had his thoughts — as an individual — on what this money going to local municipalities across the country could mean going forward.
“I’m concerned that we are mortgaging the future of our children big time. It just adds to the tax burden,” he said. “There’s no free money, everything costs. Not in the short term, but in the long run this could be a burden for everybody.”
As it relates to schools, the ARP will bring Moore County Schools’ a third round of COVID-19 relief since the start of the pandemic. The latest federal stimulus includes $3.6 billion for all of North Carolina’s public schools, and the State Board of Education is expected to finalize each district’s portion of that funding in the next month.
The state has put specific conditions on the use of prior Elementary and Secondary School Emergency Relief allocations to individual school districts. Earlier this month the State Board of Education approved distributions from the December federal stimulus that included $7.9 million for Moore County Schools.
Superintendent Bob Grimesey said that districts are being advised to expect a larger payout from the most recent stimulus plan, but that otherwise they are “nowhere near getting anything specific.” As it stands he intends to present spending plans for at least the $7.9 million recently announced to the Moore County Board of Education in early May. But those plans will, to some extent, depend on the amount and constraints on the next round of COVID-19 relief funding.
“Clearly it’s focused on COVID relief, but the preeminent priority will be learning recovery. Our focus is going to be on the status of our students relative to where they would have been if not for all of the disruption that they’ve encountered since March of 2020,” said Grimesey.
“We will have a more definitive picture of that when your students take their EOGs and EOCs at the end of this year. We have a lot of other metrics that we’re employing with our intermediate assessments that give us some idea, but we really won’t know until the end of the year. So we just make assumptions that we’ve got a lot of work to do to sort of help our students recover as much as possible what they would otherwise have gotten.”
The schools will have until Sept. 30, 2023 to spend money from the second round of ESSER funding outlined earlier this month. In addition to the expenses related to safely moving students back to campus and minimizing spread of the coronavirus in school buildings, those recent school relief funds are targeted toward helping students regain their academic footing after a turbulent year.
Grimsey anticipates that funds trickling down from the American Rescue Plan will come with a late 2024 expiration date. The school system’s ultimate plan for spending those funds could ultimately include building improvements, upgraded technological infrastructure and added personnel to support students’ social and emotional well-being. That all depends on what strings are attached to the latest batch of federal funding.
“Last summer was just about crisis intervention. This is now about crisis recovery, and those are two entirely different conversations,” Grimesey said. “There’s a lot more money there than just buying masks. We’ve got to be very mindful about using that money in the ways it’s intended to be used to help our students with learning recovery.”