December 31 is the deadline for states, cities, and municipalities to obligate their State and Local Fiscal Recovery Funds (SLFRF). The $350 billion program—part of the 2021 American Rescue Plan Act (ARPA)—has played an important role in rebuilding and sustaining public services over the last 3.5 years. However, the latest data show many recipient governments still have substantial sums left to obligate and, just as worryingly, some may mistakenly believe they have satisfied the obligation requirements even though they have not. Advocates, and all those interested in successful public services, should make sure their state and local government have plans to meet the obligation deadline.

As EPI has recently reiterated, the post-pandemic economic recovery is very much a success story, and that is in part due to SLFRF. It took a full decade for public-sector employment numbers to recover from the Great Recession, but SLFRF ensured that it happened in less than half that time following the COVID-19 recession.

SLFRF can be used in many ways—from recruiting and retaining workers to enhancing public health measures, building housing, installing broadband, and so much more. This flexibility has been key to SLFRF’s success, but also has created some challenges. In conversations with state and local advocates, policymakers, and researchers at EPI’s network of state and local think thanks, we have heard that policymakers in many governments have experienced a sort of “paralysis of choice,” unable to choose between the myriad good options available.

The time to choose is now. Any dollars not obligated by the December 31 deadline need to be returned to the U.S. Treasury (the funds don’t have to be spent until the end of 2026). Worryingly, the latest public data on SLFRF obligation and spending through March 31 suggest many state and local governments may not be on track.

Overall, states have obligated 86% and spent 62% of their funds. Seven states—Alabama, Arkansas, Connecticut, Kentucky, New Jersey, New York, and Utah—have obligated less than two-thirds of their funds. Four states—Mississippi, Oklahoma, South Carolina, and Tennessee—have spent less than 20% of their funds. There are also 49 large cities or counties—with populations 250,000 or higher—that have obligated less than 50% of their SLFRF, totaling $32.5 billion (see Table 1 at the end of this post). While the latest data may not capture more recent decisions, there is reason to be concerned.

Additionally, some states, cities, and counties may be mistakenly reporting items obligated that are, in fact, only budgeted. Obligation means “an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment.” That is to say, obligating funds requires taking specific steps to ensure the money is used as intended, and that those decisions are memorialized in a contract or subaward or some other documented fashion. Passing a budget that allocates SLFRF to a specific purpose—on its own—is insufficient to constitute obligation. (Please refer to this previous blog post for a more thorough discussion of obligation requirements.)

There is no easy way to tell whether a unit of government is correctly reporting obligations or whether it has made mistakes. Local news reports and communications with policymakers, however, suggest that this is a very real risk. This is not an accusation of malfeasance; rather, it is a worry that honest mistakes are being made that need to be addressed quickly.

It is imperative that advocates reach out directly to state and local policymakers and confirm that they have either properly obligated their funds or have clear plans to do so by the end of the year.