The American Rescue Plan Act’s Coronavirus State and Local Fiscal Recovery Funds (ARPA-SLFRF) represent a historic $350 billion investment to support state and local governments in responding to the economic and public health challenges of the COVID-19 pandemic. Local governments were given flexibility in how these funds could be spent. This study examines how local governments in New Jersey allocated and used their ARPA-SLFRF funds compared to those in other states, focusing on types of projects funded, fund obligation efficiency ahead of the December 2024 deadline, and the equity of funding distribution based on fiscal and socioeconomic factors. The analysis offers insights into ARPA’s effectiveness in addressing local needs and informs future federal aid programs.
Using various federal and state government data sources, this study finds that New Jersey local governments allocated a smaller share of ARPA funds to revenue replacement (40%) compared to other states (57%), while dedicating a larger share to public health, infrastructure, and public sector capacity projects. Spending patterns varied across government tiers. Tier 1 local governments in New Jersey, which serve larger populations and received the most ARPA funding, prioritized public health and public sector capacity more than their Tier 1 counterparts outside the state, which focused more on revenue replacement, economic impact, and infrastructure. In contrast, Tier 2 and Tier 5 local governments across all states, serving smaller populations and receiving less ARPA funding, were far more likely to allocate funds to revenue replacement, with over 70% of Tier 5 local government projects dedicated to this category. This suggests that smaller local governments may have faced greater fiscal pressures and used ARPA funds to sustain current services.
As of April 2024, New Jersey local governments had obligated a slightly larger percentage of their ARPA-SLFRF funds (84%) compared to governments in other states (82%). The most significant difference was observed among Tier 1 local governments, where nearly 90% of New Jersey funds had been obligated, surpassing the 81% obligated by Tier 1 governments in states other than New Jersey. These findings suggest that New Jersey, particularly its larger Tier 1 jurisdictions, progressed more efficiently toward meeting the December 2024 obligation deadline. Failing to obligate ARPA funds by this deadline resulted in losing the opportunity to spend those resources.
The study also finds that ARPA funds were allocated more generously to local governments with greater fiscal need. Local governments in the bottom 20% of median household income and those most economically distressed received about $175 per capita, while wealthier and less distressed governments received around $100 per capita. Larger and more densely populated local governments received significantly more per capita funding, with those in the most populous quintile receiving nearly $200. Municipalities with higher pre-pandemic revenue per capita received over $150 per capita, suggesting fiscal capacity is correlated with the funding distribution. Overall, these findings show that ARPA funds prioritized less affluent, more distressed, and larger local governments but also highlight disparities based on fiscal resources.
The study’s findings have two key implications for future federal aid programs. First, many local governments allocated ARPA funds in alignment with the policy’s primary goals—responding to the economic and health crises. This suggests that maintaining flexibility in future federal aid programs would enable local governments to tailor spending to their unique needs. Second, ARPA funds were allocated to more distressed local governments, demonstrating a potential model for future federal aid programs to ensure resources reach areas with the greatest need. Prioritizing these distressed areas in future federal aid could contribute to a more equitable and effective distribution of resources, helping to address disparities among local governments.