Minnesota is expected to receive about $8 billion in federal funds as part of the American Rescue Plan Act, and about $2.12 billion of those funds will go to local relief, divvied out amongst the state’s county, city and other municipal governments.

Last week, administrators of McLeod County and local towns and townships gathered for an informational meeting to discuss the funds, specifically about eligible expenses.

Although the funds were supposed to have been sent within 60 days after the signing of the bill on March 11, the money had not yet been received as of June 7. But the county estimates it will receive about $6.97 million, and Hutchinson City Administrator Matt Jaunich believes the city will receive between $1.3 and $1.6 million. All other McLeod County cities and townships are expected to receive funds, with estimates ranging between $12,000 and $632,000, depending on population.

McLeod County Administrator Sheila Murphy said that many Minnesota townships, cities and counties did not spend all their funds from the CARES Act last year, and so that money went back to the state. She said a key reason for having the meeting last week was to make sure local governments know how to use the money so it is spent locally.

“We don’t want to see people not access that funding that is available to them, so we want to find out and help people understand what is eligible, what can we spend this money on, what is everyone else doing … and to make sure we all know how to do that so it doesn’t go unspent,” she said.

One area where the funds are not eligible to be spent is on schools. Minnesota public schools are already expected to receive about $1.32 billion of their own relief funding. The money is also not allowed to be used to reduce net tax revenues, or to be saved as reserves.

According to Murphy, the objective of the funds is to support COVID-19 response efforts, replace lost revenue for municipal governments, support economic stabilization, and address systemic public health and economic challenges. To those ends, some eligible uses for the funds include:

  • Supporting public health expenditures, such as funding COVID-19 mitigation efforts, medical expenses and behavioral health care.
  • Addressing negative economic impacts caused by the pandemic, such as harms to workers, households, small businesses and other industries.
  • Replacing lost public sector revenue by using funding to provide government services to the extent of the reduction in revenue experienced due to COVID.
  • Provide premium pay for essential workers.
  • Invest in water, sewer and broadband infrastructure.

Murphy said that within these categories, municipalities have broad flexibility to decide how to best use the funding to meet the needs of their communities. But she cautioned that sustainability is a key concern when considering programs. Municipalities should consider how a program such as premium pay for essential workers would be paid for after the federal funds are gone.

Whenever the funds arrive, recipients will have until the end of the year to spend the money, a considerably longer period of time than was given for the CARES Act. Until then, local governments will have to begin thinking about how to best use their share of the relief funds.