Budget & Tax

Billions to spend with limited guidance

July 22, 2021

Ray Carter

Approximately $11 billion in federal bailout funding is being dumped into the state of Oklahoma as the result of the passage of the federal American Rescue Plan Act (ARPA) after accounting for money going to everything from private citizens to state government to local governments to other organizations, lawmakers were told at the inaugural meeting of the Joint Committee on Pandemic Relief Funding.

That money is coming even though Oklahoma state government revenue has almost fully rebounded to pre-COVID norms. Yet the state cannot use the federal money for some of the state’s most pressing needs.

“This is not for funding pensions,” said Melissa Houston, whose firm 929 Strategies is a contractor working with state officials to develop a plan for ARPA funds. “This is not for funding ‘rainy days.’”

Oklahoma has billions in unfunded pension liabilities that cannot be addressed with the federal bailout funds. State officials have also sought to raise state savings to prepare to better deal with future downturns. So far, they have set aside more than $1 billion, but Gov. Kevin Stitt has said $2 billion is required for true financial stability.

Rather than address those needs, Houston told lawmakers that the “basic purpose” of the federal bailout funds is “to respond to the public health emergency” of COVID-19 and its associated impacts.

The federal COVID funds come as the worst of the pandemic appears behind the state and many of its associated financial costs have already been addressed with prior rounds of federal bailout funding.

In addition, the federal funds may be spent years after the effective conclusion of the pandemic. States are required to have all available federal bailout funding obligated by December 2024 and to have spent ARPA funds by 2026.

State lawmakers have direct oversight of $1.8 billion in federal bailout funds, officials said, but will have to comply with federal regulations that remain half-baked in some instances and face financial “claw back” penalties if federal officials conclude that money was not used appropriately

Mark Tygret, director of the Oklahoma House of Representatives fiscal staff, told lawmakers that ARPA funds designated for infrastructure must be spent on projects that align with federal guidance that is currently all but nonexistent.

“We’re still waiting on anything other than two paragraphs on the website,” Tygret said.

In other instances, processes involve massive amounts of minutia.

“Many of these programs, or structural distribution mechanisms, already exist,” Tygret said. “Many of them are going to be working under a CFDA number, the Catalogue of Federal Domestic Assistance, the 3,761-page document that anybody wants to read it with me, help yourself.”

And federal guidance keeps changing.

“Senator (Roger) Thompson was really fond of this book that I put together with all of the ARPA information but, Senator Thompson, I want to say that I’ve had to start creating addendums, because things keep coming out on a monthly, sometimes weekly basis,” said Mike Fina, executive director of the Oklahoma Municipal League. “Questions get answered, and we’re trying to piece it all together.”

At one point, Houston noted that state officials were having to rely on “an interim rule that continues to evolve, and some of the new reporting that came out put a lot more of the burden on the state.”

Amanda Rodriguez, chief financial officer for the State of Oklahoma, suggested that it is impractical and perhaps impossible for the Joint Committee on Pandemic Relief Funding to provide more than broad guidelines for ARPA fund usage, noting lawmakers won’t have time to provide individual project review.

“If we all tried to review each one of these individually, as a committee, I would think it would be a very slow process,” Rodriguez said.

Throughout the meeting, presenters noted the extreme volume of federal spending, which critics say is playing a role in fueling inflation.

“It’s an awful lot of money,” Tygret said.

“There’s, again, so much money circulating around,” Rodriguez said.

While the federal government has yet to provide clear guidance on use of the bailout funds and has given states nearly five years to spend ARPA money, there’s one area where federal officials are in a rush for detail: state plans.

The deadline for Oklahoma government to provide a state plan for spending ARPA money is due in just over one month on Aug. 31.