Why the Strings Attached to Federal Funds Are Worth It

March 22, 2022

Luke Bosso

Last year, the federal government offered $3.07 billion to Indiana units of government through the American Rescue Plan Act (ARPA) to help mitigate the financial effects of the pandemic. This optional funding gives state and local officials the freedom to invest these dollars in infrastructure, critical public health programs, and other areas of need. But local governments and communities in the state aren’t spending the money.

The strings attached to the funding and confusion about the rules are making leaders hesitant to spend the funding. Many communities across the state are still trying to figure out how to correctly spend the money or decide if it’s even worth it. But here’s why they should reconsider.

Prior to the pandemic, Indiana was often cited as a model of fiscal responsibility and economic growth, one of a few that have routinely been placed in this category over the past 10-15 years. Indiana continues to break records in job creation and capital investment, make investment in critical programs, and fully fund its road plan. Additionally, Indiana has a massive budget surplus, with nearly $5 billion in reserves.

But, the pandemic has leveled the playing field, and states like California now have a $31 billion budget surplus. Our neighbor to the west, Illinois, which was close to a default, now has a fiscal life preserver. Suddenly, Indiana’s big lead over other states is gone.

This begs the question: How can Indiana, with a history of rejecting federal resources because of the accompanying requirements, compete for jobs and growth in this environment?

Here’s how: We have to look beyond national politics and party lines and do what’s best for our community – our home. By using the available federal ARPA funds, our community leaders can fuel community and economic development. Investing these funds into future-focused programs can spur economic growth for decades in the future, ensuring Indiana remains a top-tier state for economic investment.

Every locality in our state has a wish list of growth initiatives. In some rural areas of our state, communities are already planning to expand broadband or increase wastewater storage capacity. Other areas of the state are considering investments in longer-term projects such as establishing microloan programs, affordable housing plans, and much more.

The big consideration is what you want your community to be in 20 years. How are you generating new economic growth, and how are you going to prolong that growth? Why would someone want to live and work in your community? How do you get people to stay?

This is the time to get creative and maximize the potential of your community. And the ARPA funds can help your community get there.

Of course, the ARPA funds are much more restrictive than they should have been. After all, the one-size-fits-all approach to allocating the funding – based in part on population – overlooks rural communities. But there are still “right” ways for every community to take advantage of the funds, whether you agree with how the funds were made available or not. Opportunities for funds like these rarely present themselves to local governments, and there’s still plenty of money on the table.

However, the strings attached to the funds are so burdensome that communities are starting to think that it’s not worth the time. To that, I would say that yes, there are a lot of strings attached to the ARPA dollars, but the purpose – the betterment of our communities – is worth the administrative cost. Will it take some work? Yes. Will it be worth it? Absolutely.

As a state, we are at a crossroads. The choices we make today will impact our communities for decades in the future. Let’s not let our politics stand in the way. Consider taking the ARPA funds and use them to make our communities stronger and more vibrant – for ourselves, our children, and for our Indiana home.

Contributing Advisors