What's the holdup in Kansas? State, cities sitting on $8 billion in federal COVID aid.

Andrew Bahl
Topeka Capital-Journal
U.S. President Joe Biden signed the American Rescue Plan Act of 2021 on March 11 to providing assistance to states, counties and cities impacted by COVID-19. Kansas got $1.6 billion in funds but has generally not made plans on how to spend the windfall.

Life is good in Lakin, according to city administrator Michael Heinitz. 

While Kearny County, where Lakin is the county seat, has reported a smattering of COVID-19 cases in recent weeks, there are far fewer there than in other more populated corners of the state.

The local economy is humming, Heinitz said, and the city has ample reserves on hand to handle any new projects which might arise.

That's why the town of 2,300 made the unusual decision to refuse federal funding under the American Rescue Act, which pushed out aid to states, counties and cities nationwide.

While most state and local governments across the country saw the trillions of dollars rolling in from Washington, D.C., as an opportunity to shore up infrastructure, fight the COVID-19 pandemic and help local businesses, Lakin considered the $300,000 it was due to receive to be more trouble than it was worth.

Some had concerns the town's staff wouldn't be able to cope with the paperwork the funds demand, as well as concerns the federal government would impose onerous requirements in the future as a condition of using the money. But the overriding concern, Heinitz said, was the federal taxpayer dollars weren't needed in the city.

"If somebody else needed the money, it could go to them instead of us," Heinitz said.

Lakin is atypical, with only a small slice of Kansas municipalities declining their share of federal relief dollars. But it points to a difficult terrain for the state and local governments, who are weighing how best to use a windfall many didn't expect — and some said wasn't needed.

Larger municipalities are getting tens of millions of dollars — if not more — prompting debate about where the money should go. The state has barely moved on allocating $1.6 billion in direct aid from Washington.

Smaller governments, meanwhile, are increasingly finding themselves hamstrung by a litany of rules and reporting requirements. Many, like Lakin, have limited full-time staff to keep on top of the paperwork and some have been forced to look to outside consultants to help them cope.

"A lot of the criteria was designed for big city monetary use," said Jason Wells, chair of the Wichita County Commission, a rural western Kansas community of farmers and ranchers. "It wasn't designed for our 1,200-person town."

And governments of all sizes remain frustrated that the U.S. Treasury Department hasn't been quicker to provide a better sense of what the funds can be used, with officials hesitant to act out of fear that they will make a wrong turn, forcing them to repay the funds.

"It takes city council meetings. It takes community input. It takes a lot of things that take time to discover what you're going to be able to spend the proceeds on," said Emily Brock, director of the federal liaison center at the Government Finance Officers Association. "And so I think that there is natural hesitancy in spending the proceeds because everybody wants to be certain."

State slow to move on $1 billion-plus in funds

State and local governments in Kansas are in line for $8.6 billion from the American Rescue Plan Act, passed by Congress in December.

If this feels like deja vu, in many ways it is.

The state also received $18 billion from the CARES Act last March, with local governments receiving a significant cut of that. All of those funds have been spent already, with most going to grant programs to support businesses, health care providers and individuals affected by the pandemic.

With ARPA, things are slightly different. While much of the money is earmarked for specific uses, such as housing and rental assistance or child care, there is a $1.6 billion pot of money for the state to use for a much wider range of purposes. Cities and counties get a cut of the action, too, with $1 billion in funding heading their way.

At the state-level, the process for doling out federal aid can be complicated — Kansas is one of only a handful of states that isn't using the normal appropriations process to sort out how the funds will be used.

A panel of officials on the Strengthening People and Revitalizing Kansas executive committee appointed by Gov. Laura Kelly and Republican legislators are tasked with reviewing potential uses for the funds. They then make recommendations to the State Finance Council, a committee of top legislative leaders, which is chaired by Kelly and has final say.

Kelly has already landed in hot water with Republican legislators for allegedly spending some of the federal aid without their say-so. The governor's office has argued the spending, which included passing along ARPA money to small cities, was allowable — but that hasn't stopped top Republicans from threatening legal action.

The SPARK executive committee has met just a few times since it was formed earlier this year. About $500 million of the state's aid monies are already earmarked for the fund — which pays out unemployment benefits — and more money was distributed this week to fund bonuses for nurses. Roughly $1 billion is still sitting around untouched, however.

Department of Administration Secretary DeAngela Burns-Wallace noted there is less of a hurry in figuring out a spending plan — state and local governments have until 2023 to report to Washington how they are planning on using the money. This is a welcome change from the CARES Act, when officials effectively had nine months to spend all the money.

Burns-Wallace said the holdup was determining if there should be a broader group of stakeholders to give input to the SPARK executive committee and, if so, what that should look like.

Still, some states have already figured out where a good chunk of the funding will go. Tennessee, for instance, has allocated about half of its funds on sewer, water and broadband infrastructure. Colorado used hundreds of millions of dollars to plug holes in its most recent budget.

Rep. Troy Waymaster, R-Bunker Hill, and chair of the House Appropriations Committee, said the delays in the process in Kansas were mystifying. 

"We're kind of at a standstill," Waymaster said. "And if that's the process ... and it's just going to be the executive committee, well, the executive committee needs to step up and actually start meeting and discussing where they think this money is better fit for the state of Kansas."

Counties, cities wait anxiously for guidance as COVID-19 rages

In many jurisdictions, the ongoing rise of the delta variant and the corresponding increase in COVID-19 cases has made the pandemic a live issue in a way many didn't expect months earlier.

In Pottawatomie County, the county commission voted to use $100,000 to help hire more staff at the local health department.

Leslie Campbell, the health department's administrator, said the move was vital, as the agency only has two full-time nurses, plus two administrators. Those workers were not only being asked to handle routine public health work but also give out COVID-19 vaccines and help local schools test for the virus.

And with the Kansas Department of Health and Environment currently offering less support for the department's contact tracing, staff had to do that as well.

"They don't want to work every weekend," Campbell said. "Originally the job descriptions didn't say we had to work seven days a week, doing all of these activities. And so bringing on some extra staff to help with that stress is really going to be important."

One of the broadest categories where ARPA funds can be used is in direct COVID-19 response, such as helping support county hospitals or long-term-care facilities or providing personal protective equipment to workers.

Other allowable expenses are a bit trickier. Governments can't use the funds for pension payments or to pay down debt but can use them for a host of other items, ranging from sewer projects to supporting local businesses.

But most of what lawmakers know is based on preliminary guidelines released by the U.S. Treasury Department in the spring. Fuller guidance is expected to come soon, but it is unclear when that may happen, leaving many local governments unsure of which way to turn.

The wrong decision could mean the money will have to be paid back to the federal government, something no local official wants to risk. But absent any further information, counties say it is hard to start sounding out potential ways to use the funds.

Shawnee County commissioners, including chairman Kevin Cook, are still reviewing how to spend the county's share of federal COVID-19 relief money, as they wait for guidance from the U.S. Treasury Department.

In Shawnee County, officials wanted to use a sliver of their money for building projects but had to back off over fears the federal rules might change.

"Until we have further guidance regarding ARPA funds or other resources, it’s hard to make those allocations without knowing where those will go,” said Kevin Cook, who chairs the county commission.

Dave Jones, chair of the Finney County Commission, pointed to additional confusion over a provision preventing the money from being used to pay the salaries of county workers — unless they work in public safety of public health.

"It sure as hell would be nice to know where we stand and how we're going to get to where we're headed," he said. "We've got an itch for more information."

Dave Jones, right, chair of the Finney County Commission, says the county needs more information in order to distribute COVID-19 funds.

Counties look for help as they way relief spending plans

Even without help from the feds, local governments are starting to brainstorm potential uses of the money anyway. 

In Harvey County, Commissioner Chip Westfall said they were waiting to get more public input before moving forward.

But he already pointed to a desire to expand broadband access, something expected to be high on the wish list for many lawmakers across the state.

"Even being between Hutchinson and McPherson and Newton and having an interstate run through us, we still have dead digital zones out in the county," Westfall said. "So we will be looking to help companies, schools and libraries, to enhance their services."

In Finney County, officials have moved forward with soliciting a contractor to help them track their share of the aid, as well as help with filing the required quarterly reports to the federal government.

That is likely to be a popular option, with many counties having limited full-time staff to sort through the dizzying array of requirements dictating how the money is used. These firms typically take a cut of the overall funding to pay for their services, creating a nationwide cottage industry for supporting short staffed governments.

"There is definitely a burgeoning business right now, consulting for ARPA, that's for sure," said Brock, of the Government Finance Officers Association. "I tell ... members all the time to be very careful about that. Because if they're promising one thing and underdelivering, then you're worse off than when you started."

But even with outside help, many counties still have anxiety about the process.

Even though they theoretically have years to make up their minds on how to spend their windfall, Bruce Chladny, executive director of the Kansas Association of Counties, said officials don't want the issue hanging over their heads any longer than necessary.

"They don't want to sit on this money trying to figure out what we're gonna do with it eight months, 12 months, 18 months from now," Chladny said. "I think a lot of them are just like, 'I want to get it out the door and be done with it.'"

Andrew Bahl is a senior statehouse reporter for the Topeka Capital-Journal. He can be reached at abahl@gannett.com or by phone at 443-979-6100.