PROVIDENCE, R.I. (WPRI) — Rhode Island leaders suddenly have an unfamiliar challenge on their hands: how to spend a windfall of cash.
While President Biden’s newly enacted $1.9 trillion American Rescue Plan Act includes a host of headline-grabbing provisions — from $1,400 stimulus checks to expanded child tax credits — it’s also going to send an enormous amount of money to lower levels of government nationwide.
In Rhode Island, officials are still totaling up exactly how much will be flowing to the state government, municipalities and K-12 school districts. But it’s already clear the amount will be in the billions, and Target 12 has learned it could approach or even surpass $3 billion when all is said and done.
Rhode Island Public Expenditure Council President and CEO Michael DiBiase, whose organization monitors state spending, said the funding gives local leaders “a once-in-a-generation opportunity” if they take advantage of it.
“It’s a massive amount of money for a state like Rhode Island,” DiBiase told Target 12.
Rhode Island U.S. Sen. Jack Reed, a Democrat and senior member of the Senate Appropriations Committee, has championed generous federal funding for states and municipalities throughout the pandemic, and helped negotiate the parameters of the American Rescue Plan allocation.
“The whole purpose,” Reed told Target 12, is to give Rhode Island “a running start” in its recovery from the crisis.
Attention is now turning to how the money can and will be spent. Local leaders are still awaiting detailed guidance from Washington about its distribution, including any additional strings that will be attached by the Biden administration.
Still, it’s already clear that there will be significantly more flexibility around the American Rescue Plan money than there was with the $1.25 billion Rhode Island received last year from the CARES Act’s Coronavirus Relief Fund. Much of that money was allocated to direct costs tied to the pandemic, and states were initially told it had to be spent by last December or forfeited. (That deadline has since been extended.)
The unprecedented scale of the Rescue Plan’s spending on states and local communities has drawn parallels with President Franklin D. Roosevelt’s New Deal of the 1930s. The effects of FDR’s program remain visible today in Greater Providence, where some sidewalks still bear markers that show they were built by the Works Progress Administration, one of the New Deal agencies.
Yet DiBiase warned the new funding will not have a similarly lasting effect on Rhode Island unless officials use it strategically.
“There will be a lot of competing demands for this money, and so it’s just going to take real leadership,” he said. “Otherwise we will have — it won’t be bad, because I think people will spend it in the right places — but it just won’t make a major difference.”
Breaking down the numbers
It’s no easy task to nail down how much money Rhode Island is eligible for under the American Rescue Plan Act, which runs to 628 pages.
The law appears to contain at least three dozen or so funding streams that will automatically send money to the state, its cities or its school districts. Some of those are comparatively small, such as $50,000 for a long-term care ombudsman.
But some of the big numbers are already known.
The largest pots of Rescue Plan money for Rhode Island will flow out of the newly created Coronavirus State and Local Fiscal Recovery Funds, which are direct federal aid for governments.
The state of Rhode Island is slated to receive $1.1 billion from the Coronavirus State Fiscal Recovery Fund. According to Reed’s office, the money “may be used to provide assistance to households, small businesses, non-profits, aid to impacted industries such as tourism, travel, and hospitality, investments in water, sewer, and broadband infrastructure, and to provide premium pay to frontline workers.”
During a taping of WPRI 12’s Newsmakers last week, Gov. Dan McKee said he planned to take a different approach from his predecessor Gina Raimondo, who allocated the $1.25 billion from the CARES Act largely on her own with limited input from state lawmakers.
“We’re going to collaborate with the General Assembly,” McKee said. “I was on the record last year saying that should have been happening then. So it’ll happen in some form now. We’re working our way through that. … I would think by mid-April we’ll have a plan on those.”
“It’s a lot of money,” he added. “I think that the state can get a lot stronger financially, as municipalities can, as a result of those dollars. So you want to make sure you use it wisely. You don’t want to be spending those dollars and then find out that you have to spend them again because you have to repeat the expense — you can’t, like, layer it into the budget on ongoing expenses.”
Then there is the municipal money.
Rhode Island’s 39 cities and towns are set to share $542 million from the law’s Coronavirus Local Fiscal Recovery Fund, with spending parameters that mirror those for the state fund. But the formulas Congress used to divide up the money mean the amount of funding will vary widely.
Under the first formula, just over half the entire pot of municipal money will go to Rhode Island’s six biggest cities: Providence ($131 million), Pawtucket ($46 million), Woonsocket ($33 million), Cranston ($27 million), Warwick ($24 million) and East Providence ($19 million). The drop-off is steep from there: Coventry, the state’s seventh-largest community, is only getting $3.5 million; New Shoreham gets $100,000.
Then, however, there is a second formula that will distribute $205 million of the municipal money based purely on population. (In other states that money is going to county governments, but since Rhode Island doesn’t have those, it will flow straight to the cities and towns instead.)
Official numbers for how much each city and town will get from the $205 million pot haven’t been released yet by the federal government. But a back-of-the-envelope estimate suggests about $194 per resident, so the additional totals would roughly range from $35 million for Providence to $161,000 for New Shoreham.
And there is the K-12 schools money.
The Rescue Plan allocates Rhode Island $415 million through the Elementary and Secondary School Emergency Relief Fund, according to the U.S. Department of Education. At least $374 million of that amount must be distributed directly to local school districts, with the state allowed to keep up to $42 million.
The law also requires that at least 20% of the schools funding is used to help students who fell behind because of the pandemic.
Those three buckets of Rescue Plan funding — state aid, municipal aid and schools aid — total about $2 billion alone, and together they aren’t even all the sizable pots of money. Other funding for Rhode Island includes $202 million to assist renters and homeowners; $113 million from the federal Coronavirus Capital Projects Fund; $90 million for the state’s three public colleges; and $57 million for childcare.
None of those totals include two of the largest sources of funds that will come to Rhode Island, because they are flowing directly into households: the $1,400 stimulus payments for most adults, as well as the expansion of the child tax credit for parents.
DiBiase said he thinks that one of the biggest risks tied to the Rescue Plan money is that it doesn’t get used as effectively as it could be.
“I think it’s more likely that we spend it in a lot of different places that please a lot of different constituencies and interest groups, but maybe doesn’t really fundamentally change the future for very many people,” he said.
Buildings, online marketplaces, sewers
Local leaders emphasize that there is no rush to spend the new federal money: the law gives them until the end of 2024 to allocate it. But with the first tranche of cash expected to arrive in the state by May, mayors have already begun discussing how to handle it.
“The process is extremely important,” said DiBiase. “We need to broadly engage Rhode Islanders.”
The Rhode Island League of Cities and Towns has begun providing information to municipalities about what to expect, and is spearheading coordination across municipal lines, partly because of the significant compliance requirements that come with federal funding. The McKee administration is also examining how to work with municipalities and school districts on the project.
Noting that Rhode Island cities and towns rank near the bottom nationally for capital spending, DiBiase said, “That’s why our schools were falling down, that’s why a lot of roads are not very good, and I think this is a big opportunity for them to catch up on a lot of infrastructure.”
The mayors of the three cities set to receive the biggest windfalls — Providence’s Jorge Elorza, Pawtucket’s Don Grebien and Woonsocket’s Lisa Baldelli-Hunt — all told Target 12 it is too soon to offer any definitive plans, particularly since they are still awaiting the Biden administration’s formal guidelines for the funding.
Echoing McKee, they do agree on what they shouldn’t do with the money: create new permanent programs that would have to be funded out of their regular budgets once the federal cash runs out. Baldelli-Hunt said that was a problem she recalled seeing after the Obama administration stimulus passed, notably with new education programs created as part of that law’s Race to the Top initiative.
“Those are the unintended consequences when they’re not paying attention to those things,” she said. “Then what happens is something good like this creates a problem, and then you’re looking at deficits.”
On a population basis, Woonsocket appears poised to reap the biggest rewards from the Rescue Plan’s municipal funding. A Target 12 analysis suggests the city could receive nearly $1,000 per resident when both pots of municipal money are allocated — far more than the roughly $300 per resident many other communities are in line to get.
Baldelli-Hunt said she’s had some preliminary conversations with City Council leaders about where the money should go. Her ideas include potentially constructing a new municipal or public-safety complex in order to retire some of the city’s older buildings. She is also considering blight removal in order to spur more single-family home construction.
“There are a number of projects that we could undertake,” she said. “It’s just a matter of what we can use the funds on.”
In Providence, Elorza is looking at ways to help small businesses and restaurants that have struggled to build a digital operation as activity shifted online due to the pandemic. He said he sees big companies like Amazon and Uber Eats getting “all the spoils” when they partner with mom-and-pop enterprises.
“So what we’re very interested in is, can we create those online marketplaces, and not only provide the resources such as the infrastructure — the computers and printers — for people to establish it, but also do some of the workforce training so that they know how to use the technology and take advantage of going online,” Elorza said.
He added, “It’s actually really complicated. So perhaps we can invest in that, to move more and more of our small businesses and our restaurants to online marketplaces that really don’t fleece them with fees, and instead they can reinvest their earnings back into their businesses.”
In Pawtucket, Grebien is contemplating putting some of the federal money to work below the city streets.
“We have some sewer stuff that we’ve been putting off,” he said, noting the bill specifically authorizes spending on water, sewer and broadband infrastructure. Expanding 5G network availability is another option, he said.
“We understand that this is a one-timer, and we don’t want to squander it away,” he said. “How do we best impact the community, both, you know, the short-term piece and then that longer-term piece and investment so people still continue to move in?”
Ted Nesi (email@example.com) is a Target 12 investigative reporter and 12 News politics/business editor. He co-hosts Newsmakers and writes Nesi’s Notes on Saturdays. Connect with him on Twitter, Facebook, LinkedIn and Instagram