Treasury broadens COVID relief uses for states, localities

State and local governments will have greater flexibility to spend $350 billion of federal COVID-19 aid under new rules from President Joe Biden's administration.

The revised rules mean that most cities and counties will be free to spend their entire allotment on any government services without having to prove they lost revenue during the pandemic. The rules also allow spending on more types of construction and a wider range of high-speed internet projects, among other things.

The final U.S. Treasury Department rules come nearly 10 months after Biden signed the massive $1.9 trillion American Rescue Plan that included aid for state, local and tribal governments. The money was intended to help shore up their finances, pay the ongoing costs of fighting the virus and invest in longer-term projects to strengthen communities.

But some city and county officials had complained that the Treasury's initial guidelines, issued last May, were too rigid. In addition to pressing the Treasury for changes, local government groups also had been lobbying Congress to intervene with relaxed criteria.

The Treasury said it was responding to the feedback by allowing “broader flexibility and greater simplicity in the program.”

“As the Delta and Omicron variants have illustrated, pandemic response needs will continue to evolve," Deputy Treasury Secretary Wally Adeyemo said in a statement Thursday when the agency released its rules. "These funds ensure that governments across the country have the flexibility they need to vaccinate their communities, keep schools open, support small businesses, prevent layoffs, and ensure a long-term recovery.”

One of the most significant changes will let state and local governments claim up to $10 million of revenue losses during the pandemic without having to prove it. Federal money used to...