The Department of the Treasury described Replacing Lost Public Sector Revenue, one of the four described subcategories of the Coronavirus State and Local Fiscal Recovery Funds Program (SLFRF), as the “most flexible eligible use category under the SLFRF program.” While the entirety of SLFRF is designed to help state, local, and Tribal governments in the United States recover from the wide-reaching impacts of COVID-19, the Treasury designed the subcategory of Replacing Lost Public Sector Revenue to mitigate revenue loss non-Federal governments experienced due to COVID-19.  

Local governments can use funds awarded under this category for “government services,” encapsuling any service traditionally provided by the government. This includes, but is not limited to:  

• Health services 
• Environmental remediation 
• Provisioning of police, fire, and public safety services 
• Infrastructure projects, such as road building and maintenance 
• General government administration, staff, and facilities 
• Construction of schools and hospitals 

There is one important qualifier to determine the revenue awarded under this subcategory—funds may only be used in an amount equal to or less than the revenue loss experienced by the government due to COVID-19. There are two options to determine revenue loss, as described in the Final Rule of the SLFRF published by the Treasury in January 2022. Awardees may choose one and cannot switch once they make their election. 

1. “Standard allowance” 
2. Calculating actual revenue loss through a formula provided in the Final Rule  

The “standard allowance” option allows governments to receive funding in a manner similar to a standard deduction when filing taxes – the option of one standard allotment for all cases. For the “standard allowance” of Replacing Lost Public Sector Revenue, recipients receive $10 million to spend on government services during the timeframe of SLFRF (described in our overview article, linked here). The Treasury calculated this total through analyses of revenue loss across states and localities, and they suggest this option for “SLFRF’s smallest recipients.” 

The option to calculate actual revenue loss provides prospective recipients with another avenue through which to appeal for SLFRF funding under its first enumerated subcategory. Revenue loss is to be calculated across the years of 2020, 2021, 2022, and 2023. Recipients may choose if they wish to calculate revenue loss by the last day of each year (i.e., December 31) or by the end of each respective fiscal year (i.e., September 30). Another article will detail the intricacies of calculating revenue loss through the specific formula provided within the Treasury’s Final Rule.  

Funds under this SLFRF subcategory provide a wide range of flexibility. “Government services” encompasses a wide range of uses for fund allocation. Recipients can choose the standard allowance of $10 million or can calculate actual revenue loss, whichever suits them best. Moreover, funds under this category are streamlined in terms of reporting and compliance compared with other SLFRF categories. Through this subcategory, local governments have access to millions of dollars of funding for a vast array of uses, making the options near limitless.