Will ARPA’s Local Fiscal Recovery Funds Advance Racial Equity?

July 15, 2022

Most cities named equity as a priority in their recovery plans, but strong leadership, community advocacy, and institutional equity infrastructure are critical to ensuring equitable investment choices.

By Fatimah Alkhaldi, Chidera Ihejirika, Eliza McCullough, Sarah Treuhaft*
Part of a joint research project by PolicyLink and the Institute on Race, Power and Political Economy at The New School

In May 2022, most municipalities across the country received their second and final tranche of local fiscal recovery resources from the 2021 American Rescue Plan Act (ARPA). Signed into law on March 11, 2021, ARPA provided an unprecedented $130 billion in flexible resources to cities and counties to spend over five years to address the immediate economic and health impacts of the p­­andemic and rebuild stronger, more equitable economies.

ARPA’s local recovery funds provided local governments with a singular opportunity to invest in advancing racial equity. Following the public outcry against police brutality and systemic racism after the murder of George Floyd in May 2020, many local elected officials acknowledged that current and historic local policies have contributed to racial inequities and pledged to prioritize equity going forward. At the federal level, the Biden Administration issued a day-one executive order that centered equity — “the consistent and systematic fair, just, and impartial treatment of all individuals, including individuals who belong to underserved communities that have been denied such treatment” — in all federal policies. 

Aligned with this mandate, the US Department of the Treasury (US Treasury) prioritized equity in its interim and final spending guidelines for the ARPA funds, encouraging grantees to target resources to the communities of color, tribal communities, and low-income communities disproportionately negatively impacted by the pandemic, and to “lay the foundation for a strong, equitable economic recovery…by addressing the systemic public health and economic challenges that may have contributed to more severe impacts of the pandemic among low-income communities and people of color.” 

Recognizing the potential for the ARPA investments to address long-standing inequities, as well as the risk of local policymakers not centering equity in their decision-making, PolicyLink and the Institute on Race, Power and Political Economy at The New School partnered to analyze the extent to which cities prioritized equity in their ARPA investments. This research builds upon the equitable investment framework shared in the May 2021 PolicyLink report, 10 Priorities for Advancing Racial Equity Through the American Rescue Plan Act: A Guide for City and County Policymakers.

To assess whether and how cities operationalized equity in their initial ARPA spending decisions, we analyzed the first performance reports that large cities were required to submit to the US Treasury by August 31, 2021, and a dataset on city ARPA allocations created by the Associated Press based on these reports. The reports asked grantees to describe how their strategy “prioritizes economic and racial equity as a goal, names specific targets intended to produce meaningful equity results at scale, and articulates the strategies to achieve those targets.” We reviewed these reports using a rubric that assesses equity performance across six arenas: 1) overall equity focus; 2) application of equity tools and institutional infrastructure; 3) community engagement; 4) use of equitable labor practices; 5) breadth and depth of equity investments; and 6) investment transparency/accountability. Of the 89 city reports submitted, we analyzed the 63 that included investment strategy narratives. At the time that these reports were due, 50 of the 89 cities had allocated some funding, seven had allocated all of their funds, and 32 had not made any spending decisions. 

In addition, we reviewed additional publicly available information related to the implementation of ARPA local fiscal recovery funds in these and other cities and counties, including news articles, public meeting records, and information shared online. And we collaborated with the Southern Economic Advancement Project to identify equity-focused investments in smaller Southern cities.

We will be releasing our full analysis in late summer 2022. This brief shares some initial observations from this research, which we hope can support cities and counties in making equity-promoting investments as they deliberate how to spend their remaining ARPA funds.

Did cities prioritize equity in deciding how to spend the funds?

Most cities named equity as a top priority, but some of those cities provided very little information about how equity would be prioritized. Nearly all of the cities (57 out of 63, or 90 percent) exhibited equity awareness and described some level of commitment to equitably investing their ARPA resources. Many acknowledged how the pandemic disproportionately impacted low-income communities and communities of color and/or exposed long-standing economic, social, and health-related inequities. The majority (40, or 63 percent) used or described planning to leverage data disaggregated by race to inform their decisions. 

Looking at some more specific ways that cities could demonstrate their equity focus — such as by describing specific racial inequities, following equity policies or principles, or setting specific equity targets — we found far fewer cities undertaking such practices:

  • Race-consciousness: 30 cities (48 percent), exhibited race-consciousness by naming how specific racial groups (e.g., Black, Latinx, Asian American, Pacific Islander, Native American, Indigenous, and other communities of color) have been negatively impacted by the pandemic and systemic inequities.  

  • Citywide equity policies: 15 cities (24 percent) referenced existing city policies — either ordinances or resolutions — that support efforts to dismantle systemic racism or require the city to center equity in their policymaking. These policies range from recent declarations of racism as a public health crisis (as in North Las Vegas) to long-term equity initiatives (such as Seattle’s Race and Social Justice Initiative).

  • Dedicated equity staffing: 21 cities (33 percent) referenced having or planning to have equity offices and positions dedicated to equity.

  • Equity principles: 17 cities (27 percent) described using equity-focused principles or goals to guide their spending plans. Some examples:

    • Boston prioritized closing racial and socioeconomic gaps in public health, wealth, and wages;

    • Seattle described a focus on eliminating race-based disparities;

    • Saint Paul named three strategic equity objectives: building a workforce that reflects the city’s demographics; diversifying its investments across communities; and improving its ability to co-create with the community;

    • Denver articulated four equity goals: being an inclusive employer; integrating an equity approach across its programs and policies; engaging the community; and using data to advance equity; and

    • Chicago laid out five principles, including investing in healing and tracking data to be accountable for equitable progress.
       

  • Equity targets: Despite the general attention that many cities paid to equity, only seven cities (11 percent) named explicit equity targets relating to closing gaps or achieving outcomes for specific groups or universally.

How did cities operationalize equity in their decision-making?

It is not enough for local governments to name equity as a priority; they must operationalize equity throughout their process of deciding how to allocate resources. Two critical ways that cities activate an equity lens are by using equity frameworks and tools to guide their choice of investments and by engaging the communities that are most impacted by inequities in deciding how to invest.

Use of equity frameworks and tools to guide investment decisions

Equity frameworks and tools take different forms, but they are all resources designed to help local government leaders to assess existing disparities created and perpetuated by current and past policies, and then iterate and redesign policies, practices, and investments that advance equity. We found that slightly more than a third of cities (23, or 36 percent) were using or planning to use at least one equity framework or tool to guide their ARPA allocation decisions. 

  • Equity frameworks: 18 cities (29 percent) are using equity frameworks — action strategies, initiatives, and plans that lay out a vision and an approach to increasing equity — to inform their ARPA investments. Cities described using four types of equity frameworks:

  • Racial equity tools: Eight cities (13 percent) referenced using racial equity tools to select their ARPA investments. Racial equity tools help decision makers explicitly consider racial equity in programs, policies, practices, and budgets/investments. Cities described using two types of tools:

    • Budget equity tools that guide city leaders in analyzing how budget decisions benefit or burden marginalized communities and developing proposals that reduce disparities. Denver, San Antonio, and Portland referenced using pre-existing budget equity tools.

    • Project vetting tools that assess and score potential projects using several criteria and weigh equity highly among the criteria. Baltimore solicited proposals for projects via an online form and evaluated the proposals using seven criteria of which equity impact was given the most weight. San José prioritized projects by integrating a set of racial equity questions into its existing criteria focused on community value, opportunity enablement/risk mitigation, time criticality, and job duration. Durham also integrated equity into a scorecard it developed for assessing project proposals.
       

  • Geographic targeting: 39 cities (62 percent) described using data that identified disproportionately impacted neighborhoods to help prioritize funds:

    • Qualified Census Tracts (QCTs): The US Treasury encouraged cities to target their investments to QCTs, which are census tracts where at least half of households have lower incomes than most of the surrounding region, as a strategy to reach low-income communities and communities of color disproportionately impacted by the pandemic. Thirty-six cities (57 percent) are targeting their investments to QCTs.

    • Neighborhood risk/vulnerability mapping: 10 cities (16 percent) are using comprehensive equity indices to identify priority areas for investment, such as Denver’s Neighborhood Equity Index, San José’s Digital Equity Priority Index, Denver’s NEST (Neighborhood Equity & Stabilization) neighborhoods, and Cleveland’s Neighborhood Transformation Initiative (NTI) targets.

Engaging communities hardest hit by the pandemic and systemic inequities in decision making

Engaging the community members hardest hit by the pandemic and structural inequities — who are often excluded from local policymaking — is critical to ensure the funds are used to address their concerns and align with their priorities. Among the 63 cities, 58 of them sought to collect public input and feedback on the use of funds through a variety of mechanisms including listening sessions, public comments, virtual public meetings, phone calls, emails, online surveys, and outreach campaigns. However, only 40 of these cities described proactively conducting targeted outreach to secure input and feedback from communities of color and other disproportionately impacted communities.

What types of equity-promoting investments are being made with ARPA resources?

The US Treasury outlined four uses of the local fiscal recovery funds: 1) revenue replacement to provide government services; 2) responding to the health and economic impacts of the pandemic; 2) providing premium pay to essential workers; and 4) investing in sewer, water, and broadband infrastructure. 

Among the 57 cities that had allocated some or all of their ARPA resources by August 31, 2021, we found that 11 cities allocated at least half of their ARPA funds to revenue replacement, 12 cities set aside between 20 and 40 percent of their funds to revenue replacement, and 34 cities allocated less than 20 percent of their funds for this category. Research from the Southern Economic Advancement project also reveals that small cities are also allocating a majority of their funds to replace lost revenue. Cities are not required to describe how their revenue replacement funds advance equity, making assessment challenging.

Across the other types of ARPA investments, we found many examples of cities making important investments to promote equity, both by dedicating funds to specific hard-hit communities and by investing in remedies to systemic inequities laid bare by the pandemic.

Targeting funds to excluded and marginalized communities

Some cities are using their ARPA funds to advance equity by channeling funds to specific communities and groups disproportionately impacted by the pandemic and structural racism, such as formerly incarcerated people, undocumented immigrants, refugees, and entrepreneurs/business owners of color. For example:

Investing in solutions to structural inequities exacerbated by the pandemic

Cities are also using ARPA resources to address inequities in access to the basic ingredients of economic security and well-being — from family-sustaining incomes to housing security, broadband access, and community health and safety.

  • Economic security: Many cities are using their ARPA allocations to provide income support for workers and families who lost jobs and income during the pandemic. While most cities that invested in premium pay focused on city employees, some directed resources to the low-wage, private sector frontline essential workers who had no option to work from home during the early days of the pandemic. These workers are disproportionately people of color and immigrants. In California, Oxnard allocated $2.5 million to provide grocery and pharmacy workers with $1,000 bonuses, and Calexico allocated $1 million to premium pay for agricultural, health care, and grocery employees.

    Cities are also translating ARPA funds into longer-term economic opportunity by funding public job programs and guaranteed income pilots. New York City is using $230 million in ARPA funds to hire 10,000 residents in communities hit hardest by the pandemic — such as day laborers and public housing residents — to clean and beautify public spaces through the City Cleanup Corps. Buffalo set aside $9 million of its ARPA funding to create a Neighborhood Improvement Corps to hire more than 50 low-income residents of color to clean up public spaces. In October 2021, Chicago allocated $31.5 for a guaranteed income program, which will provide $500 per month to 5,000 low-income families for a year. This was the largest US program launched to date, until May 2022, when Cook County allocated $42 million in ARPA resources to fund a two-year guaranteed income pilot that will reach 3,250 residents. Cook County also committed to establishing a permanent program. 

  • Housing security: Cities are leveraging ARPA resources to address their housing crises through a range of investments, including eviction prevention, homelessness reduction, affordable housing preservation and development, and home repair/improvement. Detroit — where just 4 percent of renters had legal representation in 2017, compared with 83 percent of landlords — set aside $6 million to establish a right to counsel program, with another $12 million expected to come from private funders. Louisville is spending $9 million on a court eviction diversion program that expects to help 1,130 residents stay in their homes. Savannah invested $7 million into its affordable housing fund to implement the Housing Savannah Action Plan to build or retain at least 15,000 homes for 21,000 low-income Savannahians by 2032. Kansas City put $12.5 million toward a new housing trust fund to produce rental housing for at least 150 extremely low-income households. And the District of Columbia allocated $2 million to expand the Douglass Community Land Trust

  • Childcare: When schools and child care facilities shut down in the face of the pandemic, frontline workers and healthcare providers struggled to access child care. Some cities allocated ARPA funds to child care solutions in response to this need. Dallas launched a $1 million grant program for childcare providers to mitigate the negative financial impact of the pandemic. St. Louis allocated $2 million towards increasing the number of childcare centers and increasing wages for childcare workers, the majority of whom are low-income women of color. After finding that hospitality workers at the airport needed childcare services, Phoenix used $5 million in ARPA funds to provide free childcare services for the workforce.

  • Community infrastructure: Cities are working to remedy environmental injustices and increase climate resilience in disinvested communities by investing ARPA resources in energy retrofits, green spaces, lead pipe replacement, public transportation, and more. Pittsburgh is dedicating $19.5 million in ARPA funds to replace its lead water pipes and remediate lead paint, which disproportionately negatively impact the health of the city’s Black families and children. Washington, DC, put $20.5 million toward transit hubs in historically underserved neighborhoods, and Boston is expanding its fare-free bus pilot to three bus lines for two years. Evanston, Illinois, is investing in a home energy retrofit one-stop center to upgrade 50 homes in three low-income neighborhoods. 

  • Health equity: Some cities are using ARPA resources to address health inequities that were exacerbated by the pandemic. Buffalo allocated $10 million to establish a community health clinic on Buffalo’s East Side, where some of the highest concentrations of negative health and economic outcomes are found. Detroit allocated $15 million to the Detroit Community Health Corps, which will connect families in need with a variety of resources via a network of community health workers, licensed social workers, case managers, and peer counselors.

  • Digital inclusion: Covid-19 and the global lockdown also highlighted the ongoing digital divide, and some cities are using ARPA funds to tackle this issue. Portland dedicated $3.5 million to the Tech Kit Program to deliver devices, internet access, and training partners to Black, Indigenous, people of color communities, seniors, and people with disabilities. Dallas invested $40 million to provide all households in Dallas with high-speed, reliable internet, and access to devices in their homes, focusing on historically underserved areas. 

  • Community safety: ARPA created an opportunity for cities to increase community safety by investing in community-based alternatives to policing, such as sending non-police health care professionals to respond to 911 calls related to mental health crises, homelessness, and drug use. Among the 63 cities with ARPA investments, we found that 17 (27 percent) are investing in non-police interventions. Minneapolis, for example, is using ARPA resources to add two new vans to the city’s Behavioral Health Crisis Response pilot program, which sends unarmed mental health professionals to respond to mental health crises. At the same time, as we’ve described, unfortunately even more cities (23, or 37 percent) are investing or planning to invest in policing by purchasing vehicles, new equipment and body-worn cameras for city police officers, hiring additional police officers, renovating police department buildings, upgrading dispatch systems, and more. Albuquerque, for example, devoted $8 million to renovate its police headquarters and purchase new vehicles.

What factors are driving the equitable allocation of ARPA investment dollars?

Our research uncovered how community advocacy and engagement, elected official champions, and equity-focused institutional structures have been key drivers of equitable ARPA investments.

  • Community advocacy and partnership: Many if not most of the equity-focused investments described above were proposed and fought for by organizations working in and for the residents and communities most impacted by the pandemic. In Los Angeles County, the Coalition for Equitable ARPA Implementation, led by the Advancement Project California, successfully advocated for the County Board of Supervisors to adopt a set of equity principles (including using the funds to reduce racial inequities and not for policing or incarceration), an equity funding formula to distribute the resources based on an index of community need it created, and a public dashboard to track ARPA funding. Of the County’s $1.9 billion, 75 percent is going to the neighborhoods hardest hit by the pandemic. 

  • Equity leadership from the top: In Boston and St. Louis, newly elected mayors who campaigned on equity agendas with deep support from marginalized communities are leveraging ARPA to implement their policy priorities. After multiple rounds of community input, Boston’s Mayor Michelle Wu established equity principles to guide all funding allocations, focusing on closing equity gaps in public health, wealth, and wages. In addition to its fare-free transit expansion, its investments include $20 million to increase permanently affordable housing through the Acquisition Opportunity Program, a $2.5 million community grant program, and a $3 million food justice fund. St. Louis Mayor Tishaura Jones declared that the city’s ARPA funding would be used to chart a new course in the city by strengthening social safety nets and targeting funding to communities most in need. Under her leadership, the city allocated $21.4 million toward emergency rental assistance, $10 million for emergency shelter access and wraparound homelessness services, and $500 direct cash payments to more than 9,000 residents.

  • Institutional infrastructure for equitable policymaking: Since King County in Washington State established its Equity and Social Justice initiative in 2008, local governments across the county have been working to center and institutionalize equity throughout their practices, decisions, leadership, policies, and budgets. Hundreds now participate in the Government Alliance on Race and Equity (GARE). Municipalities that are in the process of prioritizing equity have put in place structures and tools — chief equity officers (CEOs), equity principles, ordinances, strategic plans, budget tools, equity indicators, impact assessments, offices, and more — that help them normalize and operationalize equity. Many of the places with the most equitable ARPA investments — such as Boston, St. Louis, Los Angeles County, Madison, and Seattle — are multiple years into the process of developing and implementing these equity processes and tools.

Maximizing Equity with Remaining Local Fiscal Recovery Resources

Following the federal government’s encouragement to use the recovery resources to advance equity, some local governments are clearly making investments that reach the most impacted communities, stabilize economically insecure residents and neighborhoods, seed promising new policy approaches, and address structural inequities to build stronger, more equitable communities.

Many cities and counties are still in the process of deciding how to spend their remaining ARPA resources, and we hope they borrow, add to, and build upon the examples of targeted, equity-boosting investments shared in this brief. Our research also underscores the crucial role that advocates play in convincing local leaders to make such targeted investments. These groups must continue to demand solutions that address community needs and manifest community aspirations, and elected officials must continue to align policymaking with those solutions. Local philanthropies should fund these community-based organizations to engage in local policy processes. Philanthropy should also support the local media outlets that cover local policy debates, as well as policy groups and researchers that are tracking the program and holding the government accountable to equity goals.

For the longer term, our research also points to the need to strengthen and expand the movement to build lasting institutional infrastructure for equity in local government. While the vast majority of cities named equity as a top priority, only about one in three had plans, processes, staffing, or guidelines in place to operationalize that equity commitment. One important way to continue building this internal equity capacity is by expanding the reach of the Government Alliance on Race and Equity national network, which has a strong track record of supporting cities in building this institutional infrastructure for equity.

City Local Fiscal Recovery Fund Performance Reports Analyzed

  1. Albuquerque, New Mexico
  2. Anaheim, California
  3. Anchorage, Alaska*
  4. Arlington, Texas
  5. Atlanta, Georgia
  6. Aurora, Colorado
  7. Austin, Texas
  8. Bakersfield, California
  9. Baltimore, Maryland
  10. Boston, Massachusetts
  11. Buffalo, New York
  12. Chandler, Arizona
  13. Charlotte, North Carolina
  14. Chicago, Illinois
  15. Chula Vista, California
  16. Cincinnati Ohio
  17. Cleveland, Ohio
  18. Colorado Springs, Colorado
  19. Dalla, Texas
  20. Denver, Colorado
  21. Detroit, Michigan
  22. Durham, North Carolina
  23. El Paso, Texas
  24. Greensboro, North Carolina
  25. Henderson, Nevada
  26. Honolulu, Hawaii**
  27. Houston, Texas
  28. Jacksonville, Florida
  29. Kansas City, Missouri
  30. Las Vegas, Nevada
  31. Lexington-Fayette County, Kentucky***
  32. Lincoln, Nebraska
  33. Long Beach, California
  34. Los Angeles, California
  35. Louisville-Jefferson County, Kentucky***
  36. Lubbock, Texas
  37. Madison, Wisconsin
  38. Minneapolis, Minnesota
  39. New Orleans, Louisiana
  40. New York, New York
  41. North Las Vegas, Nevada
  42. Oakland, California
  43. Omaha, Nebraska
  44. Philadelphia, Pennsylvania
  45. Phoenix, Arizona
  46. Pittsburgh, Pennsylvania
  47. Plano, Texas
  48. Portland, Oregon
  49. Raleigh, North Carolina
  50. Reno, Nevada
  51. Riverside, California
  52. San Antonio, Texas
  53. San Diego, California
  54. San Francisco, California
  55. San José, California
  56. Santa Ana, California
  57. Seattle, Washington
  58. St. Louis, Missouri
  59. St. Paul, Minnesota
  60. Tampa, Florida
  61. Toledo, Ohio
  62. Tulsa, Oklahoma
  63. Washington, DC

* Denotes a municipality
** Denotes a consolidated city-county — a city and county that have been merged into one unified jurisdiction
*** Denotes a county

Authors

Fatimah Alkhaldi, Research Associate, Institute on Race, Power and Political Economy at The New School
Chidera Ihejirika, Research Associate, Institute on Race, Power and Political Economy at The New School
Eliza McCullough, Associate, PolicyLink
Sarah Treuhaft, Vice President of Research, PolicyLink

Acknowledgments

We appreciate the many individuals and advisers who provided invaluable guidance and insights on this research. A special thanks to our amazing colleagues, Grieve Chelwe and Darrick Hamilton of The New School and Gabriel Charles Tyler, Jessica Pizarek, and Rosamaria Carrillo of PolicyLink for their contributions to this research. We also thank the David and Lucile Packard Foundation for supporting this research.