Agenda - Council Work Session - 03/08/2022

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Federal Register/Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations 4403 amount,referred to as the"standard revenue,only includes a subset of regular revenue loss calculation. Thus, allowance," is set at up to$10 million recipient aggregate general revenue, selecting a point estimate toward the total for the entire period of Treasury applied a scaling factor to higher end of the expected range not performance not to exceed the recognize that tax revenues generally only increases the likelihood that the recipient's SLFRF award amount. make up just over half of general standard allowance will reflect the Although Treasury anticipates that this revenue collected by state and local experience of a larger number of SLFRF standard allowance will be most helpful governments (i.e.,Treasury scaled up its recipients but is more responsive to the to smaller local governments and Tribal estimate based on tax revenue to comments of those with smaller awards. governments,any recipient can use this produce an estimate for total general In addition,using a point estimate standard allowance instead of revenue).285 The resulting calculation toward the upper end of the range calculating revenue loss pursuant to the was then extrapolated over the four-year accounts for the difficulty and formula above, so long as recipients period of performance and divided by a uncertainty in predicting revenue losses employ a consistent methodology across population of interest to arrive at an years into the future,throughout the the period of performance(i.e., choose average loss estimate. period of performance.287 either the standard allowance or the As noted above,Treasury estimated a Finally, Treasury selected a single regular formula). Treasury intends to range of scenarios to account for allowance level, as opposed to varying amend its reporting forms to provide a different values of the variables that levels,to further the goals of simplicity, mechanism for recipients to make a one- would impact average losses. For flexibility, and administrability. time,irrevocable election to utilize example,the end date of the fiscal base Furthermore, data limitations make it either the revenue loss formula or the year and growth rate of counterfactual difficult to distinguish between types of standard allowance. revenue impact the overall estimate of local governments.288 The$10 million level is based on revenue loss. In addition,this estimate General Revenue average revenue loss across state and takes into consideration the limitations local governments,taking into in the available data. The governments The interim final rule adopted a consideration potential variation in covered by the Census Bureau's survey definition of"general revenue"based revenue types and losses and continued do not entirely align with SLFRF largely on the components reported uncertainty faced by many recipients recipients.The Census Bureau's figures under"General Revenue from Own regarding revenue shortfalls. To are based on 50 state governments, all Sources" in the Census Bureau's Annual calculate this estimate,Treasury applied local government property tax collectors Survey of State and Local Government a variation of the final rule's revenue and local government non-property tax Finances. Under the interim final rule, loss calculation on available aggregate imposers,representing at a minimum general revenue included revenue state and local government tax revenue the more than 38,000 "General Purpose collected by a recipient and generated data as reported by the Census Bureau Governments" defined by Census. from its underlying economy, and it for the first calculation date of However,there are only roughly 32,000 would capture a range of different types December 31, 2020. This estimate recipients of SLFRF funds. Thus, of tax revenues, as well as other types accounts for expected variation across Treasury considered the difference of revenue that are available to support recipient experiences and reflects the between the number and type of entities government services.289 Specifically, fact that the final rule revenue loss in the Census Bureau data and the revenue under the interim final rule calculation provides recipients several SLFRF recipients. included money that is received from options for specific aspects (e.g., Based on this methodology,Treasury tax revenue, current charges,and calendar year or fiscal year basis;use of estimates that average revenue loss miscellaneous general revenues and average state and local revenue growth (determined by comparing the excluded refunds and other correcting rate or specific local rate). Treasury counterfactual revenue to actual transactions,proceeds from issuance of compared actual calendar year 2020 tax revenue)may range from$0 to$11.7 debt or the sale of investments, agency revenues,in aggregate for all state and million per recipient over the period of or private trust transactions,revenue local governments,to several performance.286 Treasury settled on a from utilities, social insurance trust counterfactual trends that vary based on point estimate toward the upper end of revenues,and intergovernmental the end date of the fiscal base year.284 the range of potential averages,in part, Treasury also assessed counterfactual to account for significant variation in 287 See,e.g.,Government Accountability Office, trends using different revenue growth the experiences of recipient State and Local Governments:Fiscal Conditions rates (e.g.,the three-year average growth governments: Some recipients likely During the COVID-19 Pandemic in Selected States(July 2021)(noting that"[s]tate and local rates of total state and local government experienced losses at the upper end of government revenues partly depend on the overall general revenue for both fiscal years this range of potential averages.A point economy,and actions to stem the spread of the ending in 2016-2018 and fiscal years estimate toward the upper end of the virus drastically reduced economic activity."); Board of Governors of the Federal Reserve System, ending in 2017-2019;the three-year range errs toward ensuring more Monetary Policy Report(July 9,2021)(noting that average growth rates of total state and recipients' experiences are covered and the pandemic"pushed down state and local local government tax revenues for fiscal increases the utility of the standard government tax collections"and that while some of years ending in 2017-2019;and the one- allowance for SLFRF recipients. the drag is"abating"state and local"government year growth rate for total state and local Specifically,the program includes a payrolls. .have only edged up from their lows at the onset of the pandemic"). government tax revenue in the last full very large number of recipients with 288 Local government tax revenue data in the fiscal year before the public health relatively smaller awards;these Census Bureau's Quarterly Summary of State and emergency). To account for the fact that recipients have tended to describe Local Tax Revenue,supra note 271,is provided on the initial estimate,based on tax having greater difficulty completing the an aggregated basis. 8 The Department also released guidance clarifying how a recipient may determine whether 2114 Because the Census Bureau's state and local 285 Annual Survey of State and Local Government a particular entity is"part of the recipient's government tax revenue data is reported on a Finances(2019). government."See FAQ 3.14.Coronavirus State and quarterly frequency,fiscal base year end dates of 286 This is the range of averages that Treasury Local Fiscal Recovery Funds,Frequently Asked March 31,June 30,September 30,and December 31 calculated by varying the aforementioned Questions,as of July 19,2021;https://home. were used in this assessment. assumptions. treasury.gov/system/files/136/SLFRPFAQ.pdf.