Agenda - Council Work Session - 03/08/2022

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4428 Federal Register/Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations areas,and then using those state or level, even if it does not decline further, permitting organic revenue growth to territory funds to offset tax cuts. Such relative to the same amount of revenue. cover the cost of tax cuts. an approach helps ensure that SLFRF Public Comment:Several commenters Finally, a recipient government may funds are not used to"indirectly"offset expressed concern regarding the request reconsideration of any amounts revenue reductions due to covered measurement of spending cuts relative identified in a notice from Treasury as changes. to the recipient's FY 2019,for example subject to recoupment under this arguing that the choice did not take into framework. Comments and responses to Department,Agency,or Authority g g the recoupment process are discussed in account increases in spending in 2020. meet of Public Comment:Several commenters As one commenter noted,the fiscal year section Remediation and Recou p supported the interim final rules 2020 required extraordinary this Supplemental Information. approach to considering spending cuts intervention by recipient governments 3. Reporting at the department,agency, or authority and the ongoing public health g g p To facilitate the implementation of level,on the basis that this approach is emergency continues to require the framework above, and in addition to supported by the statutory language extraordinaryintervention. prohibiting SLFRF funds from being reporting required on eligible uses, used to"directly or indirectly" offset a Treasury Response:FY 2019 provides recipient governments are required to reduction in net tax revenue. On the a reasonable and relatively generous report certain information. The interim baseline for considering spending final rule indicated that Treasury would other hand,some commenters argued because it is the last full fiscal year prior provide additional guidance at a later that the methodology for identifying to the COVID-19 public health date and that, on an annual basis,it offsetting spending cuts was too restrictive; specifically,that emergency and governments' expected each recipient government extraordinary efforts to address the would be required to provide the measurement at the agency or department-level may not adequately Impact of the pandemic. This approach following information: p y q y also ali ns with the FY 2019 baseline for ' Actual net tax revenue for the account for the size and various g reporting year; programs that could occur in one agency measuring revenue loss. Measuring • Each revenue-reducing change or department. One commenter argued spending cuts from year to year would, made to date during the covered period that recipient governments should by contrast,not recognize any available and the in-year value of each change; instead be permitted to consider funds to offset revenue reductions . Each revenue-raising change made spending cuts on a more granular sub- unless spending continued to decline, to date during the covered period and unit of a department but noted that this failing to reflect the actual availability of p funds created b persistent change and the in-year value of each change; and additional flexibility would come at the Y a p g • Each covered spending cut made to cost of transparency and clarity. limiting the discretion of states and date during the covered period,the in- Treasury Comment:Treasury territories. year value of each cut,and recognizes that some recipients may For the reasons discussed above, documentation demonstrating that each vary in their budgeting processes,with Treasury is adopting the approach taken spending cut is covered as prescribed some budgeting on a department level in the interim final rule without change. under the interim final rule. and others budgeting at more or less (5)Identification of amounts subject Since the adoption of the interim final granular sub-units of government. to recoupment.If a recipient rule,Treasury has provided guidance on Relying on spending at a department, government(i)reports covered changes reporting regarding eligible uses and has agency, or authority level allows that reduce tax revenue (Step 1); (ii)to required recipient governments to recipient governments to report how a degree greater than the de minimis indicate whether they have made SLFRF funds have been spent usingcovered changes and the value of such reporting units already incorporated (Step 2); (iii)has experienced a Chan es,364 g p g yreduction in net tax revenue (Step 3), g into their budgeting process. and (iv)lacks sufficient revenue from Reporting Burden Spending Cuts Baseline other,permissible sources to pay for the Public Comment:Some commenters Under the interim final rule,to entirety of the reduction (Step 4),then argued that the framework for the recipient government will be identifyingd reporting impermissible calculate the amount of spending cuts considered to have used SLFRF funds to an p n gm p that are available to offset a reduction in offsets was burdensome and that the offset a reduction in net tax revenue,up burdens should be accounted for under tax revenue,the recipient government to the amount that revenue has actually Executive Order 13132 Federalism must first consider whether there has declined. That is,the maximum value of ( ' been a reduction in total net spending, the reduction revenue due to covered August 4, 1999). excludingTreasury Response:Taking into SLFRF funds (net reduction changes that a recipient government consideration comments received in total spending). This approach must cover is capped at the difference regarding burden,Treasury is ensures that reported spending cuts between the baseline and actual tax g g y actuallycreate fiscal space,rather than 363 considering a tiered approach to p revenue. In the event that the reporting on the offset provision. simply offset other spending increases. baseline is above actual tax revenue but p g p A net reduction in totals spending is Specifically,under this approach, a P g the difference between them is less than recipient would only be required to measured as the difference between the sum of revenue reducingchanges p y q totals spending in each reporting year, g report information to the extent needed p g p g y that are not paid for with other, to determine whether SLFRF funds had excluding SLFRF funds spent,relative permissible sources, organic revenue been used to offset a reduction in net tax to total spending for the recipients growth has implicitly offset a portion of e, a revenue. For example, recipient fiscal year ending in 2019,adjusted for the reduction. The revenue reduction p p inflation. Measuringreductions in government would be required to report cap implements this approach for spending relative to 2019 reflects the 364 See Reporting Guidance,Section C.11, fact that the fiscal space created by a 363 This cap is applied in section 35.8(c)of the available at https:llhome.treasury.gov/system/files/ spending cut persists so long as final rule,calculating the amount of funds used in 136/SLFRF-Compliance-and-Reporting- spending remains below its original violation of the tax offset provision. Guidance.pdf.