The American Rescue Plan Act of 2021 (ARP) provided $350 billion in funding to state, local, and tribal governments to be administered through the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program. In the National Income and Product Accounts (NIPAs) the distribution of these funds is recognized as intragovernmental current or capital transfers, recorded as expenditures by the federal government on Table 3.2 Federal Government Current Receipts and Expenditures and as receipts by state and local governments on Table 3.3 State and Local Government Current Receipts and Expenditures.
Distributions from the SLFRF through the first quarter of 2022 were recorded as a current transfer, specifically as grants-in-aid to state and local governments. The classification as a current transfer was appropriate for funds that were used to support the current operations of state and local governments in responding to the COVID-19 public health emergency.
Distributions from the SLFRF beginning in the second quarter of 2022 are recorded as capital grants-in-aid to state and local governments. The classification as a capital transfer is appropriate for funds that will be used on capital expenditures and investment by state and local governments. This change in classification coincides with the Final Rule on the use of the SLFRF, which was published in the Federal Register in January 2022 and took effect on April 1, 2022. The Final Rule provided broader flexibility to state and local governments in the use of SLFRF funds, particularly regarding the types and scope of capital expenditures, or investments in property, facilities, or equipment, that are eligible for funding. These transactions are also presented in NIPA Table 5.11U Capital Transfers Paid and Received, by Sector and by Type, lines 10 and 43.