The state of Hawaii and the counties have until the end of the year to obligate up to $400 million in federal funds meant to alleviate the impacts of Covid-19 and support economic recovery, or face returning it.

That amount is what’s left of the $1.91 billion Hawaii got from the American Rescue Plan Act passed by Congress in 2021, the largest federal aid package since the 2007 recession.

State and local governments have until the end of 2026 to complete approved projects, but all funds must be tied to contracts, RFPs or purchase orders by Dec. 31, 2024.

As of the end of September — the most recent quarter reported by the U.S. Treasury — total obligations by the state and the counties were $1.7 billion, with around $1.5 billion expended out of the $1.9 billion.

That leaves $210 million in funds that need to be obligated in the next nine months and $190 million that has to yet be committed for any purpose in Hawaii.

The federal windfall for local governments was designed to offset municipal revenue loss during the pandemic and also create opportunities for one-off investments in costly infrastructure like broadband and wastewater treatment systems.

The funds are widely viewed as a lifeline for cities, towns and villages and “reflected an unprecedented level of funding for entirely new programs that needed to be rolled out quickly,” said Angela Bresnahan, Kauai County’s Emergency Rental Assistance Grants Coordinator.

Money Left On The Table?

The U.S. Treasury's decision to set a longer timeframe for the State and Local Fiscal Recovery Fund program -- four years to obligate all the funds and six years to spend them -- "took some pressure off state policymakers in contrast to the challenges many had in spending their Coronavirus Relief Funds," a Pew Charitable Trusts study found.

Around 35% of funds allocated by the states were categorized as revenue replacement, a catch-all for government activity and based on guidance from the Treasury, many projects were funded this way because there were fewer reporting requirements, according to the National Association of State Budget Officers. For example, the City and County of Honolulu was able to direct money to housing and homeless programs from the revenue replacement stream.

Out of its total SLFRF allocation of $386 million, Honolulu has approved $302 million for projects, with $231 million obligated or expended, according to its own tracker.

Right now Honolulu doesn't anticipate having to return any SLFRF funds, according to city spokesman Ian Scheuring, but there may be changes to the final lineup of projects. The reporting also doesn't yet reflect an $80 million pre-payment toward OPEB, other post-employment benefits, included in the draft budget, he said.

Projects are tracked quarterly and if they aren't showing progress, funds can also be recalled and reassigned elsewhere, Scheuring said.

"It's difficult to say, with absolute certainty, whether or not any active projects may need to be canceled — any number of external factors can impact the ability of a department to execute a project within the timeframe set by the Treasury," he said.

Among the approved projects that still need to go under contract are an upgrade to the Handi-Van's reservation and telephone system ($737,340) and additional technical support for the Department of Planning and Permitting ($3.75 million). A plan to replace a reservoir on Wilhelmina Rise in Honolulu has been scratched.

However, Honolulu's allocation of SLFRF funds for infrastructure was twice the national average for local government, according to the Local Government ARPA Investment Tracker. It also spent more on housing and community aid, offset by less spending on government operations and public safety.

The $25 million Kalaeloa Seawater Desalination Facility being built at Campbell Industrial Park is the largest single infrastructure project funded on Oahu using recovery funds.

Half of Maui County's $28 million obligation is committed to one project, water source development and for West Maui.

For a smaller county like Kauai, the influx of federal money was unprecedented and numerous rule changes to the program by the U.S. Treasury required close tracking.

"Like all jurisdictions throughout the United States, this presented challenges for Kauai, but the programs allowed us to respond nimbly to community needs," grants coordinator Bresnahan said.

She said Hawaii counties and state offices collaborated, meeting bi-weekly to share knowledge and experience and coordinate many of the relief programs funded by SLFRF, including the rental and homeowner assistance programs.

Kauai is on track to expend the remainder of the $21 million approved budget within the required period, Bresnahan said.

The largest county project remaining -- the Lihue Civic Center -- has $7 million in SLFRF funds obligated and construction is slated to begin in the summer.

Maintaining Key Services

The state's ability to leverage the fiscal recovery funds into one-off infrastructure was hamstrung by the need to maintain basic government services, according to its most recent progress report to the U.S. Treasury.

"Without them, the State of Hawaii would have been required to make large cuts to government services, including to education and healthcare," it said.

Hawaii had spent 84% of its $1.641 billion SLFRF funding by June 30 and $808 million -- almost half of the adopted budget -- was used to repay the U.S. Treasury for funds the state borrowed to pay unemployment benefits after the Unemployment Trust Fund was depleted.

The next largest expenditure category was revenue replacement including $131 million to maintain levels of emergency ambulance and dispatch services over two years, $48 million for the Hawaii Tourism Authority and $50 million each in general support for the University of Hawaii and the state's public schools.

Hawaii still has 10 projects on its list budgeted at a total of $46.2 million yet to be obligated. Those include additional security features for the State Capitol building, fire alarm upgrades at the Hawaii State Hospital and improvements to the state's computer and communications capacity for disaster response.

Civil Beat’s community health coverage is supported by the Swayne Family Fund of Hawaii Community Foundation, the Cooke Foundation, Atherton Family Foundation and Papa Ola Lokahi.