The American Rescue Plan Act provides for federal funding to units of local government from the newly created Coronavirus Local Fiscal Recovery ("CLFR") Fund. Each state is responsible for distributing its CLFR allotment among its "non-entitlement units of government" (NEUs). Treasury asked states to determine whether their "minor civil divisions (MCD)" (townships in Illinois) should be eligible to receive CLFR funding.
Illinois, along with seven other states (Indiana, Kansas, Missouri, Nebraska, North Dakota, Ohio, and South Dakota) were identified as weak-MCD states. In weak MCD states, MCDs generally play less of a governmental role than in other states. Treasury guidance indicates that MCDs that lack the legal or operational capacity to accept CLFR funding, or do not provide the broad range of services that would constitute eligible uses for CLFR funding, should not be eligible to receive a distribution from the CLFR Fund.
Treasury instructed weak-MCD States to undertake a facts-and-circumstances test to determine whether an MCD has the legal and operational capacity to accept ARPA funds and provides a broad range of services that would constitute eligible uses under ARPA. After undertaking its facts-and-circumstances test, Illinois determined that while its townships are important units of government that provide vital services, the majority don't have the operational capacity to accept ARPA funds. Even when they do have such operational capacity, they don't provide a sufficiently broad range of programs and services eligible for CLFR funding. Thus, townships have been deemed ineligible for CLFR Fund distribution.