PA Municipalities Crying Poor After COVID Relief Funds Finally Dry Up

It was a good run, but they had to know it was going to end at some point. Now that the federal government funding gravy train that began with COVID is finally starting to come to an end, suddenly Pennsylvania is crying poor. 

PA Governor Josh Shapiro’s administration has said it is bracing for some Pennsylvania towns to fall into financial distress as federal COVID stimulus money runs out, according to ABC 27.

During the pandemic, state and local governments leaned heavily on federal aid to stay afloat. But with that support ending, cracks are starting to show.

Now the Department of Community and Economic Development is asking for a $10 million boost to the state’s emergency fund for struggling municipalities in its 2025-26 budget—just 2.3% of Gov. Josh Shapiro’s $430 million request for the agency.

Some argue the funding is too little, while others say it would be smarter to help towns before they reach crisis levels. Under Act 47, distressed municipalities can access recovery support once they officially declare financial hardship.

As billions in federal COVID relief dollars run out, Pennsylvania is preparing for a wave of municipal financial distress. The Department of Community and Economic Development (DCED) wants to add $10 million to the Act 47 fund, which supports struggling local governments. As of March 18, the fund held $17.4 million, and current participants include Harrisburg, Chester, and Newville.

The ABC report notes that DCED Secretary Rick Siger called the proposal a proactive step to prepare for “any potential impact for the ARPA cliff,” referring to the end of American Rescue Plan Act funding. Passed in 2021, ARPA sent $350 billion to governments nationwide, including $7.29 billion for Pennsylvania, $4.95 billion for large counties and cities, and $1.21 billion for smaller municipalities.

Governments had until the end of 2024 to commit ARPA funds, and must spend them by Dec. 31, 2026. Most Pennsylvania municipalities used their share to replace lost revenue—an easy reporting route under Treasury rules. Nearly two-thirds of the state’s 2,140 smallest recipients (Tier 5 entities) did exactly that.

But the relief was temporary. “This money is not going to be replaced. It was designed for an emergency. The emergency is gone,” said William Glasgall of the Volcker Alliance. He warned that limiting expenses and raising taxes will soon be “very common” for local governments. Glasgall also dismissed DCED’s proposed boost: “I mean, [$10] million will last about three seconds.”

Some towns already feel the squeeze. State College avoided tax hikes for three of the last four years thanks to ARPA funds—but a property tax increase is coming in 2025.

Still, not all municipalities are panicking. David Sanko of the Pennsylvania State Association of Township Supervisors said many local governments are “not stressed at all” because they planned ahead. His group urged members not to rely on ARPA for ongoing costs and is now pushing the state to cut expenses—like repealing prevailing wage mandates—rather than only expand aid.

Sen. Patty Kim (D-Dauphin), who represents Harrisburg, agrees prevention is better than rescue. “More needs to be done to prevent communities from becoming financially distressed instead of offering help afterward,” she said. As for the $10 million increase, she’s uncertain it will make it through the legislature. With possible federal funding cuts ahead, Kim warned, “I am bracing myself for a very, very different budget in the next couple of months.”