The December Deadline Nobody Talked About (Until It Was Too Late)
If you weren’t paying attention in December 2024, the U.S. Treasury was. That’s when the final deadline hit for cities and states to spend or commit the $350 billion that came through the American Rescue Plan Act. It sounds like a lot until you realize that nearly $30 billion in ARPA funds went back to Washington unused. Not because cities didn’t want to spend it. Mostly because figuring out how to actually spend pandemic relief money according to federal rules turned out to be complicated in ways that sound boring until you realize it means your city probably made some very specific bets about the next three years without quite knowing it.
Here’s the thing about ARPA money: it was supposed to be a bridge. A one-time infusion to help cities survive a specific crisis and then figure out their long-term finances. Most cities used it exactly that way. Some used it differently. And now, in 2026, we’re all finding out which strategy was which.
Half Your City’s Budget Might Be Broken This Year
According to the National League of Cities City Fiscal Conditions Report 2025, 52 percent of American cities are anticipating budget shortfalls this year. That’s not a rounding error. That’s half. And the core reason is straightforward: ARPA was a one-time thing, and it was enormous. Cities got used to having it, even when they didn’t intend to.
The real structural problem sits with a specific subset of cities that made a particular choice during the pandemic. Mid-sized cities that used ARPA funds for recurring operational expenses, payroll, benefits, ongoing services, are now looking at structural deficits averaging $47 million annually, according to Brookings Metro Fiscal Health Analysis. That’s the kind of gap that doesn’t disappear just because you want it to. It means something has to change permanently: services get cut, or taxes go up, or you find new money somehow. Those are your options, and they all involve conflict.
The cities that used ARPA mostly for infrastructure or one-time projects are in better shape, though not by as much as they’d probably like. They still have problems. They just don’t have the permanent structural hole in their budget that operational spending created.
Why Everyone’s Fighting About Infrastructure Right Now
Here’s where the disagreement gets interesting, and honestly, it’s worth understanding because it explains why your city council probably spent three hours on something that seemed simple.
There’s still money available for infrastructure. The Bipartisan Infrastructure Law has roughly $180 billion in unobligated grants sitting there as of early 2026. On paper, that sounds like a solution. Cities can apply for it. Problem solved. Except it’s not actually solved, and the disagreement is almost entirely structural rather than political.
The obstacle isn’t that Republicans and Democrats can’t agree on whether infrastructure matters. They can. The obstacle is that most small and mid-sized cities lack grant-writing staff. Professional grant writers are expensive. They require expertise. They’re competitive. A large city with an eight-person grants department can navigate a complex federal application process without blinking. A city of 50,000 people probably has one person doing grants, if they have anyone at all. So they see $180 billion available and they see the barrier between them and that money, and it’s not philosophical. It’s staffing.
When finance directors from municipalities across the country were surveyed, 71 percent of them identified workforce recruitment for public works as a larger obstacle than funding itself. You can read that as “money isn’t actually the main problem.” The main problem is finding people qualified to design projects, manage them, and see them through completion. That’s real. That’s structural. And it’s not something that gets solved by another round of federal money alone.
The Disagreement Your City’s Probably Having Right Now
So here’s where the real conflict sits, and it’s genuinely complicated because both sides have a point. Some cities and their leaders argue that the solution is local investment in capacity: hire grant writers, build up planning departments, make your city attractive enough that infrastructure people want to move there and build things. This is expensive upfront. It means spending money now to be able to spend money later. It means betting that having that capacity will pay off over time. It usually does, but not immediately, and not without political capital.
Other cities are arguing that if the federal government is going to offer money with application requirements that essentially exclude small cities without grant-writing infrastructure, that’s a design problem with the federal program, not a problem that local cities should have to solve on their own dime. They’re saying: that $180 billion was supposed to be accessible to communities that need it, and if it’s not accessible to smaller cities, then it’s not really accessible.
Both arguments are structurally sound. Neither side is wrong. That’s actually the part worth paying attention to, because it means there’s no villain in this story. There’s just a real tension between how federal funding gets distributed and what real capacity looks like at the local level.
What Actually Happens Next in Your City
So what comes next? Most likely, some combination of difficult choices. Your city will probably cut something. They’ll probably find some way to increase revenue, which might mean taxes or fees or creative accounting or all three. Some will aggressively pursue infrastructure grants and accept that they need to pay for capacity to do it. Some will wait and hope their state provides pass-through funding. Some will try to do more with less, which usually works for a year or two before it doesn’t.
The infrastructure money will probably get spent, though not as efficiently as it could. Projects will take longer to start because it takes time to build the machinery to access federal funding. Some cities will do it better than others, which will probably make things harder for the ones that struggle, which is just how equity works when resources aren’t equally distributed from the start.
If you want to know exactly what happens next in your city, that information is probably sitting in a budget proposal or a council memo somewhere. Read it. Or ask someone who did. Then maybe show up to the hearing where they actually talk about it. Not because you need to fix everything, but because the people making these decisions are trying to balance real constraints with real community needs, and those conversations are better when the people affected actually know what’s being talked about.