Community Project Funding: 117th Congress Revives and Recalibrates the Earmark Process

In the 117th Congress, lawmakers will reinstate the process of earmarking for local governments and nonprofits after a decade-long ban, ushering in the return of congressionally directed spending through a reformed process dubbed "Community Project Funding" (CPF) with added oversight mechanisms.

On Feb. 26, 2021, House Appropriations Chair Rosa DeLauro (D-Conn.) officially announced guidance to solicit lawmakers' requests for CPF. Following weeks of internal debate on the other side of the aisle, House Republicans voted on March 17 to allow members to request dedicated spending projects.

Formerly and colloquially referred to as earmarks, "Community Project Funding" is defined as any congressionally directed spending, tax benefit or tariff benefit that would benefit an entity or a specific state, locality or congressional district.¹ Since the funding is specified to a recipient, it is by nature not subject to competitive award processes. Potentially eligible projects range from infrastructure, community programs, university research, hospitals and other local initiatives.

Members will be allowed to request funding to support specific community projects as part of the annual appropriations process to fund the federal government. Most often invoked in regard to the annual federal appropriations process, earmarks can also be used for authorizing measures, such as infrastructure legislation. House lawmakers have broadly outlined plans to use earmarks in the upcoming surface transportation reauthorization bill.²

Congress has prohibited the practice of earmarking since 2011 in the 112th Congress, due to questionable abuses including wasteful spending and corruption scandals regarding how legislators directed funds. The earmark moratorium did not exist in chamber rules nor was it enforced by points of order. Rather, it was established by party rules and committee protocols and had been extended by every Congress since through party rules and protocol. Since the ban, earmarks have carried a negative connotation, necessitating meaningful reform to address accountability and transparency in the case of a return.

In recent years, members on both sides of the aisle expressed interest in lifting the earmark moratorium to return power to Congress to direct funding for local needs rather than leaving the distribution to the executive branch, and have distinguished that members know the needs and priorities of their districts. Many have argued that earmarks serve as catalysts for bipartisanship and efficiency on Capitol Hill.

The reformed process announced by the Appropriations Committee for the upcoming fiscal year is intended to account for transparency and accountability in community funding through a number of robust guardrails. Further, this process will be limited in certain ways that did not apply 10 years ago.

CPF Guidance

The House and Senate have agreed to limit total earmarks to $15 billion, or $7.5 billion for each chamber. It remains unclear how the bicameral process will shape up; Senate Democrats have not yet issued guidance for their process, and Senate Republicans have not decided on whether to participate in earmarking.

The House Appropriations Committee published guidance regarding accounts and programs eligible for CPF requests, as well as the criteria necessary for consideration in those areas. The new guidelines are in addition to rules that already exist, including that requests must be made in writing and be disclosed before floor consideration. Individual legislators have unique forms with different questions and requirements in order to be considered.

Key takeaways from CPF guidance include:

• Funding Cap. Funding is limited to no more than 1 percent of discretionary spending. Each project must be for Fiscal Year (FY) 2022 only and cannot include multiyear funding. Since appropriations are annual bills, the funding will need to be spent one to two years from the enactment of the bill, so any project needs to be shovel-ready; planning projects may be requested.
• Limit on Number of Requests. House members will be limited to 10 requests across the spending bills open to CPF. Roughly 20 accounts are open for such requests.
• For-Profit Recipient Bans. Members can request funding only for nonprofits or a specific state, locality or congressional district. If the entity is a nonprofit, it must provide evidence that it is a nonprofit as described under Section 501(c)(3) of the Internal Revenue Code.
• Project Description. Funding request must include a project description (limit 1,000 characters), as well as a budget breakout specifically describing how funds will be used by the grantee. The explanation of the request must include why it is a good use of taxpayer funds.
• No Financial Interest. Members must certify that they, their spouse and their immediate family do not have financial interest in their requested projects to the House Appropriations Committee.
• Transparency Metrics. Member requests for CPF will be submitted online and searchable. The recipients of CPF will be released by the House Appropriations Committee before the full committee votes on legislation, as well as the project description.
• Community Support Requirements. Members must provide evidence of community support for the projects, as well as compelling evidence that demonstrates a true need. This includes endorsement by elected officials and other organizations. Examples include: press and support from newspaper editorial boards, listings on state intended use plans, community development plans, or other publicly available planning documents or resolutions passed by city councils or boards. In some cases where funding needs to flow through the state administrating authority, state support letters will be required.
• CPF Audits. The Government Accountability Office (GAO) will conduct a mandatory audit of a sample of projects and report its findings to Congress.

Holland & Knight Insights

• With its revival, CPF is an opportunity in the federal appropriations process to shape meaningful policy outcomes. As lawmakers see the direct impacts of the coronavirus pandemic on their districts, CPF presents a unique opportunity to bolster post-pandemic recovery. CPF empowers members to direct aid to specific projects in their districts and ensures that they are responsive to local needs. That said, members of Congress will weigh heavily how they are helping their constituents in their CPF decision-making. Consideration needs to be given as to how a community project request would mesh with member priorities.
• CPF presents an opportunity for eligible entities to avoid the complexities of federal grant programs. However, entities interested in earmarks will need to be quick to develop CPF requests. The timeline is tight, especially this year as House Committee leadership did not publish initial guidance until late February and full guidance until March 10. This leaves less time for stakeholders to develop and submit a request. With a limit of 10 requests across 20 accounts, this will be a very competitive process at least in the House. The Senate is not expected to have the same limit of 10 requests. Nevertheless, this will become an annual process (unless discontinued in the future), so next year will present a new opportunity.
• The "Community Support" emphasis in CPF guidance cannot be ignored. A project that genuinely addresses a community need and could be supported by elected officials or community organizations and nonprofits will stand a better chance. Generating this type of support will require effort against short timelines. Members are very unlikely to support requests that are not physically located (or being carried out) in their districts, and a senator will be unable to support a project not located in his or her state.
• The return of earmarks reasserts Congress' role in making specific decisions about spending taxpayer money. Congress has the constitutional authority to direct how money is expended – what is known as the "power of the purse." During the earmark moratorium, there were bipartisan complaints that the ban this transferred the legislative branch's constitutionally delegated authority to the executive branch.
• Earmarks have the capacity to incentivize and foster bipartisanship. When community projects are at stake in the passage of a bill, lawmakers are generally more inclined to support the measure. Projects with mutual aid across district lines can bring members together who do not usually work together.

Eligible Accounts and Programs

Of the 12 annual appropriations bills, 10 will be open for CPF. The two bills that will not be earmarked are the Legislative Branch and State/Foreign Operations Appropriations bills. Of the 10 bills open to requests, each have only a handful of accounts available for requests.

Members will have their own internal deadlines for constituent entities to submit requests for their consideration. These internal deadlines are typically one to two weeks before the member needs to meet the set subcommittee deadlines. The internal deadlines allow the member to thoroughly review requests and determine how they will prioritize requests. House subcommittee deadlines are between April 14-16.

Notes

¹ Lifting the Earmark Moratorium: Frequently Asked Questions, Congressional Research Service report

² Final guidance has not been published.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.