United States: Congress Launches FY 2023 Community Project Funding Process After Successful Revival

Highlights

• To build upon the successful return of earmarks in fiscal year (FY) 2022 via the Community Project Funding process, members of Congress in FY 2023 will again solicit requests for earmarks to support specific community projects as part of the annual appropriations process.
• The FY 2022 process garnered significant support, as lawmakers seized the opportunity to direct funding to a broad range of projects to their respective districts across the nation.
• This Holland & Knight alert provides an overview of the FY 2023 Community Project Funding guidance provided by the U.S. House of Representatives and Senate, along with a look at the eligible accounts, programs and deadlines.

President Joe Biden signed into law the $1.5 trillion Consolidated Appropriations Act of 2022 (the Omnibus) (Public Law No. 117-103) on March 15, 2022. Included in the Omnibus for the first time in a decade was a large portfolio of earmarks, after Congress reinstated the process of directing federal funds for local projects in the 117th Congress. (See Holland & Knight's previous alert, "Community Project Funding: 117th Congress Revives and Recalibrates the Earmark Process," March 23, 2021.)

The process garnered significant bipartisan support, as lawmakers seized the opportunity to direct funding to a broad range of projects to their respective districts across the nation. The Omnibus included nearly 5,000 earmarks totaling nearly $9 billion across 10 of the 12 appropriations bills.¹ Democrats secured more than $5 billion for their states and districts, and Republicans secured nearly $3.4 billion. Slightly more than $600 million of earmarks were bipartisan, championed by lawmakers in both parties.

To build upon the success of earmarks in fiscal year (FY) 2022, members of Congress in FY 2023 will again solicit earmark requests for earmarks to support specific community projects as part of the annual appropriations process.

House Appropriations Chair Rosa DeLauro (D-Conn.) unveiled the process on March 18 for fiscal year (FY) 2023 appropriations, including Community Project Funding request overall guidance. Shortly thereafter, Senate Appropriations Chair Patrick Leahy (D-Vt.) unveiled the upper chamber's process for FY 2023 appropriations, including Community Project Funding.²

Formerly and colloquially referred to as earmarks, Community Project Funding (CPF) 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. 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.

In the 117th Congress, lawmakers reinstated the process of earmarking for local governments and 501(c)(3) nonprofits, ushering in the return of congressionally directed spending through a reformed process rebranded as community project funding and congressionally directed spending.

By reinstating the earmark process, Congress enacted meaningful reforms to address accountability and transparency. The process of earmarking had been prohibited since the 112th Congress, due to questionable abuses such as wasteful spending and corruption scandals regarding how legislators directed funds. However, members on both sides of the aisle ultimately lifted the moratorium to return power to Congress to direct funding for local needs rather than leaving the distribution to the executive branch. Many have argued that earmarks serve as catalysts for bipartisanship and efficiency on Capitol Hill.

FY 2023 Community Project Funding Guidance

The CPF request process remains similar to that of last year. As noted above, both the House and Senate Appropriations Committees have issued guidance to members on how to submit earmark project requests for consideration in the coming months.

All of the transparency and accountability requirements the Appropriations Committees announced last year for CPF requests remain in place, including limiting spending on CPF to no more than 1 percent of discretionary spending.

Each member of Congress is responsible for identifying his or her own process and submission timeline. After their respective deadlines, each member will submit his or her requests to the Appropriations Committees to review the requests.

Notably, both Committees provided added detail and instructions to their FY 2023 processes that provide valuable direction for entities considering submitting a CPF project request. Key takeaways include:

• House Increases Limit on Number of Requests. This year, House members may submit up to 15 CPF requests, up from 10 requests last year. Senators do not have a cap on the number of their requests.
• Transparency. For transparency in the process, members are again required to post online their requests and financial disclosure letters that certify no financial interest in the projects requested. For the Committees to consider a request, these requirements must be met.
• 15-day Comment Review Period. In a change from last year, offices are asked to wait until 15 calendar days after the Committee's submission deadline before posting the information online. Providing 15 days between the submission deadline and posting will allow Committee staff to review the requests and make sure they are properly categorized as a CPF request.
• Community Support and Engagement. Community engagement and support are again crucial in determining which projects are worthy of federal funding. To that end, members will be asked to include evidence of community support that served as compelling factors in the decision to submit project requests. Examples of these include, but are not limited to:
  • letters of support from elected community leaders (e.g., mayors or other officials)
  • media articles highlighting the need for the requested CPF
  • support from newspaper editorial boards
  • projects listed on state intended use plans, community development plans or other publicly available planning documents, or
  • resolutions passed by city councils or boards
• Evaluation Criteria.  Generally, House and Senate subcommittees will consider requests with the following in mind:
  • Ban on for-profit recipients. The Committee is imposing a ban on directing CPF to for-profit entities.
  • Matching requirements. Several federal programs eligible for CPF requests require a state or local match for projects either by statute or according to longstanding policy. The Committees will not waive these matching requirements for CPF requests.³
  • One-year funding. Each project request must be FY 2023 funds only and cannot include a request for multiyear funding. However, the performance period for a project funded with amounts provided in FY 2023 will depend on the appropriations account from which it is funded and may be longer than one year.
  • State, local or tribal governmental entities as grantees. Members are encouraged to consider public entities as primary grantees to oversee the completion of the project.
  • Nonprofits as grantees. If a member of Congress requests that funding be directed to a nonprofit organization, the member will need to provide evidence that the recipient is a nonprofit organization by supplying either the Employer Identification Number (EIN) or an IRS determination letter. Further, many water projects often partner with nonprofit entities to complete the projects. Therefore, projects may also be directed to nonprofits with an inherently governmental function.

More specific instructions are provided from each subcommittee, including eligible accounts and the required information to accompany such requests, as well as updated guidelines.

Eligible Accounts, Programs and Deadlines

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.

Notably, the House and Senate generally synchronized the eligible accounts this year. In 2021, the Senate had more eligible accounts than the House. However, only the House Defense Subcommittee is accepting requests; the Senate Defense Subcommittee is not.

Below is a closer look at the eligible accounts for each subcommittee, along with the deadline for House and Senate members to submit CPF requests (all deadline dates are 2022):

Holland & Knight Insights

Community Project Funding is an opportunity in the federal appropriations process to shape meaningful policy outcomes at the local level. CPF empowers members of Congress to direct aid to specific projects in their districts and ensures that they are responsive to local needs. That said, members must weigh heavily how they are helping their constituents in their CPF decision-making. Consideration needs to be given as to how a request would align with member priorities.

CPF presents an opportunity for eligible entities to avoid the complexities of federal grant programs. However, entities interested in earmarks should be quick to develop CPF requests with tight timelines.

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. House 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.

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.

Footnotes

1. As is true for any grant recipient, they will need to work with the respective Executive Branch departments and agencies to determine when funds may be ready for release, and that timing may vary by department. The Appropriations Committees are working to provide resources to help guide communities through the process.

2. The Senate refers to Community Project Funding as "Congressionally Directed Spending," though the two terms are synonymous.

3. This does not mean that matching funds must be in-hand prior to requesting a project, but that local officials must have a plan to meet such requirements in order for such a project to be viable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.