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Administration seeks authority to "cure" remaining ERA2 funds and swap federal/state dollars to avoid treasury recoupment
Summary
Administration officials told the House Appropriations Committee they seek statutory authority to "cure" remaining Emergency Rental Assistance (ERA2) federal funds by swapping federal balances into clearly eligible uses and replacing prior high‑risk uses with state general fund, reducing risk of U.S. Treasury recoupment.
Douglas Farnham and administration staff told the committee that the state holds about $14.3 million in remaining Emergency Rental Assistance (ERA2) federal funds from a larger $152 million grant and that Treasury guidance has raised recapture risk for some prior expenditures.
Farnham said Treasury has issued strict guidance and that several states faced large recoupment demands; Vermont’s ERA2 program used some funds for affordable housing repairs and rental assistance. Treasury later questioned some uses and could assert that up to roughly $8–9 million of the remaining balance may be at risk; Farnham said the administration’s plan is to “cure” those higher‑risk amounts by identifying other federal‑eligible uses for the remaining ERA2 balance and then replace the originally used funds with general funds so the overall program intent is preserved and federal recapture risk is reduced.
Farnham described “curing” as a swap: spend eligible federal funds that remain in ways Treasury will accept, and backfill the prior high‑risk uses with general fund appropriations so the legislative intent of the original programs is preserved. He said the ERA2 grant’s period of performance ends Sept. 30, 2025, so the administration needs authority this spring/summer to reconcile and fully spend eligible federal funds before that deadline.
Administration staff said Treasury has taken aggressive recapture actions against other states in late 2024 and that the state has already spent about $4 million on affordable housing repairs and roughly $4 million on rental assistance amounts for which file documentation may be incomplete. The administration estimated it may need to move roughly $8–9 million of the remaining $14.3 million to fully reconcile and protect the federal balance; final reconciliation will be completed during summer 2025.
Farnham and committee staff explained this is not a request for new net federal money but a statutory authorization to perform the swap (use remaining federal ERA2 funds on eligible expenses, replace previously questionable federal expenditures with general fund) so the state can avoid recapture and preserve legislative priorities for housing and rental assistance.
