Treasury Rules Against Cities Using Pandemic Aid to Pay Debt

The U.S. Treasury Department stuck by its rule that states and cities can’t use pandemic relief aid to pay down debt.

On Thursday, the Treasury released its final rule detailing how municipalities can use some $350 billion of aid from the Biden administration’s American Rescue Plan. The rule bars governments from using the funds to pay debt service, one of several restrictions that the Treasury has put on the money.

A bevy of governments like Illinois had asked the Treasury to relax that restriction, arguing that they needed to take on debt when the pandemic upended their finances in 2020. ...