Did Connecticut's transfer of interest earned on federal ARPA funds into the General Fund break the law on legislative oversight of pandemic relief money?
Plain-English summary
Connecticut received billions of federal dollars under the American Rescue Plan Act (ARPA). While that money sat in the State Treasurer's Interest Credit Program, it earned interest. The state then moved that interest into the General Fund, where it could be spent on anything the General Assembly later appropriated. House Republican Leader Vincent Candelora asked whether that move violated Special Act 21-1, the 2021 law setting up legislative oversight of how Connecticut spends ARPA money.
Attorney General William Tong concluded the transfer was lawful, on three independent grounds:
- Connecticut's default rule (Conn. Gen. Stat. § 3-39b) sends all interest earned on Treasurer-invested funds to the General Fund unless another statute or bond indenture redirects it. Special Act 21-1 says nothing about interest.
- When the General Assembly wants to override the default, it knows how, and has done so for many specific funds (Criminal Injuries Compensation Fund, Real Estate Guaranty Fund, and others). It chose not to do that for ARPA interest.
- Special Act 21-1 only governs "federal funds designated for the state" through ARPA. The U.S. Treasury Department's own SLFRF Final Rule FAQ says interest earned on advances of federal funds is not program income and is not subject to ARPA's program restrictions.
So the interest is state money, governed by state default rules, and lands in the General Fund.
What this means for you
If you are a state legislator or legislative staffer
The opinion is a roadmap for what Special Act 21-1 does and does not control. It does not control interest. If the General Assembly wants ARPA interest treated like ARPA principal, it would have to amend Special Act 21-1 (or pass a new statute) to redirect that interest, the same way other Connecticut statutes redirect interest for specific funds. The AG's reasoning leans heavily on what the legislature did not say, so any future drafting should be explicit if the goal is to capture interest.
If you work on municipal or quasi-public-agency finance
If your locality or agency holds federal grant funds and is unsure where interest goes under Connecticut law, the default starting point is § 3-39b: interest on funds invested by the Treasurer goes to the General Fund. The exceptions are narrow (specific fund statutes, written application by the head of a state agency, or a Treasurer determination that another allocation is in the State's best interest). Do not assume interest follows the underlying federal program restrictions.
If you are a journalist or accountability researcher covering pandemic relief spending
The bottom line of this opinion: Connecticut treated the interest as state revenue, not as restricted federal aid. That was legal under both state and federal rules in effect at the time of the transfer. If you are investigating whether interest earnings were used in ways that critics consider inconsistent with the spirit of ARPA oversight, the legal hook is gone. The political and policy critique remains, but the statutory critique was foreclosed by the AG's reading of § 3-39b.
If you advise on public finance
Note the AG's reliance on the federal SLFRF Final Rule FAQ guidance that "[i]nterest earned on advances of federal funds is not program income" and "is not subject to program restrictions." That federal position is what lets Connecticut sweep the interest without triggering U.S. Treasury claw-back risk. Confirm the FAQ is still current before relying on it for similar questions about other federal grant streams.
Common questions
Q: Why does interest on federal money default to Connecticut's General Fund?
A: Because Connecticut law says so. Conn. Gen. Stat. § 3-39b directs all interest earned on Treasurer-invested funds to the General Fund unless another state statute or a bond indenture provides otherwise.
Q: Did Special Act 21-1 cover only the original ARPA dollars, or also any income they generated?
A: Only the original dollars. Special Act 21-1 applies to "federal funds designated for the state" under ARPA. The AG concluded interest earned by the Treasurer on those funds is not the same thing as federal funds designated for the state.
Q: How much interest is at stake?
A: The opinion does not name a dollar figure. It addresses the legal authority for the transfer, not the amount.
Q: Could the General Assembly change this result?
A: Yes. The opinion explicitly notes the General Assembly has overridden the § 3-39b default for many specific funds (such as the Criminal Injuries Compensation Fund). A new act could redirect ARPA interest to a specific purpose. Until then, the default applies.
Q: Does the federal government object to states sweeping ARPA interest into general revenue?
A: No. The U.S. Treasury Department's State and Local Fiscal Recovery Funds Final Rule FAQ states that interest earned on advances of federal funds is not program income and is not subject to ARPA program restrictions.
Q: What is the State Treasurer's Interest Credit Program?
A: A pooled investment program run by the State Treasurer, which invests state funds and credits the earned interest under the rules in § 3-39b.
Background and statutory framework
Special Act 21-1, "An Act Concerning Legislative Oversight and Approval of COVID-19 Relief Funds," set up legislative review of how Connecticut planned to spend the ARPA money flowing into the state in 2021. It told the executive branch to seek legislative approval for proposed allocations of ARPA dollars. It did not address what happened to interest earned while those dollars sat invested with the Treasurer.
Conn. Gen. Stat. § 3-39b is Connecticut's general rule for interest on Treasurer-invested funds. The default destination is the General Fund. The statute permits interest to be allocated elsewhere only on written application by the heads of state agencies or if the Treasurer deems an alternative allocation in the State's best interest. Neither exception applied here.
The opinion also relies on a familiar canon of statutory interpretation: when the legislature includes specific direction in some statutes and omits it in others, the omission is taken as intentional. Mayer v. Historic District Comm'n, 325 Conn. 765, 777-78 (2017). Because the General Assembly has expressly directed interest to particular funds in many other statutes (Criminal Injuries Compensation Fund, Real Estate Guaranty Fund, and others), and chose not to do so in Special Act 21-1, the AG concluded that omission was deliberate.
The third leg of the analysis pulls in federal guidance. Under the U.S. Treasury SLFRF Final Rule FAQ, interest earned on advances of federal ARPA funds is not "program income" and is not subject to ARPA's program restrictions. That removes any conflict between Connecticut's sweep and federal grant law.
Citations and references
Statutes and acts:
- Conn. Gen. Stat. § 3-39b (default crediting of interest to General Fund)
- Conn. Gen. Stat. § 54-215 (Criminal Injuries Compensation Fund interest)
- Conn. Gen. Stat. § 22a-133t and § 38a-52a (similar fund-specific provisions)
- Conn. Gen. Stat. § 20-324c (Real Estate Guaranty Fund threshold-based interest crediting)
- Conn. Gen. Stat. § 21a-226 (similar conditional interest crediting)
- Special Act 21-1, § 1 (Connecticut's ARPA oversight statute)
Case:
- Mayer v. Historic District Comm'n, 325 Conn. 765, 777-78 (2017) (legislative silence as intentional choice)
Federal guidance:
- U.S. Treasury Department, State and Local Fiscal Recovery Funds Final Rule FAQ (cited at https://home.treasury.gov/system/files/136/SLFRF-Final-Rule-FAQ.pdf)
Source
- Landing page: https://portal.ct.gov/AG/Opinions
- Original PDF: https://portal.ct.gov/-/media/ag/opinions/2025/2025_1_ago_formal_opinion_request_re_arpa_fund_interest_earnings.pdf?rev=161d07cabfa149e3b24dcff3460aa733
Original opinion text
OFFICE OF THE ATTORNEY GENERAL
CONNECTICUT
william tong
attorney general
April 28, 2025
By Email
The Honorable Vincent Candelora
House Republican Leader
Legislative Office Building, Room 4200
300 Capitol Avenue
Hartford, Connecticut 06106
Re: Request for Formal Opinion
Dear Leader Candelora:
You have requested my formal legal opinion on whether the recent transfer of interest earned on funds the State received through the American Rescue Plan Act ("ARPA") from the Treasurer's Interest Credit Program to the General Fund "violated Special Act 21-1, An Act Concerning Legislative Oversight and Approval of COVID-19 Relief Funds." I conclude it did not, for at least three reasons.
First, the default rule in Connecticut is that "all interest earned on [funds invested by the Treasurer] shall be credited to the General Fund unless . . . [o]therwise provided by a state statute or bond indenture . . . ." Conn. Gen. Stat. § 3-39b.[1] Special Act 21-1 does not override the default rule, as it says nothing about interest earned on ARPA funds and does not direct the interest to be credited anywhere.
Second, the General Assembly knows how to override the default rule when it wants and has done so on several occasions. For instance, it established the Criminal Injuries Compensation Fund and explicitly directed that "[t]he interest derived from the investment of the fund shall be credited to the fund." Conn. Gen. Stat. § 54-215; see also, e.g., id., § 22a-133t (similar); id., § 38a-52a (similar). In some instances, the General Assembly has expressly distinguished between the fund at issue and the General Fund in the same statute, directing that interest should be credited to one or the other depending on the circumstances. See, e.g., Conn. Gen. Stat. § 20-324c (requiring that "[t]he interest arising from such investments shall be credited to the Real Estate Guaranty Fund whenever the fund balance is below five hundred thousand dollars, and to the General Fund whenever the fund balance is equal to or greater than five hundred thousand dollars"); Conn. Gen. Stat. § 21a-226 (similar).
If the General Assembly had intended for Special Act 21-1 to override § 3-39b's default by precluding ARPA fund interest from being credited to the General Fund, it knew how to and would have done so expressly just as it did in these and other statutes. Its choice not to override the default is strong evidence that was not its intent. See, e.g., Mayer v. Historic District Comm'n, 325 Conn. 765, 777-78 (2017). That is especially true since the General Assembly is presumed to know the default rule in § 3-39b and "the effect that its [inaction] would have," and also "to have intended that effect . . . ." Id. at 377.
Third, and no less importantly, Special Act 21-1 only applies to "federal funds designated for the state" through ARPA. See S.A. 21-1, § 1. Interest earned from the State Treasurer's investment of ARPA funds is not itself "federal funds designated for the state." And while "program income" generated from ARPA funds "must be used for the purposes and under the conditions of the Federal award," the United States Treasury Department has made clear that "[i]nterest earned on advances of federal funds is not program income" and "is not subject to program restrictions."[2] If the federal government itself does not view earned interest as income that is part of the federal program, there is no reason to believe the General Assembly viewed it as part of the "federal funds designated for the state" that are subject to the allocation procedures spelled out in Special Act 21-1.
I trust this opinion responds to your request.
Very truly yours,
WILLIAM TONG
[1] Section 3-39b also permits interest to be allocated elsewhere upon written application by the heads of state agencies or if the Treasurer deems it in the State's best interest. Neither exception applies here.
[2] https://home.treasury.gov/system/files/136/SLFRF-Final-Rule-FAQ.pdf (emphasis in original).