Despite issuers’ hopes, a compromise defense bill passed by the House Tuesday night failed to include a provision allowing for expanded use of pandemic relief funds.

The provision, which the Senate passed in October as standalone legislation, likely won’t be taken up this year, though some supporters continue to hold out hope.

The legislation would allow states and local governments to use up to $10 million or 30% of their American Rescue Plan Act allocation, whichever is greater, for transportation, infrastructure and disaster relief – uses that are currently restricted by ARPA.

The move would free up $123 billion for states and local governments, said Joung Lee, deputy director and chief policy officer for the American Association of State Highway and Transportation Officials.

Governments would also be able to use the money for local matches to federal funds, which is important given the large amount of federal funding in the newly passed Infrastructure Investment and Jobs Act, Lee said.

“That flexibility is a very important policy underpinning for ARPA funds that we’d like to extend more completely for transportation purposes,” Lee said.

The measure began as an amendment to the IIJA but later morphed into its own legislation, the State, Local, Tribal and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act, which the Senate passed unanimously in late October. Earlier this week, a group of 30 issuer organizations, including AASHTO, urged House leaders to take up the bill and had hoped that it would be included as an amendment in the NDAA. But the provision was not included in the final compromise NDAA bill passed by the House late Tuesday. It remains unclear whether it will pop up again this year.

“We obviously can’t read the crystal ball on the Hill, but we’re certainly not going to give up for the year,” Lee said. “We’ll continue to make the push.”

Lee said he’d been in contact with House leaders Wednesday to remind them of the issue’s importance to state departments of transportation.

The National Association of Counties, which helped organize the Monday letter to House leadership, is turning its attention to next year, said Eryn Hurley, deputy director for NACo’s Government Affairs Department.

“We are hopeful to work with our federal partners on the bipartisan legislation in the new year,” Hurley said.

Newly eligible uses would include a wide variety of surface transportation projects ranging from national highway programs, the TIFIA loan program, nationally significant freight and highway projects and the Territorial and Puerto Rico Highway Program. The funds could also be used for government services, a variety of transit-related projects, Community Development Block Grants, and disaster relief, according to NACo.