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Louis Jacobson
By Louis Jacobson March 16, 2021

American Rescue Plan includes $350 billion for states, localities

For months during the coronavirus pandemic, congressional Democrats tried to secure financial assistance for states and localities to cope with new public health expenses and tax shortfalls from shuttered businesses. Republicans, who controlled the Senate then, refused, arguing that such aid would amount to a bailout for mostly Democratic constituencies that had made bad spending decisions in the past.

As a presidential candidate, Joe Biden took up the issue, promising to secure fiscal help for states and localities if he was elected.

Now, with passage of the $1.9 trillion American Rescue Plan in March, he has fulfilled that promise.

The law provides $195.3 billion to state governments, $130.2 billion to local governments, $4.5 billion to territories, and $20 billion to tribal governments, for a total of $350 billion. That's more than double the $150 billion provided to states and localities in the CARES Act, which was enacted about a year earlier.

The amount of aid provided received some criticism after data suggested that the revenue hit to state and local governments was not as big as some experts had feared. But supporters said the allocation was needed.

"Although revenue losses in some states were not as dire as predicted early in the pandemic, state and local governments across the country have, nevertheless, already made massive cuts to their budgets and staffs," wrote the liberal Economic Policy Institute. "These cuts have serious implications for the health of local economies and the quality of life in those communities."

Monies from the bill "can be used to cover costs or replace revenue lost due to the pandemic, giving governments wide latitude in the application of the funds, and the use of funds would not be subject to an expiration date," Fitch Ratings, which rates the fiscal health of states and localities, wrote in an analysis of the bill. 

We rate this a Promise Kept. 

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