The Treasury Department announced Monday that it will begin distributing hundreds of billions of dollars in emergency funding to state and local governments as part of the $1.9 trillion coronavirus relief law signed by President Biden earlier this year.
The measure, known as the American Rescue Plan, included $350 billion in unfettered aid for state and local governments, with $195.3 billion directed toward state governments and Washington, and $130.2 billion allocated for local governments. An additional $20 billion will be given to federally recognized tribal governments, while $4.5 billion will go to U.S. territories.
"With this funding, communities hit hard by COVID-19 will able to return to a semblance of normalcy; they’ll be able to rehire teachers, firefighters and other essential workers – and to help small businesses reopen safely," Treasury Secretary Janet Yellen said in a statement. "There are no benefits to enduring two historic economic crises in a 13-year span, except for one: We can improve our policymaking."
More money will be given to states that had a higher number of unemployed citizens at the end of 2020 rather than the overall population, which has irked some states in the south and midwest that tend to have Republican governors and better jobless rates. While many Democrat-led states implemented strict lockdown measures to curb the spread of the virus, some of their GOP counterparts adopted a more laissez-faire approach, allowing businesses to remain open for a better part of the pandemic.
For instance, California, the most populous state, will receive the most money, $27 billion – roughly 13% of the total amount designated for all state. The second most populous state, Texas, will receive the second-highest amount, $15.8 billion, according to figures published by the Treasury Department.
But New York will receive the third-highest amount at $12.7 billion, even though Florida is the third-largest state by population, according to U.S. Census Bureau 2020 estimates. Florida will receive about $8.8 billion, the fourth-highest amount among states.
Broad Treasury guidance dictates that state and local governments can use the money for public health expenses, as well as to offset harm from the crisis to small businesses, workers and affected industries. Essential workers qualify for premium pay. Money from the legislation can also be used to invest in water, sewer and broadband internet.
But the money also has strings attached to it: Treasury said state and local governments cannot use the money to cut taxes, pay down debt or bolster reserve funds.
The funding could provide a jolt to the nation's economy after employers added just 266,000 jobs in April – well below the consensus forecast of 1 million. Labor Department data shows the economy has 8.2 million fewer jobs than it did in February 2020, before the pandemic forced an unprecedented shutdown of the nation's economy.