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On March 11, 2021, President Biden signed into law the American Rescue Plan, the most recent legislation designed to combat the economic fallout associated with the COVID-19 pandemic. One key component of the $1.9 trillion package is an estimated $362 billion in federal aid to state, local, territorial, and tribal governments to cover expenditures incurred due to the public health emergency. That allocation is more than twice the $150 billion allocated to such governments as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020.
The $362 billion included in the American Rescue Plan is allocated to sub-federal governments in the following amounts:
Funds allocated to state, local, tribal, and territorial governments through the American Rescue Plan may be used to cover costs associated with the economic impacts of the COVID-19 pandemic, to help pay for essential workers, to cover government services affected by a loss of revenue, and to invest in water, sewer, or broadband infrastructure. Additionally, local governments are permitted to transfer funds to qualifying private nonprofit organizations, public benefit corporations that work in transportation, or a special-purpose unit of state or local government. The legislation stipulates that state and local governments are not permitted to use funds to offset any reductions in tax revenues resulting from a change in law during the pandemic, nor can they use funds to make deposits into pension funds.
Funding provided for the purposes described above is available until December 31, 2024, but will likely be disbursed much earlier. The Congressional Budget Office estimates that $284 billion (78 percent) of the total allocation will be disbursed in 2021, $77 billion in 2022, and the final $1 billion in 2023.
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