States Have Many Opportunities to Support an Equitable Recovery With Remaining Billions of Federal Pandemic Aid

As many states begin their legislative sessions, states overall have over $80 billion in federal pandemic aid remaining. This gives them significant opportunities this year to address the pandemic’s ongoing impacts, such as by helping residents who are struggling to pay rent or by bridging the opportunity gap for students after a long period of remote learning. Policymakers should look to the many positive ways states used federal aid in 2021 and invest the remaining funds to support a robust and equitable recovery. State policymakers can make best use of these funds by engaging communities most affected by the pandemic to understand their priorities.

The American Rescue Plan Act’s Fiscal Recovery Funds (FRF) provided $195 billion to states to be obligated by the end of 2024. In 2021, most states allocated at least some portion of their share, typically through their budgets or special legislative sessions, with 57 percent of total funds being allocated. A collective $80 billion remains, and all but four states have money left. In the median state, remaining FRF equal 12 percent of the state’s budget, which means many states have major opportunities to push equitable policies and programs forward.

In 2021, states made a variety of worthy investments to address the pandemic’s immediate impacts as well as long-term needs:

• Thirty-four states, Washington, D.C., and Puerto Rico invested in health care. For example, Texas allocated over $2.5 billion to expand medical care capacity and mental health initiatives. Colorado invested $100 million in similar health initiatives, including $2 million for school-based mental health services for children and their parents.

• Twenty-seven states, D.C., and Puerto Rico used the funds for education. For example, Virginia provided $111 million for undergraduate student tuition assistance and need-based financial aid. Michigan appropriated $121 million for its state-funded preschool program. D.C. allocated $21 million for “high impact and frequency tutoring” focused on students who struggled academically during remote learning.

• Thirty-three states, D.C., and Puerto Rico invested in economic relief and development. For example, Wisconsin allocated $420 million to small business grants. Puerto Rico devoted $250 million to premium payments for essential workers in the public and private sectors.

• Twenty-six states, D.C., and Puerto Rico invested in human services programs to provide housing, cash, and food assistance. For example, New Jersey allocated $40 million to fill COVID-19-induced funding gaps in affordable housing and community development projects. California appropriated over $1.7 billion to expand children’s savings accounts. Washington State used $45 million to provide food assistance to hunger relief organizations that serve Black, Indigenous, and other communities of color.

The U.S. Treasury Department issued a final rule early this year clarifying that states can use FRF for a variety of investments to support families and communities with low incomes. The rule also notes that households with incomes below 300 percent of the federal poverty level (or $65,880 for a family of three), and communities with median incomes below this level, were likely to have been impacted by the pandemic, and therefore allows FRF to be spent on housing, food assistance, health care, cash assistance, and more in these communities.

Some states have also increased transparency and encouraged community input on how the funds are spent. For example, Delaware provides its FRF allocations and the most recent news on spending on its state website. And Montana’s Communications Advisory Commission held open, virtual meetings and accepted public comments. These practices and others, such as statewide surveys and partnerships with community-based organizations, can direct dollars toward more effective and urgent uses of funds, supporting recovery and advancing equity.

States have key opportunities to empower communities and tackle long-standing racial and economic inequities that have been exacerbated during the pandemic. States should continue to engage residents, especially those hit hardest by the public health and economic crises, and appropriate their federal pandemic aid in a transparent way to make the most of their opportunity.

Maya El Jawhari, a CBPP intern, contributed to the research and writing of this post.