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Weekly Update: May 24 – News and Resources for State Leaders

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The American Rescue Plan (ARP) Act of 2021, a $1.9 trillion economic relief package, was signed by President Joe Biden on March 11. Much of the funding included will have impacts on states, both in their budgets and in the specific policies they enact. The Council of State Governments (CSG) is providing our members with ongoing analyses of the various components of the ARP in this special edition series of The Current State e-newsletter, out each Monday. 

This week, CSG provides resources on how states can utilize American Rescue Plan (ARP) Act funds for vaccine distribution, a breakdown of higher education funding in the ARP, and updated information on vaccine access in the southern U.S. This week’s newsletter also includes news, updates and resources covering the rollout of child tax credits, U.S. Department of Treasury guidance on fiscal recovery funds, mental health grants and more.

NEW THIS WEEK

Vaccine Distribution

The ARP provides $93 billion in funding for public health efforts, including funding for vaccine distribution. Most of that funding goes to the U.S. Department of Health and Human Services, including $7.6 billion for the COVID-19 response at community health centers and $5.2 billion for purchasing vaccines and related medical equipment.

Vaccine Access in the Southern U.S.

In response to a request from the CSG Southern region, researchers conducted a specific review of state vaccine scheduling practices in those member states. Among the CSG South states, nine have a state-run website where residents can schedule a vaccination appointment, while six states do not have a state-run website with online appointment scheduling. Every state except one in CSG South has a phone hotline that residents can call for information about COVID-19 vaccinations. Virginia has the highest percentage of fully vaccinated residents in CSG South, where 38.5% of residents are fully vaccinated. Kentucky is the second highest, with 35.1%.

Higher Education

The American Rescue Plan includes $36 billion in funding for the third version of the Higher Education Emergency Relief Fund (HEERF III). Half of that funding will be spent on emergency financial aid grants to students, while the other half will be used by institutions to respond to public health and financial impacts from the pandemic.  

NEWS, UPDATES AND RESOURCES

Treasury begins distributing Coronavirus Fiscal Recovery Funds

In the first 11 days since its launch, the Treasury announced it has already distributed $105.3 billion of the Coronavirus State and Local Fiscal Recovery Funds established by the American Rescue Plan to over 1,500 recipients. This leaves approximately $244.7 billion to be allocated. States and localities can use these funds to support public health, workforce, vulnerable communities and infrastructure projects including ensuring access to clean water and broadband.

Treasury releases report on tax compliance

The Treasury released a report describing the Biden Administration’s plans to close the “tax gap,” or the difference between taxes owed to the government and the taxes actually paid. According to the analysis, the gap will rise to about $7 trillion over the course of the next decade if left unaddressed. However, the ARP provides the IRS with resources to address tax administration such as funding for modernization technologies and increasing scrutiny of third party reporting.

Monthly Child Tax Credits begin
Monthly payments of the refundable Child Tax Credits from the ARP will begin going to families July 15 and will continue being made on the 15th of each month. About 39 million households (accounting for approximately 88% of children in the U.S.) will begin receiving the credit by direct deposit with no further action needed. Other households may receive the credits through paper check or debit card. Families can expect monthly payments of up to $300 for each child under age six and up to $250 for each child over age six.

The Economic and Employment Effects of Medicaid Expansion

In a new report titled, “The Economic and Employment Effects of Medicaid Expansion Under the American Rescue Plan,” the Commonwealth Fund identifies potential economic impacts to 14 states adopting Medicaid expansion with new incentive from the ARP. Key findings include how Medicaid expansion would create over one million new jobs, provide health insurance to over four million people and increase federal revenue by $49 billion. Read the report here.

Treasury releases interim final rule for recovery funds

The Treasury issued its interim final rule regarding the Coronavirus State and Local Fiscal Recovery Fund established under the Coronavirus Aid, Relief, and Economic Security (CARES) and American Rescue Plan acts. Effective May 17, the rule prohibits repayment of debt service or reserve fund replenishment. However, some state leaders worry about what this means for budget reserves as revenue growth is still not as strong as it was pre-pandemic, and the rule may weaken states’ fiscal health if tax revenues do not meet high expectations.

Identity theft prevention efforts

In a press release May 17, President Biden issued a statement introducing a new Initiative on Identity Theft Prevention and Public Benefits to ensure ARP funding is safely and effectively distributed. The initiative is coordinated by the Office of Management and Budget and the ARP Implementation Coordinator.

Ohio’s tax offset challenge

Ohio continues to lead a court challenge to federal law prohibiting states from using relief funds to offset tax cuts. Ohio and other states argue that the Treasury rule is unconstitutional because it violates the 10th Amendment and the Constitution’s Spending Clause.

Rural vaccinations

The Centers for Disease Control and Prevention (CDC) provided $9.95 million to the U.S. Department of Agriculture’s National Institute of Food and Agriculture (USDA-NIFA) to encourage adult immunization in rural areas through community education and other partnerships.

SAMHSA block grants

The Substance Abuse and Mental Health Services Administration (SAMHSA) will distribute $1.5 billion in ARP funding to the Community Mental Health Services Block Grant Program and the Substance Abuse and Treatment Block Grant Program. The money will be allocated to states and territories by both programs. Funding allocation tables can be viewed on SAMHSA’s website, here.

Guidance for Medicaid

The Centers for Medicare and Medicaid Services (CMS) provided guidance to states regarding ARP funding, specifically regarding the temporary increase in the federal matching rate for certain Medicaid home and community-based expenditures.

Final regulations for emergency financial aid

Last week, the U.S. Department of Education issued final regulations for emergency financial aid grant eligibility for Higher Education Emergency Relief Fund programs, which utilize funds from the CARES and ARP Acts. Institutions of higher education have the authority to determine which students are eligible to receive emergency aid grants.

Closing the homework gap

The Federal Communications Commission (FCC) announced libraries will be eligible for ARP funding to purchase equipment such as laptops and Wi-Fi to help people access a reliable internet connection outside library facilities. The Emergency Connectivity Fund Program provides billions of ARP funding to close the “homework gap” by giving teachers and students the resources they need to engage in virtual learning. The rules of the program can be accessed here.

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STATE UTILIZATION OF FEDERAL FUNDS

As state policymakers weigh options on how to maximize the relief from the American Rescue Plan, state officials have begun to appropriate the stimulus funds.

  • California’s new budget proposal includes $35 million over five years to pay for “universal basic income pilot programs” that will give money to people receiving low or no income. The proposal accomplishes this by helping local governments fund their own programs, however these governments will have to help fund the programs. It is the first statewide funding effort for universal basic income; however, it comes in the wake of local pilot programs — such as one in Stockton, California — which have been found to increase employment among those receiving benefits.
  • In April, Connecticut Gov. Ned Lamont announced his proposal for ARP funding for the state. The proposal calls for investments in five key areas: defeating COVID-19 through strengthening testing and vaccination practices; investing in the future by providing upgrades to infrastructure and internet access; making the state more affordable with enhanced child care opportunities and financial aid for students; and modernizing the state with upgrades to service delivery. As thousands of nursing home staff threaten to strike due to wages and workforce deficiencies, Lamont is proposing $280 million to help with negotiations. Of that money, $25.5 million in ARP funding would be spent on hazard pay and workforce development and training opportunities for nursing home staff.
  • Minnesota hopes to transfer $1.1 billion of ARP funds to the general fund to help balance the budget and replace lost tax revenue. The remaining $500 million will allow Gov. Tim Walz to bolster health care and mitigate economic impacts of the pandemic. The state is working closely with Treasury Department officials for guidance.
  • In North Carolina, Gov. Roy Cooper announced a proposal for how to spend $5.7 billion of the state’s ARP funding with a focus on closing the digital divide via broadband expansion. Included in the plan is additional funding for Extra Credit Grants for parents facing economic hardship and for water infrastructure projects.
  • Utah lawmakers provided a breakdown of allocations of discretionary grants found in the ARP last week following their acceptance of $1.65 billion in federal relief funding. The largest allocation at $630 million will go to revenue replacement, followed by water infrastructure projects at $280 million and public health response at $250 million.
  • Wisconsin Gov. Tony Evers announced his administration will readjust its plans for ARP allocations in the state after it received $700 million less than expected. The changes will not affect the governor’s promise of relief for small business and the tourism industry.

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