By Rachel Dietert and Ben Reynolds
The American Rescue Plan Act of 2021 includes $350 billion in new funding for state, local, territorial and tribal governments through the Coronavirus State and Local Fiscal Recovery Fund. Within that fund, $195 billion is distributed to state governments and Washington, D.C. While there are some restrictions on the use of funds, states have considerable discretion. CSG has collected allocation data from state actions, enacted legislation and mandatory State Recovery Plan Performance Reports. The Council of State Governments ARPA Utilization Database includes information on these allocations through December of 2021. Data is organized into 27 “policy areas” based on funding categories. Further subcategories are provided to include more detail on the funding.
CSG is producing a series of articles focused on how states are using the State Fiscal Recovery Fund. The first article can be found here.
This second article examines the state policy areas receiving the greatest investment.
Revenue and Taxation ($21.1 billion) and Management and Administration ($19.7 billion) are the top two policy areas across the country, receiving substantially more funding than others. Revenue and Taxation was the top policy area as states elected to use funds to replace revenue lost because of the pandemic. Revenue replacement has helped states address a decrease in state tax revenue, which from April through June 2020 fell 25% compared to the same quarter of 2019 (Pew). Management and Administration investments are another way states are addressing the impacts of the pandemic. Examples of administration costs include efforts to ensure program sustainability by increasing staff or contracting with consultants.
Eleven states allocated the most funding toward Unemployment. Many states made substantial deposits into unemployment insurance funds. Arizona, for example, allocated $758.8 million into its Unemployment Insurance Trust Fund.
Revenue and Taxation was the second most funded policy area. Most states used their funding toward revenue replacement. California transferred $9.2 billion to address its revenue loss due to the pandemic.
The top policy area in four states was Broadband, and another four states top policy area was Infrastructure. New Hampshire allocated $659,734 to fund its Broadband Connectivity Program while North Dakota is using $150 million to fund natural gas pipeline infrastructure grants to develop a high-pressure transmission pipeline to transport natural gas to eastern North Dakota.
Alaska, Alabama, and Oregon invested heavily in Justice and Public Safety, more than any other area. Alaska budgeted $24.7 million to fund its Wildlife State Troopers and $28.8 million for its Office of Public Advocacy. Alabama appropriated $400 million to its Department of Corrections for its Capital Improvement Fund. Oregon used $37.3 million to address deferred maintenance and administrative services for its Department of Corrections.
Utah has allocated the most funds for Education. The stateused $15 million to offer one-year tuition and fee scholarships to individuals who deferred or interrupted enrollment because of the pandemic.
Idaho was the only state in which the highest amount of funds was for COVID-19 response, appropriating $50 million.
The top area for spending in CSG South ($3.2 billion) and CSG West ($11.1 billion) states was Revenue and Taxation. The top policy priority for CSG East states was Management and Administration. For CSG Midwest states, it was Unemployment. All four regions had Unemployment within their top five policy areas. Revenue and Taxation was in the top five in the East, West and South.
States lost a considerable amount of revenue during the pandemic and are using federal funds to make up for it. State governments are also acknowledging how unemployment rates were impacted by the pandemic. Millions of people lost their jobs in the early months of the pandemic. But the unemployment rate had fallen to 4.9% by October 2021.
(Top Policy Area by Number of Programs Funded Graphic Goes Here)
Revenue and Taxation and Management and Administration were the most invested categories and most of those funds have been used for fiscal health recovery. States also used the Coronavirus State and Local Recovery Funds to target certain areas and programs that needed additional resources, but may not have received them in “normal” years.
Among subcategories, State Fiscal Recovery Funds were invested most heavily in Health and Human Services programs (239), followed by Economic and Community Development (155) and Justice and Public Safety (134).
Of the 239 Health and Human Services programs funded, 56 involve public health. States vary in their public health needs and the programs reflect that. For example, Arkansas budgeted $10.5 million to increase hospital bed capacity while Maine allocated $102,986 to establish a program to offer free well water treatment for low-income residents. Other program areas funded in Health and Human Services include:
- Mental Health (26)
- Behavioral Health (22)
- Nutritional Stability (19)
- Long-term Care Facilities (10)
Another top program priority for states was Economic and Community Development. Economic development initiatives received the most state funds. Indiana allocated $500 million for its Regional Economic Acceleration and Development Initiative, while New Jersey is spending $15 million to develop its World Cup and Meadowlands Complex. Ensuring small businesses survived the pandemic was another high priority for states. North Carolina used $500 million to establish the Businesses Recovery Grant program to aid businesses that suffered damage due to the pandemic. Wisconsin used $46.7 million for grants to assist with costs businesses incurred for health and safety improvements. Other programs funded under Economic and Community Development include:
- Tourism (30)
- Community Development (13)
- Parks and Recreation (4)
- Diversity, Equity, and Inclusion (2)
The third most funded policy area by programs was Justice and Public Safety. The top program under this policy area was Emergency Management. Florida used $1 million to fund its Emergency Preparedness and Response Fund, while Utah used $6.9 million to update its Department of Corrections communication equipment and enhance its interoperability. Other programs funded under Justice and Public Safety include:
- Violence Prevention (10)
- Corrections (10)
- Crime Victim Services (8)
- Law Enforcement (8)
Through 2021, states allocated their ARPA funds for immediate needs. States faced revenue shortfalls and invested funding for Covid testing and other health care and health system improvements. Since states have until 2024 to allocate their APRA funds and many immediate needs for funds have been accomplished, states are going to be more flexible and creative with their ARPA funding. States will use this remaining funding to address a variety of needs.