How Large Are the American Rescue Plan Fund Distributions to State and Local Governments…And How Much Change Are They Likely to Create?
The U.S. government is distributing $350 billion to state and local governments through the American Rescue Plan, legislation passed by Congress to address the continued impact of COVID-19. Cleveland Fed researchers Stephan Whitaker and Grant Rosenberger sought to gauge how much impact such funding might have by comparing amounts allocated to state and local governments to their annual tax revenues. Would the money be transformational, or merely helpful?
Allocations “range from modest sums of less than 10 percent of the local government’s tax revenue, which may offset some collections lost during lockdowns, to values well over 100 percent, an amount that could create a once-in-a-generation opportunity to invest more than an entire year’s worth of tax revenue without taking on new debt,” Whitaker and Rosenberger wrote. “A few hundred counties and cities with high poverty rates and slow population growth will receive over 12 months of revenue and have an opportunity to greatly accelerate their recovery or make a major investment.”
The researchers found that nationwide the median distribution for counties is funding equivalent to 38 percent of tax revenue, while the median allocation for a city is the equivalent of 24 percent of tax collections. The distributions for Fourth District cities and counties are higher than the national distributions because the region includes several poorer, slower-growing areas.
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia. For more information, go to www.clevelandfed.org or follow us on Facebook, Twitter, Instagram or LinkedIn.