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09.30.21

How Large Are the American Rescue Plan Fund Distributions to State and Local Governments…And How Much Change Are They Likely to Create?

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Andrew Zajac

Executive Communications Writer

andrew.zajac@clev.frb.org

216.579.3196

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.

Read the District Data Brief: How Large Are the American Rescue Plan Fund Distributions to State and Local Governments…And How Much Change Are They Likely to Create?

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