Treasury Will Give States a Lot of Power to Decide How to Spend $35bn in COVID Relief Funds

States and local governments will have significant leeway in deciding how to spend the $350 billion in Covid-19 relief funds authorized by President Joe Biden’s American Rescue Plan, CNBC reported.

The Treasury Department said Monday that governments will be compelled to spend the cash infusion “to meet pandemic response needs and rebuild a strong, more equitable economy.”

But importantly, Treasury officials said states and territories are not allowed to use the funding to offset lost revenue as the result of a tax cut or make a deposit to a pension fund.

Senior administration officials said on Monday that approved uses for the funds are intentionally broad and flexible.

“Every state and city are different,” Deputy Treasury Secretary Adewale “Wally” Adeyemo told reporters Monday. “In the coming days and weeks, Treasury’s Office of Recovery Programs will work hand-in-hand with governors, mayors, members of Congress and other local officials to answer any questions and ensure funds are making it to communities as soon as possible.”

Of the $350 billion total, state governments and the District of Columbia will receive $195.3 billion, counties will receive $65.1 billion, cities will receive $45.6 billion and tribal governments and territories will receive $24.5 billion.

Additionally, state governments will receive their funding in either one or two payments based on their respective unemployment rates.

States that have experienced a net increase in their unemployment rate of more than 2 percentage points from February 2020 to the latest available data will receive their funds in a single payment. All other states will receive the funding in two equal tranches.

Counties, cities and tribal governments can apply and be certified for the federal funds via a Treasury website and see payments in as soon as a few days.

“Today is a milestone in our country’s recovery from the pandemic and its adjacent economic crisis,” Treasury Secretary Janet Yellen said in a press release.

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