American Rescue Plan 101: A Call for Equitable Recovery and Systems Renewal

American Rescue Plan 101

Amidst the COVID-19 pandemic, as American families struggled to meet basic needs, businesses shuttered, and state and local governments lost much-needed revenue from taxes and services, the federal government administration stepped in. On March 10, 2021 the House of Representatives passed a Senate-amended H.R. 1319, entitled the American Rescue Plan (ARP) Act which provides $1.9 trillion of additional relief in response to COVID-19. The bill includes aid that will be distributed through state and local governments, industries and communities, and tax changes.

The ARP presents a historic opportunity to address structural racial and economic inequities that the pandemic has exposed and exacerbated. Workers of color, women, immigrants, and other vulnerable communities have experienced disproportionate hardship during the pandemic including job loss, higher mortality rates, eviction, and food insecurity. In part to address these disparities, the bill is unusually flexible. ARP funds can be used to compensate for lost revenue, invest in water and broadband infrastructure, support nonprofits or public benefit corporations, and everything in between. Only 1% of the bill is allocated for vaccination, and a mere 6% is earmarked for other COVID-19 mitigation efforts; thus, the remaining 93% of funding can, and should, be used to address a variety of specific local needs. 

Funding Distribution Details

The bill provides $350 billion in Fiscal Recovery Funds for states, localities, and tribal governments, in addition to direct cash payments to families, and Paycheck Protection Program loans. The funding is distributed in two waves; 50% was distributed in May 2021 for immediate relief, and 50% will be disbursed a year later. Localities have until December 31, 2024 to obligate the funds and until December 31, 2026 to spend them. Funds are distributed to states based on unemployment rate, to large cities according to a need-based formula, and to smaller cities and counties based on population. States will receive $195.3 billion, Counties $65.1 billion, Metropolitan cities $45.6 billions, Tribal governments $20 billion, and Territories $4.5 billion.This does not include the rest of the trillion dollars that will make its way to communities and families through the remaining key provisions in the table below. Nonprofits and private organizations should seek funds within their jurisdiction (e.g., a State, local, territorial, or Tribal government) because the Treasury cannot transfer funds to those entities directly.

The bill specifies four broad categories of authorized use for the funding:

  1. Response to public health needs and economic damage from the COVID-19 pandemic: this includes COVID-19 prevention, medical care including mental health and substance abuse treatment, and public health workforce building. It also includes assistance to unemployed workers, data system upgrades to improve economic recovery efficiently, assistance for small businesses and nonprofits, and more.

  2. Providing “premium” or hazard pay for essential workers, both directly and through grants to third-party employers. Pay can be applied retrospectively or prospectively.

  3. Replacing lost revenue from the most recent fiscal year through provision of government services. Government recipients must demonstrate that recipients of funds experienced economic harm from the pandemic (loss of earnings or revenue) and that the funds “respond to” the harm in a “related and reasonably proportional” manner.

  4. Investing in necessary water, sewer and broadband infrastructure

These categories grant enormous flexibility in interpretation. Across the board, the American Rescue Plan is more than temporary relief money; it is a strategic, deliberate lifeline to rebuild and revitalize communities.

A Historic Opportunity for Recovery and Renewal

The ARP is unlike any other disaster relief bill the U.S. has seen. The funding is flexible, long-term, and contains explicit language calling for a more equitable recovery. States and localities are being given permission for creative problem-solving and ambitious initiatives. For example, governments can use funding for community health workers to increase access to health services, and for public benefits navigators to assist community members who want to apply for federal, state, and local public assistance and services. 

Following the high-profile police killings of George Floyd, Breonna Taylor, and countless other Black Americans, there has been growing national interest in non-police alternatives to improve public safety. Remarkably, the ARP does not contain any of the typical federal funding requirements for criminal justice grant programs. Instead, the emphasis is on public safety from a public health perspective, giving enormous discretion to government leaders in revitalizing their communities. The ARP offers states and localities an opportunity to build safe systems of emergency response like mobile crisis intervention services with professionals who can de-escalate crises and connect people to community-based services. This shifts away from punishment and towards investment in communities of color through affordable housing, school-based social services, utilizing Medicaid to support people with substance use disorders (SUDs), and eliminating criminal legal fees and court debt. 

Many localities are already taking advantage of this frameshift; Eugene, Oregon’s Crisis Assistance Helping Out On The Streets (CAHOOTS) program is a mobile non-emergency crisis intervention team that provides counseling, mediation, information and referral, transportation to social services, first aid, and basic-level emergency medical care. Detroit, MI is investing $35 million in a Community Violence Intervention program that funds a Community Health Corps and targeted employment/wraparound services for the city’s most vulnerable residents. There are countless other examples of local community safety interventions made possible through ARP funding in cities across the country.

The ARP also provides the largest infusion of federal funding in history for the 574 federally recognized American Indian tribes, a step toward remedying the long-standing exclusion of tribal communities from funding development efforts. The Treasury established an ARPA Task Force for Tribal Issues to consult with tribes and responded to complaints about the previous CARES funding formula, which was based on housing block grant numbers and shortchanged tribes who did not use those grants. This time around, ARP funding is being distributed more equitably to tribes, based on enrollment numbers and employees. From improved water and broadband infrastructure to prevention of domestic violence and COVID-19 mitigation, Tribes can use funds to address long standing problems in their recovery. 

Across the board, the American Rescue Plan is more than temporary relief money; it is a strategic, deliberate lifeline to rebuild and revitalize communities. Jurisdictions should utilize cross-sector, community-based collaborations to allocate resources where they are needed the most. For more information on ARP best practices, please see ARP in Action.

Key Provisions

This table details sector-specific funding and provides resources for organizations and communities on how to use ARP funding for more equitable, sustainable, and resilient recovery. 

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