Treasury opens applications for $350 billion state and local aid program

The Treasury Department on Monday launched the process of distributing $350 billion in aid for state and local governments allocated through the COVID-19 relief bill signed by President Biden in March. 

The department on Monday opened up an application portal for state and local governments to apply for funding meant to protect crucial public services and the jobs of those who provide them.

Eligible recipients can now apply for grants to help fight COVID-19, replace public revenue lost to the pandemic, provide economic relief to households and businesses, and “address systemic public health and economic challenges” that deepened the pandemic’s toll on vulnerable populations, the department announced.

“Today is a milestone in our country’s recovery from the pandemic and its adjacent economic crisis,” Treasury Secretary Janet Yellen said in a Monday statement, saying the funding will help communities “return to a semblance of normalcy.”

Biden’s $1.9 trillion COVID-19 relief bill, dubbed the “American Rescue Plan,” included hundreds of billions of dollars directly allocated for state, county, municipal, tribal and territorial government services. Democrats insisted — over fierce opposition from Republicans — on another round of state and local aid to prevent a collapse in the public sector.

Treasury on Monday also revealed how much of the $350 billion is allocated to each eligible state, county, metropolitan city, municipality, tribal government and territory. Eligible recipients can apply for funds to cover a wide range of public services and initiatives Biden administration officials called essential to an equitable recovery.

“We know that when state and local governments were contracting, we know that they cut back on education, they cut back on higher education, they did not have the funds for additional housing assistance. All of those things prevented the recovery from being as equitable as we would have liked,” said Gene Sperling, White House American Rescue Plan coordinator, in a call with reporters.

“It’s about taking every step possible to ensure … that we have a recovery that brings everyone along, that increases not just growth, but dignity and security and opportunity.”

State and local governments can apply for aid to cover vaccination programs; COVID-19 prevention, tracking, containment and treatment; and investments in treating and responding to the pandemic. Aid can also be used to cover medical treatment for mental health, substance use disorders and other crises exacerbated by the pandemic.

For economic relief, the aid can be used for direct payments to workers and households, additional pay for front-line workers and first responders, small business aid, replenishing unemployment insurance trust funds and programs for hard-hit industries. 

State and local governments also have broad authority to apply for aid to reduce medical and educational disparities in low to moderate-income areas, improving water and sewer infrastructure, expanding broadband and replacing lost public revenue.

“During the Great Recession, when cities and states were facing similar revenue shortfalls, the federal government didn’t provide enough aid to close the gap. That was an error,” Yellen said.

“Insufficient relief meant that cities had to slash spending, and that austerity undermined the broader recovery. With today’s announcement, we are charting a very different — and much faster — course back to prosperity.”

Biden administration officials said governments will have broad discretion to use state and local aid within the parameters outlined Monday, but within certain restrictions: the funds cannot be used to offset tax cuts or be used for pension funds. Officials said states could begin receiving money within days of applying.

States where unemployment is up more than 2 percentage points from February 2020 will receive their full allocation of money in one payment, while other states and local governments will receive aid in two equal tranches.