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States, cities get $325B in direct aid from COVID-19 package

The mammoth COVID-19 relief bill headed to President Joe Biden’s desk includes $195 billion in direct aid to states and the District of Columbia and $130 billion in direct aid for cities and counties. States with more unemployed residents will get a greater share of the money.

Under the final bill, states and localities would have to use the funds to respond to the COVID-19 crisis and economic downturn through measures such as assisting small businesses, boosting essential worker pay, funding government services affected by a revenue shortfall or making infrastructure investments.

Governments can’t use the money to pay for tax cuts or to shore up pension funds.

Biden is expected to sign the bill, which passed along party lines. The legislation also includes about $25 billion in direct aid to U.S. territories and tribal governments.

Congressional Republicans opposed giving states, cities and counties more direct aid. Some Republican state lawmakers argue the aid isn’t necessary, as state budgets are in better shape than many analysts initially expected last spring. Experts who study state budgets are divided on whether more aid for states and cities makes sense.

“The Senate-passed bill includes numerous improvements from the House bill, such as additional guardrails around the state and local aid,” said Maya MacGuineas, president of the Washington, D.C.-based Committee for a Responsible Federal Budget, a nonprofit focused on fiscal issues, in a news release. “But the bill still spends hundreds of billions of dollars on cities and states that don’t need the money.”

Groups that lobby on the behalf of states, cities and counties are cheering the aid package, however.

“For too long, the pressing challenges and needs facing our counties have outstripped our depleted local resources,” wrote Matthew Chase, executive director of the Washington, D.C.-based National Association of Counties, in a news release after the bill passed out of the Senate.

Clarence Anthony, the CEO of the Washington, D.C.-based National League of Cities, wrote in a Saturday news release that the money would help cities recover from the pandemic. “In particular, our nation’s small municipalities -- which have been passed over in all previous federal relief packages -- will finally be able to secure the direct relief they need,” he said.

This article was first published on Stateline, an initiative of The Pew Charitable Trusts.

About the Author

Sophie Quinton is a staff writer at Stateline.org.

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