August 12, 2022

U.S. Treasury Secretary Janet Yellen speaks as she joins White House press secretary Jen Psaki for the daily press conference at the White House in Washington, United States, on May 7, 2021.

Jonathan Ernst | Reuters

States and local governments will have significant leeway in deciding how to spend the $ 350 billion on Covid-19 aid funds approved by President Joe Biden’s American bailout plan.

The Treasury Department said Monday that governments will be forced to spend the infusion of money “to meet the needs of the pandemic and rebuild a strong, fairer economy”.

Most importantly, tax officials said states and territories would not be allowed to use the funds to offset lost revenue from a tax cut or to make a deposit into a pension fund.

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

“Every state and city is different,” Deputy Treasury Secretary Adewale “Wally” Adeyemo told reporters on Monday. “For the coming days and weeks, the Treasury Department’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 that funds get to the communities as soon as possible reach.”

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

In addition, state governments receive funding in the form of one or two payments based on their respective unemployment rates.

Countries whose net unemployment rate has increased by more than 2 percentage points based on the latest available data since February 2020 will receive their funds in a single payment. All other states receive the funding in two equal installments.

Counties, cities, and tribal governments can apply for and certify federal funds through a treasury website and view payments within days.

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

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“With this funding, communities hard hit by COVID-19 can return to a semblance of normalcy. They can get teachers, firefighters and other key workers back on track – and help small businesses reopen safely,” she added.

However, governments are banned from putting money into pension funds, which has become a major concern for Republicans in Congress.

Democrats included prevention in Biden’s $ 1.9 trillion US bailout plan just before Capitol Hill approved the legislation after several moderates raised concerns that some states might seize the funds to approve tax cuts or pension plans finance.

The approved spending for the $ 350 billion includes supporting public health spending, addressing the negative economic impact caused by Covid-19, replacing lost public sector revenues, or investing in water, sewer and broadband infrastructure.

Governments can also choose to allocate funds to providing bonuses to key workers.

Officials noted that some states or local governments may be using the funds on select infrastructure projects, but the current allocations are not intended to replace the US employment plan.

Biden’s administration is trying to convince lawmakers to support two more billion dollar stimulus plans.

The White House bills its US $ 2 trillion employment plan as a one-time infrastructure overhaul. Hundreds of billions of dollars are earmarked for road repairs, repairs to the country’s waterways and the development of climate-friendly energy.

The other is the American Families Plan, a $ 1.8 trillion collection of spending and tax breaks aimed at boosting education, reducing childcare costs, and supporting domestic family paid vacations.