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For many Americans, the federal government’s packages to stimulate the economy during the COVID-19 pandemic are notable for the direct relief they have offered to individual households, like stimulus checks and expanded unemployment benefits. But these bills have also brought unprecedented levels of federal investment into state and local governments.
One of the major features of the $1.9 trillion American Rescue Plan, passed in March of this year, was a $350 billion fund for states, territories, cities, counties, and tribal governments across the nation to supplement their own revenues. The package also included large pots of funding for areas like health, education, infrastructure, and others that are funded through state and local dollars. The American Rescue Plan followed the $2.2 trillion CARES Act from March 2020 and other pandemic relief packages that offered aid for similar purposes.
The aid provided to state and local governments in the COVID-19 stimulus bills was intended to ward off cutbacks to public services at a time when many observers feared that tax revenues would collapse as a result of the pandemic’s economic fallout. But while COVID-19 created additional urgency for federal support to states, the federal government has long played an important role in supporting state budgets.