States Dole Out Cash to College Kids, Theaters in $200 Billion ‘Experiment’

By Amanda Albright, Danielle Moran, Cedric Sam and Christopher Cannon

September 3, 2021, 5:00 AM EDT

New Jersey is bailing out cash-strapped renters whose debts piled up during the national eviction moratorium. Florida is writing $1,000 checks to police officers. Louisiana is adding to a fund it uses to rebuild from storms like Hurricane Ida, which just ripped through the state.

They’re among states nationwide that have been figuring out how to spend nearly $200 billion of direct aid provided in President Joe Biden’s American Rescue Plan—an unprecedented handout intended to ensure that the U.S. economic recovery wouldn’t be derailed by the type of fiscal crisis that followed the last recession.

Disclosures by the states show that much of the money has yet to be spent, meaning it will continue to help stoke the economy. At least $81 billion has already been spent or appropriated by states for specific uses, according to data compiled by Bloomberg from over 40 states. Getting the aid out will take time, and some programs are designed to use the funds over years.

How Much of the Funds Did States Allocate?

Allocated or Spent
Unallocated
Lacking Visibility

Source: Data collected by Bloomberg

One reason: Some states’ tax collections rebounded surprisingly quickly from the pandemic, due in part to the stock market’s rally, the ability of high earners to work at home and massive stimulus measures from Washington.

That means governors generally don’t need to draw on the funds to close massive budget gaps like those that triggered rounds of painful austerity measures over a decade ago. Instead, they have the luxury—and time—to figure out how to best use it for public works, social programs, and measures that would help repair the economic toll of the past 17 months.

“I can’t remember a time when the federal government has given that much money into the hands of the states and said, ‘Go stimulate the economy,’” said Dan White, director of public sector research at Moody’s Analytics. “It is a very interesting, natural experiment that Congress has set up, whether they know it or not.”

Sources: U.S. Census Bureau, U.S. Treasury Department, and the State and Local Finance Initiative at the Urban Institute

Some states are seizing on the chance with some novel steps, seeding college-savings accounts for poor children, delivering free books to boost literacy or moving to rescue the ailing local movie-theater industry.

New Jersey focused its first round of aid around tackling immediate needs created by the pandemic. About $865 million will go to social programs, such as providing money to renters to help them avoid eviction, after prior relief efforts were tapped out.

Over $13 billion has been set aside by states for such social-related programming so far, data compiled by Bloomberg show.

“This was huge for New Jersey,” said Zakiya Smith Ellis, chief policy adviser to Governor Phil Murphy. “Even though the state’s fiscal situation isn’t the same, the need is still there for our residents.”

Note: Data uses cumulative total taxes. Wyoming data not available on a monthly basis.

Source: The State and Local Finance Initiative at the Urban Institute

Thinking Long-Term

The Treasury has intentionally given states both broad latitude and a long timeline to spend the funds, which can be used as late as 2026. Some states will receive their aid in two split payments that are about a year apart.

In California, about $1.8 billion of the state’s $27 billion allocation is helping seed $500 college savings accounts for millions of low-income students. Foster youth and homeless students will get an extra $500. And in Florida, students who read below grade level will get free books delivered to their homes as part of a program designed to boost literacy.

It will also finance many infrastructure projects, with over $20 billion total steered that way by the states. Tennessee officials agreed to use $500 million to expand broadband while Ohio is using $250 million to provide grants for water and sewer projects.

“This is money that we need to spend wisely to make long term investments to move the state of Ohio forward,” said Mark Fraizer, a Republican lawmaker in Ohio who was a sponsor of legislation allocating the money this year.

How Four Different States Are Spending Relief Cash

Health
Infrastructure
Education
Economic Recovery
Fiscal Relief
Social
Other

Source: Data collected by Bloomberg

Some of the spending reflects local concerns. Florida, one of the state’s most susceptible to the impact of global warming, is spending over $1 billion of it on environment projects, like local government grants for resiliency projects, and using $100 million for high-resolution mapping of the coastal sea floor.

Governments can also hone in on small programs to provide relief or services. Movie theaters in Louisiana and Wisconsin will get nearly $16 million of aid. Utah officials appropriated $1 million for an initiative that helps bring awareness to mental-health issues and pressures facing women in sports, according to its plan.

Still, the rollout of the aid has been slow in some cases since states can lean on strong tax collections while they decide how to spend it.

At least 11 haven’t specifically committed the money yet, a group that is made up of mostly Republican-led states but also some with Democratic governors.

In Rhode Island, which hasn’t appropriated money yet, the state has been meeting with lawmakers and members of the community to get feedback, Governor Daniel McKee, a Democrat, said in an Aug. 30 letter to the Treasury Department about the state’s plan for spending the money.

“It’s important that we begin making investments soon—in order to safeguard our recovery—and make them within a smart framework that ensures a prosperous and equitable future,” he said in the letter.

At least 18 states have spent or appropriated at least half of their aid allocations so far, so the decisions will almost certainly extend into next year when governors start putting together their annual budgets.

Texas Governor Greg Abbott is planning to call a special legislative session to decide what to do with the state’s $15.8 billion of aid. Minnesota saved $1.15 billion of its $2.83 billion share for the 2022 legislative session.

“Where the real success of these programs will come is bridging the gap between the near-term recovery and long-term expansion,” said White, the Moody’s economist. “It’s going to be a very interesting period.”

Editors: William Selway and Elizabeth Campbell

With the assistance of: Andre Tartar, Romy Varghese and Shruti Singh

Methodology

Data was provided by state government officials and collected through reports filed to the U.S. Treasury Department. Bloomberg counted spending commitments as those that were specifically allocated to specific projects or initiatives from state aid as part of the Coronavirus State and Local Fiscal Recovery Funds. Some states noted that the appropriations are in early planning stages, or that adjustments will need to be made to programs and their funding amounts. States that are in gray in the first graphic did not have easily accessible data, didn’t specifically commit funds or didn’t respond to multiple requests for information. Colorado provided a range of money that it committed to different funding buckets and Bloomberg used the lower range of those numbers. Some states are receiving their aid allocation in two tranches, like Ohio.

Bloomberg categorized the spending commitments as follows:

These were among the areas identified as social spending: Funding for affordable housing, rental relief, food banks, utility assistance, not-for-profit organizations, cash transfers to residents, financial aid for students, and violence prevention programs.

These were among the areas identified as infrastructure spending: Funding for projects related to water, sewer, broadband, roads, bridges, resiliency projects, parks, and state capital projects. Included some building upgrades, such as improvements to HVAC systems.

These were among the areas identified as education spending: Funding for education programs for students, school construction projects, higher education, literacy programs, money to reopen schools and support for students with disabilities.

These were among the areas identified as health spending: Funding for costs associated with the pandemic, aid for senior care facilities like nursing homes, mental health programs, vaccination programs, vaccine incentives and hospital aid.

These were among the areas identified as fiscal relief spending: Funding for revenue replacement, replenishment of unemployment insurance trust funds and/or repaying related loans, replenishment of state funds and additional aid for municipalities.

These were among the areas identified as economic recovery spending: Funding for assistance to small businesses, workforce development initiatives, aid for entities impacted by the pandemic, such as movie theaters and entertainment venues, return-to-work bonuses, support for the tourism industry, job training, and efforts to foster new industries or investment.

These were among the areas that were identified as ‘other’ spending: Funding for premium/hazard pay, bonuses to first responders, costs related to the oversight and distribution of American Rescue Plan funds, information technology upgrades, cybersecurity efforts, voter-related initiatives and other line items that couldn’t be categorized.

States Dole Out Cash to College Kids, Theaters in $200 Billion ‘Experiment’

How Much of the Funds Did States Allocate?

Where States Stand

Tax Revenue Change

Thinking Long-Term

How Four Different States Are Spending Relief Cash