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A $350 Billion Rescue for State Finances That Don’t Need Saving

The American Rescue Plan was designed to shore up local government budgets, but cities and states are already seeing their finances bounce back from the pandemic.

California Governor Gavin Newsom announced a $100 billion “California Comeback Plan” at a press conference on May 10 in Oakland.

California Governor Gavin Newsom announced a $100 billion “California Comeback Plan” at a press conference on May 10 in Oakland.

Photographer: Aric Crabb/MediaNews Group/Mercury News via Getty Images

As President Joe Biden’s administration prepared to unleash $350 billion of aid for states and local governments last week, Treasury Secretary Janet Yellen said the funds would head off a repeat of the painful budget-cutting that slowed the nation’s recovery from the last recession.

The same day, in Sacramento, California, Governor Gavin Newsom delivered a very different message: Thanks to the surging incomes of the wealthiest residents, the state would have a $76 billion surplus to plow into free universal preschool, helping the homeless and the biggest tax rebate in the state’s history.