CARES Act Funding Helped Prevent Greater Disaster in 2020 — But State and Local Governments Still Face Budget Shortfalls of $300 Billion Over the Next Two Years

More Aid is Needed to Help State and Local Governments Address Rising Costs of Reopening Schools Safely and Getting Americans Vaccinated

69% Of Likely Voters, Including 64% Of Independents And 53% Of Republicans, Support Aid For State And Local Governments As A Part Of The American Rescue Plan

Critics say that additional state and local aid is unnecessary because state and local governments narrowly avoided some of the worst early predictions, in large part due to funding from the CARES Act. Here’s why they’re wrong:
Experts agree that state and local funding from the CARES Act helped prevent greater disaster — proving that economic stimulus works. But state and local governments still suffered in 2020:
  • Experts estimate that state revenues are still nearly 8% below pre-Covid projections even after 90% of available Covid relief funds have been allocated.

  • majority of states saw tax revenue decline in 2020: including by a staggering 42.5% in Alaska, 17% in Hawaii, and 14.8% in North Dakota.

  • All told, state and local governments had to lay off 1.4 million workers — nearly double the amount of jobs lost after the Great Recession.

  • The American Rescue Plan, which allocates support to states based on unemployment rates, would ensure that federal aid reaches the communities that need it the most.

While the CARES Act prevented greater hemorrhaging, more relief is necessary to keep states from catastrophe.

In a press call organized by Invest in America Action last month, Maine State Treasurer Henry Beck made the following statement:

“We’ve been hearing that shortfalls are not as bad as expected, or the economic effect is not as bad as expected, but I think that ignores the fact that it was, in fact, the first federal response that stopped the hemorrhaging. It was the direct cash support for the unemployed and rental assistance and PPP. Now is the worst time to not do another round of aid as we turn the corner.”

Failure to deliver economic relief for states spells disaster for local governments.
  • Local governments, which make up 13 percent of all employment, have already had to lay off 1.4 million workers. Millions more of these same jobs are at risk without additional federal help.

  • Cities alone lost up to $134 billion in revenue, and will lose $360 billion over the next three years — causing 74% of municipalities to start making cuts to things like PPE and essential services in anticipation of additional shortfalls.

  • Rising pandemic costs forced 65% of cities to delay or cancel capital expenditures and infrastructure projects, which in turn stifles job growth, slows local economic activity, and inevitably places additional long term fiscal burdens on the federal government.