Understanding the American Rescue Plan Act of 2021

A Guide to State and Local Funding


On March 11, 2021, The American Rescue Plan Act of 2021 (ARPA) was passed by Congress and signed into law by President Biden (D). It provides $1.9 trillion in economic stimulus to aid in the country’s recovery from the health and economic impacts of COVID-19.

One of the most important components of the law is the $350 billion in funding for state and local governments, with a much higher degree of flexibility than previous federal aid packages. Aside from this funding, the ARPA also includes a substantial amount in targeted funding for programs that will also provide state governments with continuity of operations as well as new opportunities for investments and improvements.

View Each State's Estimated State and Local Government Aid Allocations



State and Local Fiscal Relief

The ARPA provides $350 billion to help states, counties, cities and tribal governments cover increased expenditures, replenish lost revenue and mitigate economic harm from the COVID-19 pandemic.  

  • State and local recipients can use funds to cover costs incurred by Dec. 31, 2024. 
  • Provides $195.3 billion to states and DC.  
    • $25.5 billion would be equally divided to provide each state a minimum of $500 million. 
    • $169 billion would be allocated based on the state's share of unemployed workers over a three-month period, from October-December 2020. 
  • Provides $130.2 billion to local governments. 
    • $65.1 billion for counties. 
    • $45.6 billion for metropolitan cities. 
    • $19.5 billion for towns with fewer than 50,000 people.
  • Provides $4.5 billion to U.S. territories. 
  • Provides $20 billion to tribal governments.


Use of Funds

State and local government recipients can use funds for the following purposes:

  • Respond to COVID-19 emergency and address its economic effects, including through aid to households, small businesses, nonprofits, and industries such as tourism and hospitality. 
  • Provide premium pay to essential employees or grants to their employers. Premium pay cannot exceed $13 per hour or $25,000 per workers. 
  • Provide government services affected by a revenue reduction resulting from COVID-19.  
  • Make investments in water, sewer and broadband infrastructure.


In order to ensure state governments don’t create a self-made fiscal cliff, government leaders are proceeding cautiously with the proposed use for these funds. State Budget Officers from across the country have told Stateside about some of the prospective investments currently getting discussed, which include:

  • Economic development investments; focused on regional initiatives
  • Rural zone investments
  • Broadband
  • Water infrastructure
  • Hospitality sector relief
  • Manufacturing modernization
  • Public school system improvements
  • Affordable housing
  • Mental health initiatives
  • Public health initiatives targeting chronic conditions
  • Government operational capabilities
  • Small business development
  • Workforce development 


Stateside - American Rescue Plan - Essential Workers



The ARPA includes key provisions for a wide variety of industries and stakeholders. The following summary describes notable industry appropriations of the law.


Stateside - American Rescue Plan - Biggest Expenditures

K-12 Education:

  • $122.7 billion for the existing Elementary and Secondary School Emergency Relief Fund (ESSR) to remain available through Sept. 30, 2023. 
  • Provides $3.03 billion in additional FY21 funding for the Individuals with Disabilities Education Act (IDEA).
  • Provides $2.75 billion to governors through the existing Emergency Assistance to Non-Public Schools Program (EANS) to provide services or assistance to non-public schools that enroll a significant percentage of low-income students and are most impacted by the qualifying emergency. 

Higher Education:

  • Provides $40 billion through the existing Higher Education Emergency Relief (HEER) Fund. 
  • Institutions must spend at least 50% of their allocation on emergency financial aid grants provided directly to students. 
  • Institutions can use remaining funds to replace lost revenue, reimburse for emergency expenses, and more.  
  • Provides $400 million to for-profit colleges to provide financial aid grants to students.  


  • Appropriates $27.4 billion in emergency rental assistance. 
  • Provides for mortgage and utility assistance.  

Infrastructure, Technology, Broadband and Cyber Funding:

  • $10 billion for Coronavirus Capital Projects Fund. 
  • $30.4 billion for public transportation. 
  • $7.2 billion for Emergency Connectivity Fund.

Business Assistance:

  • $28.6 billion for the Restaurant Revitalization Fund (RRF) to be administered by the Small Business Administration (SBA). 
  • $10 billion for State Small Business Credit Initiative (SSBCI) to provide investment for state governments to set up programs that can leverage billions of dollars in private capital for low-interest loans and other investment to help entrepreneurs and the small business economy rebound from this crisis. 
  • $15 billion in new funding for targeted Economic Insurance Disaster Loan (EIDL) grants to provide hard-hit, underserved small businesses with increased flexible grant relief. 
  • $7 billion to expand the Payroll Protection Program (PPP) eligibility to include additional nonprofits such as 501(C)(5) labor and agricultural organizations and community locations of larger nonprofits.   


  • Provides a temporary (two-year) 5% increase in the Federal Medical Assistance Percentages (FMAP) for Medicaid to states that enact the Affordable Care Act's (ACA) Medicaid expansion and overs the newly eligible adult population per requirements of the ACA. 
  • Provides 85% FMAP for the first three years that a state covers mobile crisis intervention services for mental health or substance use disorders, expiring after five years. 
  • Modifies allotments for Disproportionate Share Hospitals (DSH) to account for the 6.2% increase to state's FMAP. 
  • Increases the FMAP by 10% for state expenditures on Home and Community-Based Services (HCBS) for four fiscal quarters. 
  • Provides a five-year state plan option of health coverage for women enrolled in Medicaid for 12 months after the birth of a child, instead of the previous 60 days.

Expanded Unemployment Benefits: 

  • The ARPA extends the Pandemic Unemployment Assistance Program (PUA) through September 6, 2021, while maintaining the Federal Pandemic Unemployment Compensation (FPUC) benefit amount of $300. 
  • Restores full reimbursement for state costs related to waiving the waiting week beginning December 31, 2020 and continues it through September 6, 2021. 
  • Extends full federal financing of benefits provided in the Short-Time Compensation program for states that have laws establishing such programs through September 6, 2021. 
  • Extends the Families First Coronavirus Response Act (FFCRA) provisions that provided temporary full federal financing of Extended Benefits (EB) through September 6, 2021. States are traditionally required to pay 50% of the cost of the EB. 

Health and Human Services:

  • Vaccines:  
    • Provides $8.5 billion for vaccine activities at the CDC, including a supplemental funding opportunity for state, locality and territory vaccine distribution grants from the December COVID relief package based on entities receiving the higher of the two distribution formulas as well as clarifies use of standards for data and data sharing. 
    • Appropriates $50 billion to the Disaster Relief Fund for COVID-19 and other disaster assistance under FEMA. The assistance is meant to bolster vaccine rollout efforts under FEMA and provide assistance to state and local governments at 100% federal cost share. 
  • State Workforce: $7.66 billion for state, local and territorial public health departments to establish, expand and sustain their public health workforce. 
  • SNAP Administration: Provides $1.15 billion to states for SNAP Administration, including $1 billion for grants for nutrition assistance programs in U.S. territories. 
  • Veterans Homes: Provides $750 million for the VA to provide construction funds to states, provided they have required matching funds to projects that will upgrade and enhance safety and operations of state veterans' homes.  
  • Telehealth: 
    • Appropriates $5.48 billion for Indian Health Service: including $140 million for information technology, telehealth infrastructure, and the Indian Health Service electronic health records system. 
    • Appropriates $500 million for emergency rural development grants for rural healthcare. 
      • Allowable use of funds include increasing telehealth capabilities, including underlying healthcare information systems. 
  • Drugs: 
    • Appropriates $10 billion to remain available until September 30, 2025 to support the enhanced use of the Defense Production Act. 
      • For the purchase of drugs, devices, and biological products for use in treating or preventing COVID-19 and symptoms related to COVID-19, and any materials, technology, or equipment (including durable medical equipment) necessary to produce or use such drugs, biological products, or devices (including syringes, vials, or other supplies or equipment related to delivery, distribution, or administration). 

*Data obtained from American Rescue Plan Act and NCSL 

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