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Monday, August 8, 2022

States Use Federal Funds Obtained Under ARPA To Send A Stimulus Check In 2022: 18 States Already In The Fray

Americans are under the impression that they have seen the last of the federal stimulus checks. At least, for the present. It has been left to the states to announce further inflation support payments. But then it is the federal stimulus checks once again. Most states are giving their inflation relief funds from money allocated under the American Rescue Plan Act passed by President Biden in March 2021.

All states in the US along with local and tribal governments across the country received $350B under the COronavius State and Local Recovery Funds (SLFRF) program. The SLFRF program is part of the American Rescue Plan and received the funds to bolster its response to and recovery from the pandemic.

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While the stimulus checks went out directly to a large section of the population, the SLFRF funds gave stability to the tottering economy and also provided immediate aid to the businesses, institutions, and state, city, local, and tribal bodies.

The SLFRF Funds Were Independent Of Stimulus Checks And Its Use Was Stipulated

The Federal funds under ARPA were substantial and, likely, states will not see this level of federal aid again for many years. The Federal administration has stipulated that ARPA funds must be appropriated before they are obligated. Funds that are not obligated by the states for COVID-19 support by 2024 have to be expended by the states by 2026.

The program provided state governments across the country with the resources needed to fight the pandemic and also support both businesses and families as they struggled due to the impact on the economy and public health.

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The funds can also be used for maintaining vital public services even as revenues declined due to the health crisis. the funds helped to build and maintain a strong, equitable, and resilient recovery. This was achieved through investments that support long-term opportunity and growth.

The Final Rule for the program took effect on April 1, 2022, and was released by the Treasury.

Ever since the Treasury issued the May 2021 Interim final rule, the economic and public health situation facing the country has seen tremendous progress and involvement. The US made tremendous progress in the fight against COVID-19.

Providing For Stimulus Checks From ARPA Funds

In addition to services and programs, the SLFRF also provided the state for use of the funds to pay direct stimulus checks to residents who have been impacted disproportionately obstructed by the effects of the pandemic.

Such a broad set of enumerated eligible uses that were made available as part of the COVID-19 economic and public response included childcare, affordable housing, and early learning activities.

There Have Been Instances Of Misuse Of Federal Stimulus Check Funds Under The ARPA Scheme

The ARPA funds were intended partly to relieve the states, cities, and local bodies from the health and economic toll of the COVID-19 pandemic. But there was the diversion of funds by states, especially by Republican-ruled states. Alabama for instance announced a plan to use the funds to build two new 4,000-bed prisons, which was strongly opposed. The state planned to use $400M out of its $2.1B share of funds under the ARPA to finance the scheme. But the fund was specifically intended as a supplement to the stimulus checks and to support states recovering from the health and economic toll of the COVID-19 pandemic.

Like in the above instance, a large sum of the aid is being used for massive new infrastructure projects that have long-term costs, though Democratic states have generally spent them on responsible investments that will yield benefits for years.

States Floating In Surplus Funds: Will Fund The State Stimulus Checks

After the initial sharp contraction when the COVID-19 virus first crossed over in the US, state general funds are overflowing with their largest ever surplus funds. Revenues from tax receipts have been the highest in years, again thanks to the injection of federal stimulus check funds that allowed people to save and spend like never before.

This fiscal was largely supplemented by the ARPA Federal funds in the form of $350B from direct transfers and over $300B in direct federal aid to the education sector, health, infrastructure, and transit agencies.

The funds should be spent by 2026 or they will go back to the federal administration. The above instance of Alabama demonstrates that some states have deployed the funds as they saw fit despite rules on how the funds can be used.

But the biggest chunk of the funds has gone for Economic relief and development, which includes unemployment stimulus checks.

Many states have set aside funds for tough times. Unemployment insurance trusts have also been fortified with money from the ARPA.

States Rely On Backup Funds And Healthy Revenues In 2021 To Send Stimulus Checks

With over a dozen states sending out stimulus checks for residents, there has been concern that another round of funds could accelerate the growth of inflation. The stimulus checks are believed to have led to a surge in inflation that has breached 4-decade-old records within 9 months.

The latest to join the list is Democrat-ruled California which has announced an inflation relief fund that will give eligible families a stimulus check of up to $1,050. Residents with an adjusted gross income of as high as $250,000 will also receive a stimulus check from the state though it will be considerably smaller. 

The highest stimulus check will go out to couples earning $150,000 or less and with at least one eligible dependent. Around 23 million residents are expected to benefit from the inflation relief fund, covering 60% of the population.

Republican-ruled Florida has been the latest state to join the group of states giving out stimulus checks. Governor Ron DeSantis has vehemently opposed the government aid on this project but has seized the opportunity once it was offered. The state will be sending out a $450 per child stimulus check to families. Around 60,000 residents are expected to benefit from the stimulus check.

Other states to offer stimulus checks to residents include Maine and New Mexico, which have already despatched a large percentage of the funds. Maine has been among the most generous of the states, sending out an $850 stimulus check for individuals and double that for married couples filing jointly.

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