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June 2021 Group Watch: Possible Uses for American Rescue Plan Funds

Alabama officials are early in the process of deciding how to use the latest round of federal funds coming to the state because of COVID-19 in the form of the American Rescue Plan, including a determination of whether some of the money could be used to help build prisons (see above). The Legislature will have to approve use of the money within guidelines that the U.S. Treasury Department  recently set out in a 150-page document. State and local governments have until the end of 2024 to use it. Along with costs directly related to the coronavirus, the money can be used to expand high-speed internet access, a need that increased in urgency after the pandemic showed the importance of being able to work and take classes from home. The money can be used for water and sewer projects and will help counties and municipalities make long-needed improvements. They can use some of the funds to make up for a loss in tax revenues caused by the pandemic. The pandemic disrupted Alabama’s economy, raising unemployment to 13.8 percent in April 2020, up from a record low 3.5 percent the month before. By December 2020, the rate was back down to 3.9 percent, and Alabama’s tax revenues appeared to hold up overall. The Treasury Department formula allows states to plug in an expected average growth factor of at least 4 percent to measure whether they lost revenue during the pandemic. It is this scenario that allows states flexibility in spending some of the federal dollars.

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