States and Local Governments Are Still Sitting on Billions of Dollars of 'Emergency' COVID Relief
The Biden administration said the $350 billion bailout was urgent and necessary. Five years later, that doesn't seem true.
As the Biden administration rolled out a $350 billion bailout of state and local governments during the COVID-19 pandemic, officials stressed how the huge pile of money would address urgent needs across the country.
Those governments "have faced significant revenue shortfalls as a result of the economic fallout from the crisis," then-Treasury Secretary Janet Yellen said in May 2021, as the administration began distributing the bailout funds approved by the American Rescue Plan. "As a result, these governments have endured unprecedented strains, forcing many to make untenable choices between laying off educators, firefighters, and other frontline workers or failing to provide services that communities rely on."
A few days later, President Joe Biden urged state and local officials to act quickly. "Spend this money now that you have. Use these funds we've made available to you to prioritize public safety," he said. "Taking action today is going to save lives tomorrow."
More than four years after the American Rescue Plan passed (and more than two years after Biden declared the pandemic emergency over), state and local governments were still sitting on billions of dollars from that emergency bailout. A new report from the Government Accountability Office shows that, by March 2025, states had spent just $156 billion of the $195.8 billion they received via the American Rescue Plan. Meanwhile, local governments had spent about $102 billion of the $127.8 billion they had been awarded.
Six states—New Jersey, Mississippi, Oklahoma, South Carolina, Tennessee, and West Virginia—had reported spending less than half of their allocations by March 2025, the GAO reports.
State and local governments overwhelmingly used their federal bailout funds to replace lost tax revenue and to offset other negative economic impacts from the pandemic, according to the GAO.
Funds that are not spent by the end of 2026 could be recouped by the Treasury Department. The original deadline for spending those funds was 2024, but the Biden administration quietly extended the deadline shortly before leaving office.
The fact that so much money remains unspent, years after the pandemic ebbed, suggests that the federal bailout was larger than necessary—as Reason and others warned before the American Rescue Plan was passed.
That conclusion is bolstered by the questionable ways that many state and local governments used those funds.
As Reason has reported, some of that money was spent on things completely unrelated to the pandemic, like propping up money-losing, government-owned golf courses and funding vanity projects like tourism promotion campaigns. In various places, the pandemic relief fund was tapped to pay for minor league baseball stadium upgrades, as well as renovations to hotels and ski resorts. One Rhode Island city spent $53,000 of its American Rescue Fund allocation on new "ergonomic chairs in the city council chambers," WPRI.com reported at the time. Hundreds of millions of dollars were spent on bonuses for government officials.
In a National Bureau of Economic Research working paper published in June 2022, a trio of researchers found that pandemic-era aid distributed to state and local governments had cost taxpayers about $855,000 per job saved. The stimulus spending had only "a modest impact on government employment and has not translated into detectable gains for private businesses or for states' overall economic recoveries," they concluded.
Five years after Congress debated and passed the American Rescue Plan, it is undeniable that the bailout of state and localities was excessive, wasteful, and driven by a misguided sense of urgency about the seriousness of the fiscal situation facing those governments. That ought to be a lesson for the federal government when the next crisis arrives.
