The American Rescue Plan isn’t just plugging budget holes

As a winter COVID-19 surge and a new variant raise concerns across the country, cities and counties are grappling with health and economic disparities deepened by the pandemic. Communities that were hardest hit by the virus are now struggling with an accelerating pace of evictions, a widening education gap and rampant food insecurity. 

Fortunately, local governments on the front lines of this ongoing crisis have resources they lacked during the Great Recession: $350 billion in direct federal assistance from the American Rescue Plan. This lifeline for revenue-starved state, local and tribal governments also came with a nudge: The U.S. Treasury Department, in guidance released earlier this year, urged policymakers to invest in evidence-based solutions, track the outcomes of their spending and evaluate what works to help residents recover.

Many fiscal experts predicted that local governments would use recovery funds mostly to avoid layoffs of employees or prevent cuts to local services, backfilling for revenues lost during the pandemic. But a new analysis we just conducted of how 150 cities, counties and tribal nations are spending their American Rescue Plan dollars tells a more interesting story: Many local governments are seizing the opportunity to go beyond plugging budget holes by prioritizing investments that will leave a lasting impact.

Based on the spending plans filed with the U.S. Treasury that we reviewed, 61 percent reported that they are investing or plan to invest recovery funds to replace lost revenues. That’s no surprise. In a recent survey by the National League of Cities, eight of 10 municipal finance leaders cited federal aid as the top factor in closing budget gaps this fiscal year. 

But the new analysis, a joint project of Results for America and Mathematica, also found that 72 percent of jurisdictions are investing in public health, 69 percent are investing in expanded services to disproportionately impacted communities, 56 percent are investing in housing, 56 percent are investing in infrastructure and 43 percent are investing in workforce.

In Boston, where there is a dearth of child care workers, the city will use American Rescue Plan funds to help child care centers bring back qualified caregivers and retain key staff with better pay. In San Antonio, officials are using an interactive equity tool to rush assistance to prevent evictions.

Other localities are finding innovative solutions to stubborn challenges that have only grown worse during the pandemic, such as gaps in learning. In California, the city of San Jose is piloting a Resilience Corps, which pairs low-income students with area learning programs. In Buffalo, N.Y., the city is developing a new pilot program that will use video and license plate reading technology to reduce potentially dangerous police and resident interactions. Our analysis found that more than one-third of jurisdictions are testing out new programs, while 13 percent plan to use recovery funds to invest in guaranteed basic income — proving how local governments are serving as the new laboratories for democracy.

What is more encouraging is that many communities are using data, community input and a focus on equity to drive their investments. For example, 77 percent of jurisdictions we reviewed are targeting at least some of their funding to ensure equitable outcomes – including King County, Wash., which is using an equity impact review tool, strategic plan and equity dashboard to ensure its investments of federal recovery dollars lead to better outcomes for all its residents. More than three-quarters of communities are engaging with residents on how to spend recovery funds — including Cook County, Ill., which partnered with community-based organizations from marginalized communities to ensure their funding plan was informed by those who don’t traditionally participate. 

More than half of communities are actively using evidence and data to steer their investments. In Gilbert, Ariz., for example, a review of local crime data showed an increase in sex crime-related offenses between 2015 to 2020, prompting the town’s leaders to devote recovery funds to support a Family Advocacy Center that will offer victim services. There’s still room for local governments to improve: Less than half of jurisdictions are showing clear and promising investments in evaluating the effectiveness of their investments.

With the American Rescue Plan, the federal government acted fast to stem a recession and deliver money to residents and communities as quickly as possible. Despite their exhaustion from two years of responding to the pandemic, local government leaders are using this once-in-a-generation funding opportunity to build governments that are more data-driven, more equitable and more responsive to residents’ needs.

Zachary Markovits is the vice president of local government and managing director for the What Works Cities initiative at Results for America.