Loyola University Chicago School of Law, JD/MPP 2022
The latest COVID-19 relief package passed on March 11, 2021 by Congress provides a total of $1.9 trillion in mandatory funding, program changes, and tax policies designed to address the enduring economic damage caused by the pandemic. About 15% of the total package will be allocated to states and local governments to tackle budgetary issues associated with the pandemic with very few strings attached. The State of Illinois and the city of Chicago are in the process of assessing the relief package and formulating plans as to how they will allocate the funds.
How can states and local governments use the ARP funds?
The American Rescue Plan (“ARP”) provides $350 billion to states, counties, cities, and tribal governments to address increased expenditures and replenish lost revenue due to the pandemic, as well as to mitigate further economic harm. This funding can only cover costs incurred by Dec. 31, 2024 and will be distributed in two batches. The first half of the funding will be delivered within 60 days of the bills’ enactment (March 11, 2021), while the second half will be delivered within a year thereafter. States are obligated to distribute their funds to local governments within 30 days of receipt, and no municipality may receive more than 75% of its budget in relief funds.
There are very few guidelines as to how state and local municipalities can distribute their relief funds. State and local governments can use the funds to respond to the COVID-19 emergency and its economic effects by providing aid directly to households, small businesses, nonprofits, and particular hard-hit industries like tourism and hospitality. They can also provide premium pay or grants to essential employees that cannot exceed $13 per hour or $25,000 per worker. These municipalities are also allowed to allocate the funds to make investments in water, sewer, and broadband infrastructure. While state and local governments can use the funds to address revenue shortfalls as a result of the pandemic, the only major restriction is that they cannot use the funds to pay for pensions or to offset revenue shortfalls caused by tax cuts enacted since March 3, 2021.
How much aid is Chicago and Illinois getting?
The State of Illinois will receive a total of $13.2 billion that will be distributed to state, county, and local governments. $7.5 billion will be for use by the state government, while the other $5.5 billion will go to county and local governments. As noted earlier, states like Illinois can use this money not only to directly fight the pandemic but also to rectify budget shortfalls. Nonetheless, Illinois cannot use the relief funds to address their ongoing pension crisis.
The ARP will supply direct payments to millions of Illinoisans. Nearly 7.6 million Illinois adults will qualify for the $1400 relief checks, which accounts for about 85% of Illinois adults. Approximately $1.8 billion is being earmarked for the city of Chicago.
Chicago’s preliminary ideas for the $1.8 billion
Chicago’s Mayor Lori Lightfoot said that city officials are examining the ARP to make sure they spend the funds appropriately. Lightfoot added, “This is not $1.9 trillion of a slush fund that we can use every way that we can.” She will prioritize “catalytic investments that are going to lift us up into a full recovery.”
In the past week, Alderman Gilbert Villegas, Alderwoman Maria Hadden, and Alderwomen Sophia King introduced a resolution to explore a guaranteed income pilot in Chicago. As a result, the City Council’s Committee on Economic and Capital Development went through a subject matter hearing on March 11 to examine launching this guaranteed income pilot using $30 million, roughly 2% of the $1.8 billion of federal relief.
The aldermens’ plan for the pilot program would give $500 a month to 5000 of Chicago’s neediest families over the next year. “If you take a look at where most of the need would be, it would probably fall in the Black and Brown communities for sure. I mean – this pandemic has been an equal opportunity destroyer…60% of African Americans and 72% of Latinos have had to dip into their savings, [and] 35% of white families have had to do the same to try to survive during this pandemic,” said Ald. Gilbert Villegas, chairman of the Committee on Economic and Capital Development.
Chicago Public Schools gets its own $1.8 billion from ARP
As part of the $129 billion K-12 education package included in the ARP, Chicago Public Schools (“CPS”) expects to receive approximately $1.8 billion that will help address the district’s expected $300 million revenue reduction in next year’s budget. The remaining funds will be used to cover continued COVID-19 costs that includes cleaning, PPE, testing, and new strategies to support students’ educational and socio-emotional needs. CPS will also use the funds to hire additional nurses, social workers, and special education case managers.
It will be fascinating to see how CPS, the State of Illinois, and the city of Chicago continue to update their budgets as they reconcile the much-needed financial windfall from the ARP. School districts and local governments will need to balance the short-term needs of pandemic management with their long-term fiscal health in order to emerge from the pandemic with a brighter economic future than previously imagined.