The COVID-19 pandemic had an unprecedented impact on state fiscal conditions. In response to the crisis, states increased spending on public health and shut down economic activity, which halted state revenues. Fearing catastrophic economic consequences, the federal government stepped in and passed several stimulus packages. Two of them provided direct flexible funding to states.
The Coronavirus Aid, Relief, and Economic Security (CARES) was enacted in March 2020. The CARES Act included $150 billion in direct, flexible funding to state, local and tribal governments, known as the Coronavirus Relief Fund (CRF). The deadline to expend CRF is Dec. 31, 2021 (extended from Dec. 30, 2020).
A year later, Congress passed the American Rescue Plan (ARP) Act, creating the $350 billion Coronavirus State and Local Fiscal Recovery Funds for states, counties, cities, and tribal governments. Under the state portion, the State Fiscal Recovery Fund (SFRF), states will receive $195.3 billion. States must obligate SFRF by 2024 and spend by 2026.
Federal stimulus packages were instrumental to state pandemic responses. The CRF and SFRF emergency funding packages infused governments with financial resources to respond and recover from the pandemic. Without federal stimulus, the economic fallout during and beyond the pandemic may have left states with deep budget cuts and depleted reserves.