Making the Most of the American Rescue Plan

Massachusetts is about to get a massive infusion of federal dollars from the American Rescue Plan (ARP), the broad coronavirus relief package advanced by President Biden and approved by Congress in March.

Together, cities, towns, and the state itself are expected to receive nearly $8 billion in direct aid — along with billions more in targeted funds for areas like education, transit, and affordable housing.

It’s a once-in-a-generation opportunity to make vital investments in infrastructure, public health, and economic revitalization, but lawmakers will have to decide — relatively quickly — what areas to prioritize and how to ensure a fair and efficient process.

The possibilities are legion. While ARP funds will come with some spending guidelines and explicit restrictions, state legislators and municipal officials will have a lot of latitude — particularly if they are creative about shifting money around.

In this report, we focus on the choices facing state government, though many of the core principles apply to cities and towns as well. We find that:

• Because ARP provides one-time money, it is best suited for one-time investments in things like broadband networks, school building upgrades, transportation mainte- nance, state IT systems, and public health infrastructure.
• There may be creative ways to use one- time ARP funding to support longer-term needs, for instance by covering large startup costs or establishing endowments and loan programs.
• Another option is to use one-time ARP money to introduce new programs, like universal pre-K, which would then by supported by other revenue streams. The viability of this approach depends on the continuing strength of state tax revenues or future tax increases such as the proposed millionaires tax.
• The legislature will have control over spending decisions, unless it cedes that authority to the governor. For efficacy, it may be necessary to establish a separate budget process that fits better with ARP’s multiyear timeframe and investment- oriented focus.
• Given the different funding streams associ- ated with ARP, some central oversight or information-sharing may be essential. This would ensure transparent use of public money and keep state and local decision- makers from working at cross-purposes.