“It’s like the python that ate the rat,” Brad Whitehead, a nonresident senior fellow at the Brookings Metropolitan Policy Program, said of the struggle to shepherd so much federal money into state projects. “You need all those calories, but it’s hard to digest it all at once.”
The Treasury Department gave states broad discretion over how the stimulus money can be deployed, but imposed limits on using funds to shore up public pension programs and restricted states from using relief funds to subsidize tax cuts. The tax cut prohibition angered several Republican governors, who argued it infringed on state sovereignty, and has led to a thicket of lawsuits.
Among those challenging the restriction is Ohio, which was awarded nearly $5.4 billion of state aid through the American Rescue Plan. Gov. Mike DeWine, a Republican, opposed the entire package and, after it passed, his state took a leading role in litigation contending it was unlawful to put conditions on the relief money that prohibited states from using it to finance tax cuts.
The lawsuit is still making its way through the courts, but by June, Mr. DeWine signed legislation to use more than $2 billion of the federal funds to replenish the state’s jobless benefits fund, to improve water and sewer quality and to improve pediatric behavioral health facilities.
Biden’s Social Policy Bill at a Glance
Card 1 of 7The centerpiece of Biden’s domestic agenda. The sprawling $2.2 trillion spending bill aims to battle climate change, expand health care and bolster the social safety net. Here’s a look at some key provisions and how they might affect you:
Child care. The proposal would provide universal pre-K for all children ages 3 and 4 and subsidized child care for many families. The bill also extends an expanded tax credit for parents through 2022.
Paid leave. The proposal would provide workers with four weeks of paid family and medical leave, which would allow the U.S. to exit the group of only six countries in the world without any national paid leave. However, this provision is likely to be dropped in the Senate.
Health care. The bill’s health provisions, which represent the biggest step toward universal coverage since the Affordable Care Act, would expand access for children, make insurance more affordable for working-age adults and improve Medicare benefits for disabled and older Americans.
Drug prices. The plan includes a provision that would, for the first time, allow the government to negotiate prices for some prescription drugs covered by Medicare.
Climate change. The single largest piece of the bill is $555 billion for climate programs. The centerpiece of the climate spending is about $320 billion in tax incentives for producers and purchasers of wind, solar and nuclear power.
Taxes. The plan calls for nearly $2 trillion in tax increases on corporations and the rich. The bill also raises the cap on how much residents — particularly in high-tax blue states — can deduct in state and local taxes, undoing the so-called SALT cap.
Texas announced in October a raft of plans to start spending some of its nearly $16 billion in federal aid, unveiling major investments in broadband, rural hospitals and food banks. Yet the state, which received the second largest allotment of funds in the country, also said it was hoping to use some of the funds to slash property taxes and that, despite the prohibition against doing so, it was setting aside $3 billion for “future tax relief.”
The most contentious use of federal funds this year has been in Arizona, where Republican Gov. Doug Ducey used relief money to roll out two education programs intended to undercut mask mandates that were imposed by some school districts. A $163 million program provides up to $1,800 in additional funding per pupil in public and charter schools that are “following all state laws” and open for in-person instruction. Schools that required masks would not be eligible.