On Saturday, the House of Representatives passed the President Biden’s $1.9 trillion American Rescue Plan by a vote of 219-212. No Republicans voted for the bill, and only two Democrats voted against it. The U.S. Senate will now take up the massive coronavirus aid package and on Wednesday, released its own version of the plan which would put new restrictions on the $350 billion in aid to states and localities included in the House version. One of the key revisions put forth in the Senate plan would be to divert $10 billion of money dedicated for cities and counties to "critical capital projects" like broadband access.  Specifically, the total funding for “states” would remain the same but direct aid for cities, counties and smaller units of local government would be reduced in order to finance the new $10 billion capital projects fund. These reductions would come proportionally, with the amount for counties being cut by $5 billion to $60.1 billion; metropolitan cities would receive $3.5 billion less, or $42.07 billion; and non-entitlement units (low population cities) of local governments would get $1.5 billion less, or $18.03 billion.
 
Additionally, the Senate plan includes new policies on how the funding will be distributed and used, but keeps the population qualifying formula from the House version. Per the Senate language, the funds would now be distributed in two tranches — with states and localities now only receiving 50 percent of the funds up front. Localities with a high proportion of unemployed individuals could be eligible to receive the remainder of their funding simultaneously, but those who are not would have to wait until they have spent at least 80 percent of the first tranche funds or one year after receiving their first funding, whichever is earlier. Additionally, in order to receive the second round, localities would have to prove they were not using the money “to stave off a tax increase they otherwise would need to impose” and would be required to use the money for certain purposes, including:

  • Aid to households, small businesses or nonprofits, or aid to "impacted" industries like tourism, hospitality and travel.
  • Funding government services that reduced due to the pandemic-related hit to tax revenue.
  • To make "necessary investments" in water, sewer, or broadband infrastructure.

 
Meanwhile, the $10 billion of funding diverted from cities and counties to "critical capital projects" would be distributed evenly with $100 million to each state, territory and the District of Columbia, with another $100 million for tribal governments and Native Hawaiians.  The rest would be distributed based on the same population threshold formula as the House version, allocating 50 percent based on population, 25 percent based on proportion of individuals living in rural areas, and 25 percent based on the proportion of individuals living below 150 percent of the poverty line.