The American Rescue Plan marks the latest federal effort to address the ongoing health and economic crises due to the coronavirus. This package, signed by President Joe Biden in mid-March, builds upon prior coronavirus response bills and includes a number of essential provisions to support Americans’ health and economic well-being, and build a more equitable recovery.
These actions to address hardship are much needed. In recent surveys, millions of Americans said they didn’t have enough to eat, were behind on rent, and had difficulty covering basic expenses. Those with the least resources to get by and families with children have been especially hard hit. Low-wage workers are much more likely to have lost their jobs. Furthermore, because of long-standing structural inequities, our Black and Brown neighbors are being disproportionately harmed by the virus and its economic impact.
The bill contains several measures to provide the extra resources so many of us need to get by during these tough times, and to protect and expand public services that are more important than ever.
Economic supports for Americans and their families
The American Rescue Plan contains a package of policies to boost the economic well-being of those facing economic hardships. These include:
- An extension of expanded federal unemployment insurance through September 6, including a $300 weekly boost. This extension came just in time, as benefits were set to expire within days of the bill’s passage. This income support for jobless workers and their families is much needed. During the first week of March, over one million people nationally filed an initial claim for unemployment benefits. This marks almost a full year in which monthly initial claims have topped one million. Expanded UI is especially important for those with less resources – more than half of all initial unemployment claims in Minnesota since mid-March 2020 were from workers in lower-paid occupations.
- Increasing the incomes of lower-income workers and families through temporary expansions of the Earned Income Tax Credit and Child Tax Credit. The bill provides a larger Child Tax Credit for families with children and now will include some of the lowest-income families who have not been previously able to qualify. The CTC expansion is expected to drive an historic reduction in child poverty. Over 1.1 million Minnesota children will benefit; an estimated 44,000 children will be lifted over the poverty line. The Earned Income Tax Credit expansion will provide an income boost particularly for workers without dependent children in the home. Improvements include increasing the size of the tax credit these workers can receive, and eliminating arbitrary age restrictions that have excluded younger and older workers.
- A continuation of the 15 percent increase in food assistance through SNAP, the Supplemental Nutrition Assistance Program. This is a win-win approach that helps families put food on the table and stimulates spending in grocery and other community stores. Over 450,000 Minnesotans will see an average increase in food assistance of $25 a month. Almost two-thirds of this increase will go to households with children.
- A third round of stimulus payments sent directly to people. Importantly, this effort includes teenagers, young adults, and adults with disabilities who were left out of previous stimulus payments. Unfortunately, these payments continue to fail to fully include immigrant families.
- Provisions to lower the cost of health insurance, including more help to bring down the cost of insurance premiums for folks who get their health insurance through the Affordable Care Act marketplace. The American Rescue Plan eliminates health insurance premiums for many low-income people who are eligible for plans under the Affordable Care Act and markedly reduces premiums for others. It also extends support to folks with somewhat higher incomes who are struggling to afford their health insurance premiums. For example, a Minnesota family of four making $120,000 will see their premiums decrease by almost $200 a month through this bill.
- Additional housing assistance to help folks stay in their homes, to support people who are or were recently experiencing homelessness, and to fund housing assistance that will go directly to tribal nations.
Protecting and supporting crucial public services
The American Rescue Plan contains essential additional funding to bolster services provided by state, tribal, and local governments. This comes in the form of $360 billion in direct grants (of which $10 billion is specifically for capital projects), as well as additional funding for areas such as education and child care.
Minnesota is expected to receive $2.6 billion in fairly flexible aid to the state. These funds can be used to respond to COVID-19 and its related negative economic impacts; to provide premium pay for essential public workers; compensate for state revenue losses; and make investments in water, sewer, and broadband infrastructure. There are two restrictions on the use of these funds: the money cannot be used for public pension funds or to offset net tax cuts. These restrictions are intended to encourage states to take immediate action to support families, workers, and communities through this crisis, and build a more equitable future.
Minnesota local and tribal governments will receive about $2.1 billion in flexible funding as well.
The American Rescue Plan also includes a $1 billion Pandemic Emergency Assistance Fund for states, tribes, and territories to use for economic assistance and to reduce hardship among our lowest-income neighbors. These funds could be used for additional cash assistance through TANF, rental assistance, and more.
Some of the specific funding coming to the state and other public institutions include:
- $179 million to the state for capital projects, which could be used for infrastructure improvements such as repairing state roads and investing in our state’s parks,
- $1.3 billion in funding for local school districts,
- $547 million that will largely go directly to higher educational institutions, and
- $527 million to be administered by the state to support access to child care and child care providers.
The American Rescue Plan provides important and much needed economic support for struggling workers and their families, will protect and expand crucial public services that they count on, and will further jumpstart the economy. It’s important to keep in mind that these funds coming into Minnesota are largely focused on the near-term. For example, the funding for schools and higher educational institutions is available through fall 2023, which means a large share of this money will need to be spent in the upcoming biennium.
Minnesota policymakers should deploy these dollars wisely, and intentionally take aim at the structural inequities that have caused the pandemic and recession to be so much worse for lower-income Minnesotans and communities of color. They should also act to raise additional state revenues in order to maintain these critical investments in a more equitable future after this short-term influx of federal dollars ends.