On the Edge


Balancing Budgets in a Postpandemic World

The Issue Paper by Beverly Bunch, On the Edge: Balancing Budgets in a Postpandemic World, is the latest in a series of Alliance issue papers on state and local budgeting in the COVID Era.

The American Rescue Plan Act of 2021 (ARPA) authorized unprecedented levels of federal financial assistance to help state and local governments address the health and economic impacts of COVID-19 and maintain essential public services. The act included the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, under which Congress provided $350 billion to state, tribal, and local governments. These funds must be spent by December 31, 2026.

States received $195.3 billion of the total. When the money runs out, some governments may face fiscal cliffs—the risk of eliminating or scaling back ongoing programs in education, public safety, or other essential areas—if they do not have alternative funding sources in place. This paper outlines four key policy recommendations that will help states prevent budgetary shortfalls and strengthen long-term fiscal health after the federal cash expires.

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About the Initiative and Issue Paper Series

The goal of the Truth and Integrity in Government Finance Initiative is to help improve budgeting and fiscal sustainability in states by identifying practices that need improvement and providing concrete examples of best practices for all to follow.

The State and Local Budgeting in the COVID Era issue paper series builds on the work of previous research efforts to focus on the impact of the pandemic and ensuing recession and recovery on states and localities; explore how budgeting policies of states prior to the pandemic have impacted how well they were able to handle the crisis; identify risks and opportunities within states that will contribute to their ability to successfully recover from the financial impacts of COVID-19; and make recommendations for policy improvements that will contribute to the fiscal sustainability of states.