The American Rescue Plan Act: Law Explained

Most would agree that understanding a major new law like the American Rescue Plan Act can be challenging.

But having a clear explanation of the key provisions and impacts can make all the difference.

In this post, we'll provide a straightforward overview of the American Rescue Plan, including details on the financial relief for families, support for businesses, infrastructure investments, and more.We'll also summarize some of the key takeaways so you can quickly grasp the significance of this far-reaching legislation.

Introduction to the American Rescue Plan Act of 2021

Background and Purpose

The COVID-19 pandemic caused widespread economic disruption in the United States, with millions losing jobs, businesses struggling, and state and local governments facing budget shortfalls. To provide relief and promote recovery, Congress passed the American Rescue Plan Act in March 2021. The key goals of the Act were to:

Support individuals and families facing financial hardship
Assist small businesses and nonprofits to maintain operations
Bolster state and local government budgets
Strengthen the public health response to the pandemic

Major Provisions Overview

The American Rescue Plan contains $1.9 trillion in total spending across major categories:

Direct stimulus payments to individuals making under $75,000 per year
Enhanced unemployment aid through September 2021
Support for small businesses through the Paycheck Protection Program and Economic Injury Disaster Loan program
Funding for state, local, and tribal governments for costs related to the pandemic
Money for K-12 schools to assist with safe reopening
Funds for COVID-19 testing and vaccine distribution

There is also support in areas like nutrition assistance, housing aid, health insurance subsidies, and tax credits for families and workers.

Projected Economic Impact

Economists project the stimulus funds can boost GDP growth in 2021 by 3-4 percentage points. The aid to lower and middle income families is expected to reduce hardship and stimulate consumer spending. Support for small businesses aims to reduce closures and job losses. Overall the Act seeks to accelerate the recovery, spur hiring, and provide a temporary safety net.

Accessing the American Rescue Plan Act of 2021: Summary PDF

A 2-page high level summary of the key provisions of the American Rescue Plan Act of 2021 is available for download as a PDF on the House Budget Committee website here. This offers a useful overview of the major stimulus spending areas in the law.

What was the problem with the American Rescue Plan?

The American Rescue Plan Act (ARPA) was passed in March 2021 to provide economic relief during the COVID-19 pandemic. However, one study found that the ARPA failed to achieve one of its key goals - creating 4 million new jobs.

According to the American Enterprise Institute, the ARPA's expanded unemployment benefits actually disincentivized some Americans from returning to work. The study estimates that approximately 1.8 million Americans turned down job offers specifically because of the ARPA's temporary $300 weekly federal unemployment supplement.

While the ARPA provided necessary aid, the expanded unemployment benefits may have unintentionally reduced labor force participation rates. This highlights the complex balancing act policymakers face during economic crises. Relief funds must help those in need while also encouraging employment and growth. Achieving these dual goals is an ongoing challenge.

Do ARPA funds have to be paid back?

No, the American Rescue Plan Act (ARPA) funds provided to states, municipalities, and other entities do not need to be paid back. The ARPA funds are grants that were allocated by the federal government to provide economic relief from the COVID-19 pandemic.

However, there are expenditure deadlines that recipients need to comply with. This bill passed in 2021, and the first funds were distributed in May 2021. Now, 14 months remain until the obligation deadline of December 31, 2024.

If a municipality has not obligated its ARPA State and Local Fiscal Recovery Funds (SLFRF) by the end of 2024, they will have to return any unobligated funds to the Department of Treasury. To avoid this, it's important for recipients to have a spending plan in place and actively use the funds for covered purposes by the deadline.

Some key facts about paying back ARPA SLFRF funds:

The funds do not need to be repaid if used appropriately by the deadline
Recipients have until December 31, 2024 to obligate the funds
Any unobligated funds as of January 1, 2025 must be returned
Having a spending plan is crucial to fully utilize the funds by the deadline

So in summary, ARPA funds are not loans and do not need to be paid back. But recipients must use the funds by the 2024 deadline or remaining amounts will have to be returned. Careful planning and execution are vital to comply with requirements and fully capitalize on this economic relief opportunity.

Who qualifies for the American Rescue Plan Act of 2023?

The American Rescue Plan Act of 2021 (ARPA) provided economic relief in response to the COVID-19 pandemic. This act does not extend to 2023.

However, if there was an American Rescue Plan Act of 2023, some populations that may qualify for assistance could include:

Individuals and families experiencing homelessness or at risk of becoming homeless
Survivors fleeing domestic violence, dating violence, sexual assault, stalking or human trafficking
Low-income households facing economic hardship
Small businesses impacted by economic downturns

The ARPA aimed to provide aid to vulnerable and disadvantaged communities affected by the pandemic. Any future stimulus packages would likely have similar goals of supporting those most in need during times of crisis.

What are the accomplishments of the American Rescue Plan?

The American Rescue Plan Act (ARPA) of 2021 was a $1.9 trillion economic stimulus bill passed in March 2021 to provide relief from the COVID-19 pandemic. Some key accomplishments include:

Major funding increase for state and local governments: ARPA allocated $350 billion in aid for state, local and tribal governments which helped drive record 16.6% revenue growth in 2021. This provided economic resilience and supported vital public services.
Expansion of Child Tax Credit: The Act increased the Child Tax Credit in 2021 to $3,600 per child under 6 and $3,000 per child under 18. This helped lift millions of children out of poverty.
Additional stimulus checks: ARPA authorized $1,400 direct payments to qualifying Americans. Combined with previous rounds, total relief reached $3,200 per eligible adult and child.
Enhanced unemployment benefits: The Act extended federal unemployment programs through early September 2021 with a $300 weekly supplement. This further supported those impacted by the pandemic.
More small business aid: The Act added $7.25 billion to the Paycheck Protection Program, benefiting over 300,000 small businesses. $28.6 billion was allocated to eateries and bars via the Restaurant Revitalization Fund.

In summary, ARPA provided historic levels of pandemic relief funding to governments, families, businesses and the healthcare system - helping drive the strong economic rebound in 2021.

Direct Financial Relief for American Families and Workers

This section outlines the stimulus checks, tax credits, healthcare subsidies and other direct aid allocated to American citizens and families by the American Rescue Plan Act.

Third Round of Stimulus Checks

The American Rescue Plan Act authorized a third round of direct stimulus payments worth up to $1,400 per eligible individual, including dependents. The full $1,400 is available to individuals earning up to $75,000 and couples earning up to $150,000. The payments phase out for higher incomes.

Eligibility is based on 2019 or 2020 tax returns. Payments began processing in March 2021 and most were distributed by direct deposit or mail. Additional plus-up payments were sent to those who filed 2020 returns reporting lower incomes or new dependents.

Enhanced Unemployment Benefits

The legislation extended enhanced federal unemployment benefits through early September 2021, including a $300 weekly supplement and aid eligibility for self-employed and gig workers. It also exempted the first $10,200 in 2020 jobless benefits from federal income tax for households under $150,000.

Expansion of Child Tax Credit

For 2021 only, the Child Tax Credit increased from $2,000 per child under 17 to $3,000 per child aged 6-17 and $3,600 per child under 6. The credit is fully refundable and will be distributed as advance monthly payments from July to December 2021. Families can claim any remaining balance when filing 2021 taxes.

Subsidies for Health Insurance

The American Rescue Plan increased subsidies for COBRA and Affordable Care Act health insurance plans purchased through federal or state marketplaces. This aims to reduce premium costs for coverage purchased by unemployed workers and others seeking individual health insurance.

Support for Child Care: Child Care Tax Credit

To aid families struggling with child care costs due to the pandemic, the legislation provided a tax credit for 50% of qualifying child care expenses in 2021, up to $4,000 for one child/dependent and $8,000 for two or more. The credit can be claimed when filing 2021 taxes.

Support for Small Businesses Through the American Rescue Plan Act

The American Rescue Plan Act allotted over $28 billion in stimulus funds specifically targeted to aid small businesses impacted by the COVID-19 pandemic. Key programs include enhancements to the Paycheck Protection Program (PPP), the Economic Injury Disaster Loan (EIDL) program, grants for restaurants and bars, and flexible recovery funds for state and local governments.

Enhancements to the Paycheck Protection Program

The American Rescue Plan Act provided an additional $7.25 billion in funding for the PPP, allowing more small businesses to access forgivable loans to cover payroll, rent, utilities, and other operating expenses. Eligibility was also expanded to include non-profit organizations and digital news publishers with under 500 employees per location. First-draw PPP loans made after December 27, 2020 are now eligible for full loan forgiveness if spent on eligible expenses.

Economic Injury Disaster Loan Program Enhancements

The Act allotted $15 billion to expand EIDL Advance grants, which provide emergency funding of up to $10,000 to small businesses located in low-income communities. Applicants can now self-certify eligibility for these grants instead of providing tax documentation. EIDL loans also received $5 billion for ongoing assistance helping small businesses meet financial obligations and operating expenses.

Grants for Restaurants and Bars

The Restaurant Revitalization Fund provides $28.6 billion in direct grants to food service and drinking establishments impacted by the pandemic. Grants equal pandemic-related revenue losses up to $10 million per business. The funds can cover payroll, rent, utilities, maintenance, supplies, food, equipment, construction of outdoor seating, and other expenses.

State and Local Government Aid

The Act allocates $350 billion in emergency funding for state, local, and tribal governments to assist communities disproportionately impacted by the pandemic. Local municipalities can use these flexible funds to provide aid to small businesses and nonprofits to mitigate financial hardship. Funds can also be utilized to assist industries like tourism and hospitality that faced substantial revenue declines.

State Fiscal Recovery Fund and Local Fiscal Recovery Fund

Over $195 billion is directed to state governments with $130 billion for local governments to mitigate the fiscal effects stemming from the public health emergency. These funds offer flexibility to support public health expenditures, address economic harms to workers and industries, provide premium pay for essential workers, and invest in water, sewer, and broadband infrastructure. State and local municipalities can utilize these funds to implement small business grant programs to drive economic revitalization.

Allocations for State, Local, and Tribal Governments

This section provides an overview of the funds allocated to various levels of government through the American Rescue Plan Act to support pandemic response and recovery efforts.

Coronavirus State and Local Recovery Funds

The American Rescue Plan Act allocated $350 billion in flexible aid for state, local, territorial, and tribal governments to respond to the COVID-19 public health emergency and support communities and populations hardest-hit by the pandemic. These funds can be used to:

Replace lost revenue needed to provide vital public services
Respond to the public health emergency and negative economic impacts
Provide premium pay to essential workers
Invest in water, sewer, and broadband infrastructure

Emergency Management Performance Grants

The Act provides $100 million in additional funding for FEMA's Emergency Management Performance Grant (EMPG) program, which supports state, local, tribal, and territorial governments in preparing for all hazards, such as the COVID-19 pandemic. These grants help fund key emergency management personnel and activities across jurisdictions.

Assistance to Firefighter Grants

The Act includes $100 million for FEMA's Assistance to Firefighter Grants, which help fire departments obtain critical resources necessary to protect the health and safety of the public and emergency response personnel from COVID-19.

Environmental Justice Grants

$100 million is allocated to the Environmental Protection Agency for environmental justice grants to reduce disproportionate environmental and public health harms related to the COVID-19 pandemic in underserved communities.

Support for Tribal Governments

Over $31 billion is provided to Indian Tribes and Alaska Native communities to support vaccination efforts, respond to the pandemic's impacts, replace lost revenue, improve water and broadband infrastructure, and more.

Strengthening American Industry and Infrastructure

This section outlines other stimulus measures assisting agriculture, aviation, pensions, broadband access and additional sectors across the nation.

Aid for Farmers and Food Security

The American Rescue Plan Act provides $5 billion in financial assistance to farmers of color who have faced discrimination in USDA farm lending programs. This includes $1 billion specifically for outreach, training, education, technical assistance, grants, and loans. Additionally, the law allocates $4 billion to purchase food and agricultural commodities for emergency distribution. This strengthens food security for vulnerable communities impacted by the pandemic.

Relief for Airports and the Aviation Sector

The legislation directs $8 billion in economic relief to airports to prevent, prepare for, and respond to the pandemic. This funding will support airport operations and payroll expenses. An additional $15 billion is allocated to extend the payroll support program for the aviation sector, helping airlines and contractors retain and pay workers.

Multiemployer Pension Relief

The American Rescue Plan Act provides $86 billion to financially assist and stabilize vulnerable multiemployer pension plans covering millions of workers. This provision prevents cuts to the earned pension benefits of retirees and workers in these plans. It offers them a lifeline after years of uncertainty.

Investments in Transit Infrastructure Grants

The law provides $30.5 billion in federal investments for transit infrastructure nationwide. This includes grants to support the recovery of public transportation systems impacted by the COVID-19 pandemic. The funds will help transit agencies avoid layoffs and service reductions while ensuring safety and access to jobs.

Broadband Infrastructure Investment

Over $7 billion is dedicated toward expansion of broadband internet access across unserved and underserved rural and tribal areas. This historic investment will help connect minority and low-income families who lack internet access, addressing the digital divide. It covers broadband infrastructure deployment, digital literacy training, and affordable internet subsidy programs.

The American Rescue Plan Act provides significant funding and support for social services, community health efforts, and emergency response measures aimed at helping the most vulnerable groups during the COVID-19 pandemic.

Emergency Rental Assistance

The Act allocates $21.55 billion for emergency rental assistance programs to help prevent evictions and stabilize households struggling to pay rent due to the pandemic. Key provisions include:

Funding can cover up to 18 months of rent, utility bills, and other housing expenses. Priority is given to households below 50% of area median income.
State and local governments distribute the funds directly to landlords and utility providers.
Tenants and landlords can apply jointly for assistance to streamline the process.
Funds cannot be used to pay late fees incurred by tenants.

Education Stabilization Fund

The Act provides nearly $170 billion in additional funding for the Education Stabilization Fund to support schools and universities during the pandemic. Major areas of support include:

$122.7 billion for the Elementary and Secondary School Emergency Relief Fund to help K-12 schools reopen safely and address learning loss.
$39.6 billion for the Higher Education Emergency Relief Fund to provide financial aid grants to college students and support struggling universities.
$2.75 billion in dedicated funding for private K-12 schools.

Pandemic EBT Program

The Pandemic EBT program provides grocery benefits on electronic benefit transfer (EBT) cards to replace the value of missed school meals. The Act expands this program by:

Increasing the benefit level to $75 per eligible child to cover the cost of reduced-price breakfast and lunch meals.
Allowing younger siblings in eligible households to receive benefits.
Extending the program through the entire 2021-2022 school year.

Community Mental Health Services Block Grant

The legislation provides $1.5 billion in supplemental funding for the Community Mental Health Services Block Grant program. This funding will help meet the growing demand for community mental health services during the pandemic by supporting:

Expanded community-based mental health treatment, crisis care, substance use disorder services, and other critical access points.
Workforce training and recruitment to address mental health professional shortages.
Access to telehealth and technology upgrades to enable remote service delivery.

Substance Abuse Prevention and Treatment Block Grant

To combat the escalating drug epidemic during COVID-19, the Act allocates $1.5 billion in additional funding for the Substance Abuse Prevention and Treatment Block Grant. Key initiatives supported by this funding include:

Expansion of medication-assisted treatment and recovery support services.
Enhanced support for hard-hit communities and vulnerable populations.
Public awareness campaigns on opioid misuse and overdose prevention strategies.
Upgrades to data tracking systems to better understand trends in substance misuse.

In total, the American Rescue Plan Act provides over $350 billion in fiscal aid for state, local and tribal governments which can be used to fund COVID-19 response efforts, replace lost revenue, support economic stabilization for households and businesses, and address systemic public health and economic challenges.

Oversight and Future Considerations

Oversight Mechanisms

The American Rescue Plan Act establishes several oversight mechanisms focused on accountability and transparency for spending of relief funds. These include:

The Pandemic Response Accountability Committee (PRAC) - An independent committee of federal government inspectors general responsible for overseeing pandemic relief spending. The PRAC conducts audits, reviews relief funding recipients, and investigates fraud.
The Special Inspector General for Pandemic Recovery - An office created to oversee Treasury Department loans and investments made through stimulus programs. The Special IG conducts audits and investigations into waste, fraud, and abuse related to stimulus spending.
The Congressional Oversight Commission - A group appointed by Congressional leaders responsible for overseeing implementation of stimulus lending programs. The Commission issues regular reports on program effectiveness and transparency.
State/Local Government Reporting - State, local and tribal governments receiving relief funds must publicly report on their intended and actual use of the funds. This reporting facilitates public monitoring of spending.

Prospects for Supplementary Legislation

Congress will likely consider additional stimulus legislation in 2021 depending on the pace of economic recovery. Possible areas of focus include:

Infrastructure - Biden has proposed a $2 trillion infrastructure improvement plan that may gain bipartisan support. This could further boost jobs.
Expiring Unemployment Aid - Enhanced unemployment benefits from the American Rescue Plan expire in September 2021. Their extension may be revisited.
State and Local Governments - Supplemental funding is possible if these governments still face COVID-related budget shortfalls later in 2021.

However, further major stimulus plans face obstacles due to deficit concerns and Republican opposition. Significant compromise would be needed for any additional packages to become law.

Key Takeaways

The American Rescue Plan provides substantial emergency relief, including:

Direct payments to households
Enhanced unemployment aid
Funds for vaccine distribution
Assistance for small businesses
Support for state and local governments

Total spending is approximately $1.9 trillion. The legislation aims to accelerate the economic recovery, though key weaknesses like long-term unemployment may persist. Further congressional action in 2021 remains uncertain.

Reviewing the American Rescue Plan Act of 2021 PDF

The 359 page American Rescue Plan Act PDF comprehensively details the many stimulus programs funded under the new law. The main components include:

Title II - Funding for industries like airlines and agriculture
Title III - Measures providing direct household relief including stimulus checks and unemployment aid
Title IV - Support for transportation sectors such as airlines and airports
Title V - Funding for testing, vaccines, and health provider relief
Title VI - Assistance for small businesses through the PPP and EIDL
Title VII - Support for state, local and tribal governments

The PDF serves as a complete legislative reference encapsulating the wide range of stimulus relief provided under the Act.