The new COVID relief bill, known as the American Rescue Plan (ARP), will soon become law. It will send billions in aid to Kentucky’s families, communities and state and local governments to both combat the pandemic and provide desperately-needed economic relief through the remainder of the crisis. This landmark law will alleviate hardship, prevent further job loss and give Kentucky the tools it needs to finish the fight against the pandemic.
$1,400 stimulus checks that will help nearly every Kentuckian make ends meet
In Kentucky, 37% of adults report difficulty affording usual household expenses according to the most recent Census data. As a way of providing direct relief, and also stimulating local economies, the ARP will send direct cash payments of $1,400 per person in the household (meaning a family of three will receive $4,200, for example). In addition to the $600 per person that was provided in December, that completes the promise of $2,000 checks made at that time.
Full payments will go to individuals who earn up to $75,000 and married couples who earn up to $150,000, with the payments phasing out at $80,000 and $160,000 respectively. Those eligibility guidelines mean payments will be sent to 4.1 million Kentuckians, or 92% of the state population. The checks will provide an income boost of nearly $5.7 billion, helping individuals and families and also giving a likely boost to public revenue. The ARP includes adult dependents in a household’s payment, unlike in previous plans, although it continues to exclude payments to immigrants using an Individual Taxpayer Identification Number. You can find an estimate for how much your household will receive here.
Extension of jobless benefits
Nearly 107,000 Kentuckians claimed some form of jobless benefits during the most recent week. But several major, special unemployment insurance programs that were set up to respond to the economic fallout of the pandemic are set to expire at the end of this week, on March 13. The ARP extends these vital programs through September 6.
That includes the program for jobless gig workers, independent contractors and small business owners known as Pandemic Unemployment Assistance (PUA); the additional weeks of unemployment for regular state UI claimants and PUA claimants who have exhausted the maximum weeks they could be eligible for those programs known as Pandemic Emergency Unemployment Compensation (PEUC); and the extra $300 per week in benefits to all claimants known as Federal Pandemic Unemployment Compensation (FPUC). The extended FPUC alone could bring over $30 million in benefits to Kentucky claimants per week, and to date has brought $3.6 billion into Kentucky.
Additionally, the legislation forgives up to $10,200 of federal taxes paid on unemployment benefits from 2020 for households earning less than $150,000. And it continues full federal funding of the first week of benefits through September 6 — to date, that program has paid out $103 million to Kentucky claimants.
Robust state and local aid
The ARP includes $360 billion for state, local and tribal governments, with approximately $4.2 billion expected to go to Kentucky. That money for budgets is needed — declines in public revenue have resulted in a loss of 27,300 state and local government jobs since the pandemic hit.
An estimated $2.4 billion is expected to go to Kentucky’s state government, making a major difference in our state budget. Kentucky counties will receive an estimated $866 million in total, with all counties receiving funds. Kentucky’s metro cities — Ashland, Bowling Green, Covington, Elizabethtown, Henderson, Hopkinsville, Lexington, Louisville and Owensboro — will receive a total of $445 million. Other non-county municipalities will receive a total of $307 million. You can view estimates by county here.
The ARP funds can be used to:
- Respond to the public health emergency including negative economic impacts, such as assistance to households, small businesses and nonprofits or aid to impacted industries such as tourism, travel and hospitality.
- Provide “premium pay” to essential public workers up to a maximum of $13 per hour and $25,000 per worker.
- Provide government services to the extent of the reduction in tax revenue that has occurred.
- Make necessary investments in water, sewer or broadband infrastructure.
The legislation specifically outlines that the state cannot use the funds to either directly or indirectly offset a reduction in the net tax revenue resulting from the state reducing its tax revenue through the passage of a new state law. So the funds cannot be used to pay for tax cuts. The state also cannot deposit these dollars into a pension fund. States and localities have until Dec. 31, 2024 to spend these funds.
There is a capital projects fund that directs $10 billion total to states, territories and tribal nations for capital projects “directly enabling work, education, and health monitoring” (including remote health) related to the public health emergency. Each state, D.C. and Puerto Rico receives $100 million with funds also going to territories and tribal governments. Of the remaining dollars, 50% will be distributed as additional funding to states based on their population as a proportion of the U.S. population, 25% will be distributed based on the number of individuals living in rural areas in the state as a percentage of the U.S. rural population and 25% will be distributed based on the state’s proportion of all households in the U.S. with incomes at 150% of the federal poverty level. Kentucky will receive $185 million.
Investments in K-12 and higher education
The ARP includes $130 billion in new flexible funds for K-12 schools — the largest one-time federal investment in education in U.S. history. Kentucky K-12 schools will receive approximately $2.2 billion, which must be spent by September 30, 2023. These funds are badly needed to support schools and students through distance learning, safe in-person instruction (reducing class sizes, modifying spaces to enable social distancing, modernizing HVAC systems, hiring more custodians, nurses and counselors, etc.) and additional support services to address student trauma among other needs. Twenty percent of these funds must be used to address learning losses that have occurred due to COVID-19.
The legislation also includes $40 billion for public higher education to improve safety on campus, provide distance learning and for student support services. Schools have to put at least half of the funding toward emergency financial aid grants to address hunger, homelessness or other challenges students are facing. Kentucky higher education institutions will receive an estimated $459 million.
Expanded tax credits for children and low-wage earners
The ARP expands the Child Tax Credit (CTC) to lower-wage families by making the entire credit refundable and increasing the amount from $2,000 per child to $3,600 per child under 6 years old and $3,000 per child ages 6-17. It also pays out half of the credit to families in installments (likely monthly) from July to December 2021, with the other half applied to 2021 tax returns next year. Previously, the entire credit was applied to annual tax filings.
This 12 month enhancement of the CTC will benefit 1.1 million Kentucky children, or 86% of the state’s child population, a direct investment of nearly $1.8 billion. The expansion of the CTC will have a dramatic positive impact on kids’ well-being by cutting child poverty in the United States by more than 40%. Not only is this an immediately needed income support, but a broad array of research has shown that cash and near-cash assistance has meaningful immediate and lasting benefits in the lives of children. Congress should make this policy improvement permanent.
For families who send their children to child care or hire in-home care, the ARP also substantially expands the Child and Dependent Care Tax Credit. Families will now be able to claim a fully-refundable credit for such expenses during 2021 of up to $8,000 for one child and $16,000 for two children, up from $3,000 and $6,000 respectively. You can find an estimate for how much your household will receive here.
For low-wage working adults without children, the ARP broadens who can claim the Earned Income Tax Credit (EITC) by extending the age threshold down to 19 years old (from 24) and removes the age cap (formerly 65 years old). It further broadens the eligibility for the credit from those earning $16,000 per year to those earning $21,000 per year. It also increases the maximum credit amount from $530 to approximately $1,500. As many as 308,200 adults in Kentucky could benefit from the expanded EITC for childless adults.
Health care expansion
The health care enhancements in the ARP are aimed at reducing the cost of coverage for low-wage Americans and those recently laid off from their jobs. The law does this first by capping the cost of health insurance purchased from the exchange (which is Healthcare.gov this year in Kentucky) to 8.5% of income, down from 9.83%, with the federal government picking up the rest of the cost through subsidies. This change means that many who earn between 139% of the poverty level (or $17,900 for an individual, which is just above the eligibility for free Medicaid coverage) and 150% of the poverty level can find plans with $0 premiums. It also ensures that if the initial income estimate for the year that determines the premium subsidy level ultimately ends up too low and thus the insured person receives too much subsidy, people won’t have to pay that back.
These provisions would help approximately 77,800 Kentuckians who are covered through these plans — although the total number of people helped could be more as the enhancements apply to the special enrollment period currently underway through May 15, and may induce more people to sign up. You can find an estimate for how much marketplace coverage would cost for you with the ARP improvements here.
The ARP also offers an 85% subsidy for COBRA insurance, which is employer coverage that a laid-off worker can keep if they pay the premiums. Doing so helps to retain a continuity of care for people currently receiving treatment so that patients don’t have to change doctors or use a new drug formulary which may be necessary with a new form of coverage.
Food, housing and child care assistance
In Kentucky, just under 1 in 4 adults report that the children in their household aren’t eating enough because they couldn’t afford enough food. The ARP seeks to alleviate this hardship by extending the 15% increase in Supplemental Nutrition Assistance Program (SNAP) food assistance through September (it is set to expire in June). This temporary increase is estimated to bring in $51 million in federal funding over the three months it is being extended and maintain a boost in benefits for the 625,000 SNAP participants in Kentucky. The ARP also extends the Pandemic-EBT (P-EBT) program that provides grocery money for families with kids who would have received meals at school but whose school is closed. This extension will allow for these benefits to be distributed in August and September for those schools that are still not meeting in person.
1 in 6 Kentucky renters are behind on their rent payments in Kentucky, and with courts now processing many evictions, the rental aid in the ARP is desperately needed. It includes $19 billion to be used for emergency aid to low-income renters to help them get current on their rent and stay housed through the end of the year — which states can add to the rental and utility assistance funding they receive from the December relief package. ARP also includes a combined $10 billion funding for homelessness prevention and Housing Choice Vouchers.
Since March 2020, 46% of Kentucky parents report having had to change their job status due to child care issues, including alternating work hours, changing jobs, quitting their job or delaying having children. In 2020, 385 child care centers closed their doors bringing the number of centers down to 2,057 and exacerbating the already desperate child care shortage in Kentucky. The ARP seeks to help low-income families and child care centers by providing $15 billion in additional funds for the Child Care and Development Block Grant (CCDBG), which is used for child care assistance, and an additional $24 billion in child care stabilization funds to be used for payments and other assistance to child care centers. In total, ARP allocates $39 billion for child care, of which Kentucky is estimated to receive $293.9 million in CCDBG funding and $470.1 million in stabilization funds.
Critical investments in public health
The ARP includes approximately $85 billion to bolster the public health response to the pandemic. This amount includes approximately $50 billion for COVID-19 testing and contract tracing, $19 billion to increase the size of the public health workforce and another $16 billion for vaccine distribution and supply chains. Kentucky’s share of these funds will help the state continue to roll out vaccine distribution and increase its vaccination rate, while further decreasing the positivity rate and ultimately achieving herd immunity.
Other provisions in the legislation include:
- $25 billion in grants for restaurants and bars.
- $15 billion for Economic Injury Disaster Loan Advance grants (up to $10,000 per business).
- $7.25 billion in additional funding for Paycheck Protection Program (PPP) loans.
- $30.46 billion for public transit.
- $50 billion for Federal Emergency Management Agency (FEMA)’s Disaster Relief Fund.
- Funds specifically to address mental health and substance use disorders.
- Paid Family and Medical Leave provisions from Families First Coronavirus Response Act reinstated until Sept. 20, 2021 (they had expired Dec. 31, 2020).