Among the aid that Kentucky state government will receive from the American Rescue Plan is $2.183 billion through the legislation’s State and Local Fiscal Recovery Funds. The General Assembly appropriated slightly more than half of those dollars to a variety of uses at the end of the 2021 legislative session.
With Treasury guidance clarifying allowable uses of the funds now available, and with widespread hardship still severe across the commonwealth, Kentucky should begin developing an equitable plan for using the remaining funds. Such a plan should prioritize aid to those Kentuckians left out of the state’s spending so far and most in need due to the COVID-19 economic crisis.
So far, state has focused on helping corporations and investing in infrastructure
The Rescue Plan restricted how Kentucky can use the $2.183 billion in Fiscal Recovery Funds for the following four purposes:
- Respond to the pandemic and its negative economic impacts;
- Provide premium pay to essential workers;
- Restore cuts to public services caused by pandemic-induced revenue losses and avoid additional cuts; and
- Invest in water, sewer or broadband infrastructure.
The Rescue Plan also explicitly states that the funds may not be used to offset tax cuts or go toward public employee pensions. Nor can the money be put in a rainy day fund.
In the final days of the Kentucky General Assembly, the legislature appropriated $1.17 billion of these funds.1 Of that amount, the largest appropriation was $575 million to pay off the state’s unemployment loan, which has the effect of lowering business taxes in the future. Also included was $300 million for broadband infrastructure, $250 million for water and sewer projects, $37 million to address COVID in congregate settings, $11.6 million to increase per diem payments to local jails, and $2 million to the Attorney General to address COVID fraud-related schemes. That leaves slightly more than $1 billion from the Fiscal Recovery Funds left to be appropriated.
The General Assembly also enacted over $600 million in corporate tax cuts this session, including tax subsidies for movie studios, developers and cryptocurrency speculators as well as broad-based business tax reductions.
Plan should prioritize those most harmed by the COVID crisis
The actions during the General Assembly were focused on helping corporations and on putting money into infrastructure. Among eligible remaining uses of the dollars, a primary focus should be to address the COVID-caused hardship that remains severe and widespread across the commonwealth. Even before the pandemic hit, 16% of Kentuckians lived in poverty including 22% of children and 24% of Black Kentuckians. The situation for many worsened greatly in the crisis. Now, over 90,000 fewer Kentuckians are employed than before the pandemic began, and employment loss is disproportionately among low wage workers. Nearly one-third of Kentucky adults are having difficulty covering usual household expenses according to the most recent Census data.
The Center on Budget and Policy Priorities recently released a report outlining the kinds of ideas states could implement that would alleviate hardship and help create a more equitable post-pandemic economy, including the following:
Build robust outreach to help eligible residents get needed help
Aid in several different forms is available to households through the American Rescue Plan (and other sources) for food, housing, income support and other needs, but awareness of these programs and knowledge of how to obtain the support is sometimes missing. Kentucky could put money toward more robust outreach and application assistance, including a public awareness campaign with a one-stop shop, expanded support for existing outreach efforts and funds for local organizations to do outreach in their communities. Such efforts should focus on groups facing unique challenges and barriers to accessing support, including immigrant communities, low-income counties and neighborhoods, Kentuckians with disabilities and communities of color.
Boost incomes for essential workers and people with limited incomes
Even with the aid that is available, many Kentuckians are struggling to meet basic needs and face debt that has accrued in the crisis. More direct assistance is needed so families can achieve greater stability. The state could use Fiscal Recovery funds to provide cash assistance to low-income families, including those making less than $25,000 a year (as was suggested by the governor), people with incomes low enough to make them eligible for SNAP and K-TAP, families fleeing domestic violence, those in the child welfare system, immigrants and other groups left out of other forms of relief, and/or additional target populations. The state could also develop more robust emergency assistance programs to help address new debts and financial barriers that have arisen during the pandemic, like the need for car repairs and auto insurance or new medical and dental needs. And the state could provide premium pay to low-wage essential workers who are more likely to be women and people of color and who have put their health at risk in this crisis.
Invest in people to improve public safety
The police killings of Breonna Taylor, George Floyd and others have exposed the need for alternatives to policing and incarceration that are focused on safe, human-centered approaches to emergency response. And the pandemic has heightened the need for community investments to address needs that have become more acute in the crisis. If allowable under Treasury guidance, the state could put Fiscal Recovery Funds toward mobile crisis services led by behavioral health professionals that can help de-escalate crises, increase funding for school-based social services as an alternative to greater police presence in schools, build comprehensive support systems for addressing substance use disorders, and expand mental health support.
Help children catch up on unfinished learning
The American Rescue Plan includes direct money to schools to help address learning loss and other needs, but more funds are needed to address deficiencies and social and emotional challenges that have arisen for many students during the pandemic. Depending on what is allowable under Treasury guidance, the state could provide additional dollars targeted to districts based on their population of low-income students, students with disabilities and English-language learners for expanded tutoring and other supports, as well as funds for wrap-around services like mental and physical health care, nutrition, family support and more.
Invest in equity-enhancing broadband and clean water projects
Kentucky could supplement funds already allocated for broadband and water and sewer projects with a focus on those communities facing both affordability challenges as well as lacking basic or adequate physical infrastructure for such services. Depending on Treasury guidance, broadband dollars could be used both to install internet lines and to examine ways to subsidize service for those who cannot afford what is available. Water investments should focus on addressing health and safety issues that have long plagued Kentucky communities and ensuring families can afford the water that comes out of their taps.
These types of expenditures would not only support Kentuckians struggling to get by in the crisis. Emerging research shows boosting incomes and investing in physical and mental well-being can have long-term positive effects for children and families. And these investments can lay the groundwork for new, more equitable and effective approaches to public safety, education, family support and more that Kentucky can learn from and explore ways to fund long after the pandemic is behind us.