Click here for a PDF of this brief.
Louisianans have faced incredible challenges as a result of the Covid-19 public health emergency and the economic downturn it caused over the last year. Despite this, the state budget is in strong financial shape thanks to past federal relief, and will soon be strengthened further by another round of federal funds. Parish and municipal governments, which have not fared so well, will also be receiving significant assistance, helping to fill budget holes and offering opportunities for reinvestment in communities.
To ensure that these investments are made in ways that will most benefit Louisianans, we offer the following guiding principles for ensuring Rescue Plan funding is well spent.
By centering human needs, racial and economic equity, and prioritizing infrastructure investments that will help secure and improve the well-being of our most vulnerable neighbors, friends, and family members, Louisiana can use coming federal dollars to come out of the pandemic with an economy and government that works better, and offers a better future, for all Louisianans.
The American Rescue Plan Act of 2021 represents the single largest emergency economic intervention in American history, disbursing $1.9 trillion to respond to and recover from the economic and public health crisis caused by the Covid-19 pandemic. Louisianans are set to be major beneficiaries, and state and local governments are expected to receive approximately $5.18 billion. Governments will have until the end of 2024 to spend their allotments, which were determined by population and unemployment rates, among other factors.
The funding is designed to help states fill revenue shortfalls resulting from the economic downturn; pay for Covid-19 vaccinations and other public health measures; and enable state and local governments to make direct investments in the economic well-being of the people and communities most affected by the pandemic.
State and local governments have broad discretion in how to spend this money, but it also comes with two important limitations: Governments may not use the aid to finance tax cuts or to satisfy pension obligations. If funds are misused in these ways, state or local governments will have to repay the federal government whatever amounts were misspent. The U.S. Treasury Department will issue detailed guidance about these restrictions in the coming weeks.
Given broad flexibility, policymakers will need to be thoughtful in how they allocate these temporary dollars. It may be tempting to use these funds to pay down debts or spend on the state’s backlog of planned transportation infrastructure projects. But every dollar spent on these sorts of obligations is a dollar that is not spent directly on help for the poor and the most vulnerable, many of whom disproportionately felt the effects of Covid-19.
Nearly 1 in 5 Louisianans lived below the federal poverty line before Covid-19. If the state were to simply divide its $3.2 billion share among that population, each person would receive more than $3,200. As policymakers decide how to spend this relief money, they should ask themselves the following questions:
Using these guiding principles, Louisiana can ensure the answers to those questions are yes, and that state and local Rescue Plan funding will be well spent.
Poverty and unemployment tend to be geographically concentrated as well – meaning certain parishes or municipalities have greater shares of their populations experiencing hardship than others. For example, of the twenty-one parishes where unemployment is greater than the state rate, only seven have lower pre-pandemic poverty rates – and all have pre-pandemic poverty rates greater than 15%.
Only one of those high-need parishes – Orleans – will be receiving a higher per capita Rescue Plan funding allocation than the state. As such, the state should work with local authorities to target highest-need communities using proven methods of reducing poverty, such as cash assistance programs, and by supporting programs that help connect people already receiving certain forms of assistance to work, such as the subsidized employment programs used in San Francisco and San Antonio.
Many of the parishes with the highest unemployment and poverty rates are also places where the most Black Louisianans live. But stimulus dollars from the Rescue Plan are not spread evenly across these higher-need parishes. For example, of the eight parishes where Black people make up at least half the population, all but two have higher pre-pandemic poverty rates than the state at large, and only two have lower unemployment rates. But only one parish – again Orleans – is expected to receive a greater per capita share of Rescue Plan funding than the state.
This means that some of the poorest parishes with the largest obstacles will not be getting the resources that would be necessary to overcome the legacies of racist government policies and private sector decisions that have created the impoverished and jobless conditions of those majority Black parishes today.
Other historically marginalized groups have also suffered in the pandemic. Women in Louisiana (and especially Black and Latina women) face large gaps in pay compared to women in other states, let alone men, and have also faced disproportionate job losses. So while Louisiana policymakers should prioritize investments that combat unemployment and poverty, they must also take care to address the problems specifically faced by Black Louisianans, women, and other marginalized groups, including wage and hiring discrimination as well as directly targeting aid to these groups of people.
Policymakers should also consider disparities in types of employment when distributing pandemic aid. Louisianans who were fortunate enough to be able to work in relative safety from home were only able to do so because of frontline workers who put their health and lives on the line every day. These frontline workers are more likely to be Black people, or other people of color, and women. The state should set aside Rescue Plan dollars for bonuses for frontline workers and programs that provide education or vocational training for those who want to transition to new careers.
The Rescue Plan Act allows states and localities to spend their allotments on physical infrastructure such as water and sewage system upgrades or broadband Internet. These are worthy initiatives, but infrastructure should also include investments in people that help them achieve greater economic stability. This could mean everything from information technology upgrades that would allow government agencies to better serve the public, to scholarship programs and other services that help people most impacted by Covid-19 get back on their feet.
State policymakers should keep in mind that parishes and local municipalities will receive $1.8 billion in additional funding, but that this money is not evenly divided. For example, Cameron Parish and its municipalities are slated to receive $1.4 million ($194 per resident), while Orleans Parish is expecting over $377 million ($967 per resident).
As previously noted, only Orleans Parish is likely to receive a greater allocation per capita than the state. If localities hope to do more than close budget holes, most will need to coordinate and collaborate with one another, and with the state.
Based on these guiding principles, there are a number of sound investments state policymakers can make using American Rescue Plan dollars that will serve Louisiana for years to come:
The American Rescue Plan Act is an important opportunity for Louisiana to address historic inequities and boost our economy. But this can only happen if state policymakers avoid the temptation to use these one-time dollars in unproductive ways.
For example, the state should not use its allocation for another round of Main Street Recovery Grants – the $275 million grant program for small businesses that the Legislature authorized last year. This is not because businesses don’t require assistance, but because businesses are getting relief from other parts of the stimulus law. The Rescue Plan offers small businesses – including restaurants, which were excluded in the past – $55 billion through various grants and support programs. Moreover, Louisianans are receiving more than $5.7 billion in stimulus payments and additional unemployment assistance from the federal Pandemic Unemployment Benefits. These payments, along with increased vaccination rates and a loosening of economic restrictions, mean consumers will be in a better position to spend more at local businesses now than they were earlier in the pandemic.
Policymakers also should avoid using this money to bail out the state’s unemployment insurance trust fund, which had a balance of more than $1 billion before the pandemic but has since been depleted. Louisiana has borrowed more than $140 million from the federal government to pay unemployment benefits, and the debt is expected to grow to $200 million.
Without a state bailout, businesses that pay into the trust fund will have to foot a small surcharge to pay off the debt. This is exactly how the system was designed to work. Unemployment insurance taxes are a normal obligation for businesses. Louisiana’s unemployment taxes are among the lowest in the nation, a key reason why Louisiana’s unemployment benefits are among the most meager. Asking businesses to pay their fair share through a small per-employee increase in their trust fund contributions is reasonable, even during a recovery.
Finally, legislators should avoid the temptation to steer these dollars to road and bridge projects, despite the state’s daunting backlog of transportation needs. It remains unclear whether states can use stimulus dollars for transportation projects, as the bill only specifies that funds can be used for water, sewage, and broadband Internet infrastructure. More importantly, Louisiana would be in line for new transportation dollars through the infrastructure plan that President Joe Biden unveiled in late March. Finally, Louisiana’s gasoline tax – which is supposed to pay for transportation projects – has not been increased since 1990, is one of the lowest in the country, and has lost more than half of its purchasing power since it was last raised.The Covid-19 pandemic has been devastating for Louisiana families and businesses. As of early April, more than 445,000 of our fellow citizens had been infected and more than 10,000 people had died. From great tragedy springs opportunity, and the American Rescue Plan Act offers Louisiana an historic opportunity to address long standing economic inequities and craft a recovery that builds from the bottom. This is not simply a matter of fairness – it’s also essential to the future health of our state’s economy.