The Unprecedented
Federal Fiscal Policy
Response to the COVID-19
Pandemic and Its Impact
on State Budgets
Phil Dean
Chief Economist and Public Finance
Senior Research Fellow
Massive scal stimulus supported the economy during
the pandemic, but also contributed to goods shortages,
ination, and long-term debt.
May 2022
411 East South Temple Street
Salt Lake City, Utah 84111
801-585-5618
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Analysis in Brief
The COVID-19 pandemic created enormous challenges
throughout the world. In addition to deaths, hospitalizations,
and various long-term health impacts, signicant economic
damage also occurred in COVID’s aftermath. This economic
damage included over 23 million unemployed U.S. workers. In
the midst of these enormous economic challenges, the federal
government began its scal response to the pandemic.
Within a year of the COVID-19 pandemic beginning in the
U.S., the federal government enacted unprecedented scal
stimulus amounting to nearly 25% of 2020 GDP (over $5 trillion).
This massive response far exceeded the federal scal response
to previous recessions. Similar to previous recessions,
expansionary monetary policy also played an important role.
The federal scal stimulus came in three waves, including a
$2.4 trillion (11.5% of GDP) Wave 1 in March and April 2020, a
$0.9 trillion (4.2% of GDP) Wave 2 in December 2020, and a $1.9
trillion (8.9% of GDP) Wave 3 in March 2021.
This federal funding supported state and local government
budgets both directly and indirectly. State and local governments
directly received federal funds to respond to the public health
emergency and support economic activity. Federal scal stimulus
also provided considerable funding to rms and households,
which indirectly supported state and local government budgets
by supporting income and consumption. As incomes and
spending grew, so did tax revenue.
The Unprecedented Federal Fiscal Policy Response to the
COVID-19 Pandemic and Its Impact on State Budgets
Federal Fiscal Response to Recent Recessions as % of U.S. GDP
Source: Congressional Budget Oce and U.S. Bureau of Economic Analysis
0% 5% 10% 15% 20% 25%
Wave 1: 11.5% Wave 2: 4.2% Wave 3: 8.9%
(CARES, PPPHCEA, FFCRA) (Response and Relief) (ARPA)
Pandemic
(2020 & 2021)
0.4%
7.0%
24.6%
Dot-com Bust
(2001)
Federal Fiscal Response as % of GDP
ARRA: 5.7%
The Great Recession
(2008 & 2009)
Economic Stimulus
Act and TARP (net):1.3%
In short, scal stimulus propped up the ailing U.S. economy in
March and April 2020, when layos spiked due to shutdowns.
However, the scal stimulus also contributed to economic chal-
lenges such as goods shortages, ination, and long-term debt.
Key Findings
• Massive Pandemic Fiscal Stimulus – Within a year of the
COVID-19 pandemic beginning in the U.S., the federal govern-
ment enacted three waves of unprecedented scal stimulus
amounting to nearly 25% of 2020 GDP (over $5 trillion).
• Direct and Indirect State Budget Impacts – This federal
funding supported state and local government budgets both
(a) directly through state and local government grants and (b)
indirectly through economic support to rms and households.
• Fiscal Stimulus Benets and Costs – While helping the U.S.
economy overcome early pandemic challenges, the scal
stimulus also contributed to goods shortages, ination, and
long-term debt.
• Pandemic aid signicantly exceeded that of recent reces-
sions – Pandemic federal scal support exceeded a full year’s
worth of regular federal spending and more than tripled the
amount of aid as a percent of GDP provided for the Great
Recession. Federal scal support provided during the Dot-com
recession was even smaller tallying 0.4% of GDP, compared
with 7.0% for the Great Recession, and 24.6% for the pandemic.
May 2022
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Table of Contents
Introduction ..........................................3
Dealing with an Unknown Virus ..........................3
Pandemic Declared and Massive Economic
Disruption Begins ......................................3
Massive Federal Fiscal Response ..........................4
Comparison with Recent Recessions ......................5
Major Federal Funding Waves ............................5
Wave 1 – $2.4 Trillion Early Pandemic Response. . . . . . . . . .6
Coronavirus Preparedness and Response Act .............6
Families First Coronavirus Response Act ..................6
IRS Income Tax Filing Deadline Shift ......................6
CARES Act ...............................................6
Paycheck Protection Program and Health Care
Enhancement Act ....................................10
Wave 2 – $0.9 Trillion Response and Relief Act ......... 11
Wave 3 – $1.9 Trillion American Rescue Plan Act ....... 11
Coronavirus State and Local Fiscal Recovery
Funds (SLFRF) ........................................12
Economic Recovery .................................. 13
Incomes Increased During Pandemic ....................13
Households Using Stimulus Funds for Saving, Debt
Reduction, and Spending .............................13
Economic Challenges from Federal Fiscal Response ......14
Conclusion .......................................... 15
References .......................................... 16
Figures
Figure 1: U.S. Initial Unemployment Insurance Claims,
1970-2022 .............................................3
Figure 2: U.S. Initial Unemployment Insurance Claims and
Major Fiscal Response Bills, 2020–2022 .................4
Figure 3 – Federal Fiscal Response to Recent
Recessions as % of U.S. GDP ............................5
Figure 4: U.S. Real GDP Per Capita, 1970–2021 ............13
Figure 5: U.S. Personal Income, 2000–2022 ...............13
Figure 6: U.S. Personal Saving Rate, 1960-2022 ...........13
Figure 7: Nominal Checkable Deposits and Currency for
Households and Nonprots, 1960–2021 ...............14
Figure 8: U.S. Household Debt Service Payments as
Percent of Disposable Personal Income, 1980–2021 ....14
Figure 9: Nominal U.S. Retail Sales, 1992-2021 ............14
Figure 10: Year-Over Change U.S. Consumer Price
Index (CPI), 1947-2022 ................................14
Figure 11: Federal Surplus or Decit as a Percent of GD,
1929–2021 ...........................................15
Figure 12: National Debt as a Percent of GDP,
1966-2021 ............................................14
Tables
Table 1: Major Federal Fiscal Response Bills During
COVID-19 Pandemic ...................................4
Table 2: Combined State, County, and City CARES Act
Coronavirus Relief Fund (CRF) Allocations in
Western States .........................................7
Table 3: Education Pandemic Allocations to
Western States .........................................8
Table 4: Paycheck Protection Program and Economic
Injury Disaster Loans in Western States .................9
Table 5: Unemployment Insurance Increases Above
Traditional Unemployment Insurance in
Western States .........................................9
Table 6: IRS Economic Impact Payments to
Households in Western States .........................12
Table 7: American Rescue Plan Act Coronavirus State
and Local Fiscal Recovery Fund (SLFRF) Allocations to
Western States and Local Governments ...............11
A version of this document was originally published in the California Journal of Politics and Policy
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The COVID-19 pandemic created enormous challenges
throughout the world, including deaths, hospitalizations,
and various long-term health impacts. Signicant economic
damage also occurred in COVID’s aftermath. This damage
included widespread layos, including 6 million U.S. workers
ling for unemployment benets in a single week and a total of
over 23 million U.S. workers receiving unemployment benets
within several months of the pandemic declaration. In the
midst of these enormous economic challenges, the federal
government began its scal response to the pandemic.
This paper focuses on (a) the federal government’s 2020 and
2021 scal policy (i.e., spending and taxing) responses to the
COVID-19 pandemic and (b) the initial impacts of these scal
responses, particularly on western states. While the Federal
Reserve’s expansionary monetary policy (i.e., money supply
increase and corresponding interest rate reduction) also played a
signicant role in stabilizing the U.S. economy through the early
pandemic, the massive scale of the federal government’s scal
response to the COVID-19 pandemic (about 25% of 2020 GDP)
far exceeded its scal response to other economic downturns.
This massive and rapid federal scal response stabilized
household and company budgets, which in turn indirectly
rmed up state budgets as income taxes and sales taxes
stabilized and grew. In addition, the federal government
provided direct aid to states and their local governments to
help navigate the pandemic. At the same time, the massive
scal stimulus contributed to current economic and budget
challenges, such as goods shortages and ination.
Dealing with an Unknown Virus
COVID-19 is a respiratory disease caused by the SARS-CoV-2 vi-
rus, a new (or novel) coronavirus strain not previously seen in hu-
mans. The rapid spread of this contagious new virus throughout
the world from the end of 2019 through early 2022 caused mas-
sive economic disruption, as people and organizations grappled
with an initially-unpredictable virus that threatened to overrun
health systems. Heated debates about the appropriate role of
public policy and private decisions in response to the pandemic
continue today, including scal policy’s role.
The pandemic’s economic consequences diered from
previous recessions in recent history because U.S. federal, state,
and local governments required certain businesses to either
suspend or dramatically alter operations, such as by mandating
physical distancing requirements or prohibiting or limiting facility
use or capacity. Unlike other recessions where a market-driven
shock drove economic declines, the government’s direct actions
contributed to and even mandated a portion of the precipitous
drop in economic activity. That is, people voluntarily determining
economic engagement levels did not account for all of the
economic activity decline. Although beyond this paper’s scope,
signicant questions remain about how much economic activity
would have dropped absent these government mandates to
suspend or dramatically alter basic societal operations. However,
it seems clear that some sizable level of market-driven economic
shock would have occurred in response to the pandemic absent
government mandates, but that government responses also
restricted voluntary activity that would have otherwise occurred
even with the virus’ prevalence.
Pandemic Declared and Massive Economic Disruption Begins
On March 11, 2020, the World Health Organization declared a
global pandemic. That night, Utah found itself at the epicenter
of the U.S. pandemic when the National Basketball Association,
which held games that evening, suspended all future games
after two Utah Jazz players tested positive for the virus.
Beginning the following day, in quick succession, collegiate and
professional sports leagues, arts organizations, and educational
institutions suspended games, shows, and classes involving
large gatherings of people. In the following weeks, states issued
stay-at-home orders or advisory guidance,
and travel bans and
other restrictions were enacted (Centers for Disease Control
and Prevention 2020, and Moreland, Herlihy, and Tynan 2020).
Suddenly, what had for many been a noteworthy but somewhat
obscure world news item took center stage in U.S. daily life.
Business revenues quickly plummeted when rms and
governments could not conduct normal operations and,
in some cases, had to completely close. In response, rms
immediately began laying o employees at a massive scale,
Introduction
Figure 1: U.S. Initial Unemployment Insurance Claims,
1970-2022
Source: U.S. Employment and Training Administration
n
U.S. Recessions
7
6
5
Initial Claims (Millions)
4
3
2
1970 1980 1990 2000 2010 2020
2020 2021 2022
1
1
2
0
7
6
5
Initial Claims (Millions)
4
3
2
1
0
CPRSAA ($0.01T)
CARES ($1.7T)
Wave 1 ($2.4T)
PPPHCEA
($0.5T)
Response and Relief ($0.9T)
Families First ($0.2T)
M J J A S O N D J F M A M J J A S O N D J F MJ F M A
ARPA ($1.9T)
Wave 2 ($0.9T)
Wave 3 ($1.9T)
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dramatically increasing weekly unemployment insurance claims
to unprecedented levels. As Figure 1 shows, the staggering
immediate layo levels dwarfed previous unemployment
insurance initial claim activity, including claims during the
devastating Great Recession (2007-2009).
Seeing this massive unemployment increase, states antici-
pated revenue drops closely tied to declining household
and rm income (reducing income taxes) and private sector
spending declines (reducing sales and fuel taxes), coupled
with anticipated state spending increases for social support
programs, such as Medicaid.
In the following weeks and months, states and local
governments identied and began closing anticipated budget
gaps.
1
According to the National Association of State Budget
Ocers (NASBO), state executive budget recommendations
released in December 2019 and January 2020 initially projected
average FY 2021 General Fund increases of nearly 3.5%.
Actual enacted FY 2021 budget averages in the following
months dropped by about 5.5% from these initial budget
recommendations. However, because budget timelines vary
(including some states that budget biennially), states enacted
budgets at dierent time points during the pandemic. Some
states enacting budgets in May and June 2020 projected severe
year-over revenue declines of 20% or more (NASBO 2020).
Massive Federal Fiscal Response
In the chaotic early pandemic environment, when many
predicted a Great-Depression-like economic calamity,
2
the
federal government initiated its major scal response. Congress
acted remarkably quickly, enacting a massive initial federal scal
response in March and April 2020, followed by additional massive
supports in late 2020 and early 2021 (see Figure 2 and Table 1).
Figure 2: U.S. Initial Unemployment Insurance Claims and
Major Fiscal Response Bills, 2020–2022
Source: U.S. Employment and Training Administration
n
U.S. Recession
This massive federal scal response can be thought of as
coming in three distinct funding waves totaling $5.1 trillion,
including (1) an initial Wave 1 in March and April 2020 in the
very early stages the U.S. pandemic, (2) a year-end Wave 2 in
December 2020 under the Trump administration, and (3) a 2021
Wave 3 response under the Biden administration. Later sections
highlight major provisions of each funding wave that directly
and indirectly supported state budgets.
As context for the over $5 trillion in federal scal supports
enacted within a one-year period but owing over several years,
this total amount equates to nearly 25% of 2020 U.S. Gross
Domestic Product (GDP) of about $21 trillion (U.S. Bureau of
Economic Analysis). This increased federal spending from about
20% of GDP between 2014–2019, to 30% in 2020 and 2021. As
additional context, 2019 federal spending (the scal year prior to
the pandemic) totaled $4.4 trillion (Congressional Budget Oce
2020). That is, the $5.1 trillion in pandemic federal scal responses
exceeded a full year’s worth of regular federal spending.
Table 1: Major Federal Fiscal Response Bills During
COVID-19 Pandemic
Timing Bill – Enactment Date
Amount
(% of 2020
GDP)
Wave 1
Early Pandemic
Response
(March–April 2020)
Trump
Administration
Coronavirus Preparedness
and Response Supplemental
Appropriations Act (CPRSAA) –
March 6, 2020 ($0.01 trillion)
Vote– House: 415-2, Senate: 96-1
Families First Coronavirus Response
Act (Families First, or FFCRA) –
March 18, 2020 ($0.2 trillion)
Vote– House: 363-40, Senate: 90-8
Coronavirus Aid, Relief, and Economic
Security Act (CARES) –
March 27, 2020 ($1.7 trillion)
7
Vote– House: Voice vote, Senate: 96-0
Paycheck Protection Program and
Health Care Enhancement Act
(PPPHCEA) – April 24, 2020 ($0.5 trillion)
Vote– House: 388-5, Senate: Voice vote
$2.4 trillion
(11.5%)
Wave 2
2020 Year-
End Response
(December 2020)
Trump
Administration
Coronavirus Response and Relief
Supplemental Appropriations Act
(Response and Relief, or CRRSAA),
a component of the Consolidated
Appropriations Act, 2021 –
December 27, 2020
Vote– House: 359-53 Senate: 92-6
$0.9 trillion
(4.2%)
Wave 3
2021 Response
(March 2021)
Biden
Administration
American Rescue Plan Act (ARPA) –
March 11, 2021
Vote– House: 220-211, Senate: 50-49
$1.9 trillion
(8.9%)
TOTAL
$5.1 trillion
(24.5%)
*numbers may not sum precisely due to rounding
Source: Congressional Budget Oce, Congress.gov and U.S. Bureau of Economic Analysis
7
6
5
Initial Claims (Millions)
4
3
2
1970 1980 1990 2000 2010 2020
2020 2021 2022
1
1
2
0
7
6
5
Initial Claims (Millions)
4
3
2
1
0
CPRSAA ($0.01T)
CARES ($1.7T)
Wave 1 ($2.4T)
PPPHCEA ($0.5T)
Response and Relief ($0.9T)
Families First ($0.2T)
M J J A S O N D J F M A M J J A S O N D J F MJ F M A
ARPA ($1.9T)
Wave 2 ($0.9T)
Wave 3 ($1.9T)
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Figure 3: Federal Fiscal Response to Recent Recessions as % of U.S. GDP
Source: Congressional Budget Oce and U.S. Bureau of Economic Analysis
0% 5% 10% 15% 20% 25%
Wave 1: 11.5% Wave 2: 4.2% Wave 3: 8.9%
(CARES, PPPHCEA, FFCRA) (Response and Relief) (ARPA)
Pandemic
(2020 & 2021)
0.4%
7.0%
24.6%
Dot-com Bust
(2001)
Federal Fiscal Response as % of GDP
ARRA: 5.7%
The Great Recession
(2008 & 2009)
Economic Stimulus
Act and TARP (net):1.3%
Comparison with Recent Recessions
While the Federal Reserve’s monetary policy served as the
most-used economic stabilization tool in prior recent recessions,
expansionary federal scal policy, along with expansionary
monetary policy, served as a major contributor to the United
States’ stabilization and recovery from major economic
disruptions of the COVID-19 pandemic. As explained later, this
massive scal and monetary response also contributed to the
current elevated U.S. ination level.
Figure 3 compares federal scal responses to recent recessions,
showing response amounts as a percentage of U.S. GDP.
Although pandemic funding amounts, particularly from the
Wave 3 American Rescue Plan Act (ARPA), will be spent over the
span of several years, Congress enacted all the largest funding
bills within a single year of each other, between March 2020 and
March 2021.
By way of comparison, in response to the nancial collapse
leading to the Great Recession, the Economic Stimulus Act
enacted in February 2008, the net scal impact of the Troubled
Asset Relief Program (TARP)
3
enacted in October 2008, and the
American Recovery and Reinvestment Act (ARRA) enacted in
February 2009 altogether provided federal economic stimulus
amounts totaling about $1 trillion (Congressional Budget Oce
2008, 2015, 2021). While ARRA’s nearly $840 billion price tag
in particular was considered very large compared to previous
scal stimulus amounts, that amount relative to GDP pales in
comparison to the pandemic scal response. For example,
just the pandemic-specic unemployment insurance benet
increases over and above traditional benet amounts alone
total over $670 billion (U.S. Department of Labor 2022).
Similarly, the scal policy response to the 2001 dot-com
recession included nearly $40 billion in taxpayer rebate checks
sent as a short-term economic stimulus eort that was part of
a broader long-term tax cut package in the Economic Growth
and Tax Relief Reconciliation Act (Shapiro and Slemrod 2003). As
shown, these stimulus rebates also appear miniscule compared
to the pandemic response.
Major Federal Funding Waves
The following sections address the three major federal
scal response waves for the COVID-19 pandemic. The large
expansionary federal scal policy response included direct
aid to households and rms, which supported state and local
government revenue streams, as well as providing funds that
directly owed to states and local governments.
While the largest Wave 1 bills (CARES and PPPHCEA) had
broad bipartisan support in Congress, support for major scal
stimulus waned with each successive wave. The Wave 1 CARES
ACT passed with no dissenting votes and PPPHCEA passed with
only ve dissenting votes in the House. The Wave 2 Response
and Relief Act passed with 53 “no” votes in the House and six
“no” votes in the Senate. The Wave 3 American Rescue Plan
Act passed over a major partisan divide (211 “no” votes in the
House and 49 “no” votes in the Senate), with the sole vote
across party lines cast against the bill.
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Wave 1 – $2.4 Trillion Early Pandemic Response (March and April 2020)
The $2.4 trillion Wave 1 of the federal scal response consisted
of four bills passed in the early pandemic months when the
most severe negative economic impacts occurred. The rst two
smaller bills focused much more on federal agencies and direct
pandemic responses, while the third and fourth Wave 1 bills,
including the enormous $1.7 trillion CARES Act, had a much
broader scope that included major economic responses.
Unlike many previous federal actions passed well into
economic downturns, these bills passed within days and weeks
of the March 11, 2020 pandemic declaration. While that funding
did not all necessarily hit the economy instantaneously, much
of it did arrive within the rst weeks and months. This early
response gave households, rms, and governments better
ability to plan their way through the pandemic, and helped to
avert some of the initially-anticipated disastrous state and local
government budget impacts.
Coronavirus Preparedness and Response Act ($0.01 trillion)
The Coronavirus Preparedness and Response Supplemental
Appropriations Act, enacted several days prior to the
ocial pandemic declaration on March 6, 2020, provided a
comparatively small $8 billion amount (Congressional Budget
Oce 2020). This bill funded federal agencies for direct public
health responses, such as research, review, and purchase of
tests, vaccines, medical devices, and therapeutics; telehealth
funding for Medicaid providers; Small Business Association
(SBA) economic disaster loans; and various international eorts.
Notably, as the pandemic’s enormous scope became clearer
in the following weeks, the two following major bills grew by
orders of magnitude, with the CARES Act passed several weeks
later measuring in the trillions rather than single-digit billions.
Families First Coronavirus Response Act ($0.2 trillion)
The Families First Coronavirus Response Act (FFCRA), enacted
on March 18, 2020, was a much larger bill, costing an estimated
$192 billion, split roughly evenly between spending increases
and tax reductions (Congressional Budget Oce 2020).
Major provisions include additional public health funding
for testing and other public health response items; extended
unemployment insurance benets for laid-o workers; enhanced
Supplemental Nutritional Assistance Program (SNAP), Women,
Infants, and Children
(WIC), and other food and nutritional
benets; and tax credits to oset a new mandatory paid sick
leave policy applicable to most employers when an employee
or close family member required quarantine. This bill largely
targeted allocations to oset anticipated direct pandemic
impacts, but went beyond the CPRSAA enacted 12 days earlier
by allocating funds to not only federal agencies, but also to
households, rms, and governments.
Importantly for states, the bill also increased states’ traditional
Medicaid federal medical assistance percentages (FMAP) by
6.2 percentage points, along with other Medicaid changes.
Medicaid carries enormous scal impacts for states, averaging
nearly 20% of state General Fund spending (NASBO 2020). This
6.2 percentage point FMAP increase eectively boosted federal
Medicaid funding by 8% to 12%, freeing up state funds. By
reducing states’ share of Medicaid costs and temporarily shifting
that cost to the federal government, this provision provided
immediate budget relief to states expecting a pending increase
in Medicaid costs for new enrollees along with state revenue
declines corresponding to economic activity declines. However,
this provision did limit states’ ability to disenroll Medicaid
recipients through the end of the declared pandemic, which
increased future costs.
IRS Income Tax Filing Deadline Shift
Although done administratively rather than by an act of
Congress, on March 20, 2020 U.S. Treasury Secretary Mnuchin
also shifted the Internal Revenue Service (IRS) income tax ling
deadline from April 15, 2020 to July 15, 2020 (IRS 2020). While
providing cash ow assistance to the households and rms
remitting taxes, this action created scal challenges for states
that impose income taxes because as a practical administrative
matter, states conformed to this timing shift. For many states,
this timing shift moved a sizable amount of income tax revenue
from Fiscal Year 2020 into Fiscal Year 2021. Given the short time
period remaining in Fiscal Year 2020, the timing shift left states
scrambling to cut budgets or reallocate funds temporarily
between scal years. Notably, the impacts of this income
tax timing shift make year-over comparisons challenging for
annual budget states with income taxes.
CARES Act ($1.7 trillion)
The $1.7 trillion Coronavirus Aid, Relief, and Economic Security
Act (CARES Act), by far the largest and most impactful Wave 1
bill, both provided massive scal stimulus through a wide array
of programs and began to help panicked businesses in freefall
survive the pandemic without continued massive layos.
Enacted on March 27, 2020 (just 16 days after the pandemic
declaration), the CARES Act includes too many provisions to
cover in depth here, so only the largest and most impactful will
be addressed.
CARES Act allocations beneted state budgets both directly
and indirectly.
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Direct state and local government aid came through a wide
array of existing and new programs. In particular, state and
local governments beneted from the exible new Coronavirus
Relief Fund, allocable by state and local policymakers, but
subject to some limitations (Congressional Budget Oce 2020).
Probably more importantly, providing large funding amounts
to rms and households broadly supported economic activity,
leading state and local revenues to detach, to some extent,
from certain economic indicators such as the unemployment
rate. In other words, state and local revenues did not decline
as dramatically as unemployment increased. This is because
federal aid indirectly beneted state budgets through secondary
impacts from major economic programs such as the Paycheck
Protection Program and Economic Injury Disaster Loans for
businesses, direct household economic impact payments to
most households from the IRS, and increased benets for the
unemployed through enhanced unemployment insurance
benets. As these programs broadly supported economic
activity, state revenues quickly recovered.
State and Local Government Coronavirus Relief Funds
Flexible state and local government aid generated signicant
controversy. In fact, it became a sticking point in bill negotiations.
Those supporting exible funding highlighted signicant
state and local government direct pandemic responses and
other growing costs such as Medicaid, as well as anticipated
revenue losses stemming from declining economic activity
and avoiding employee layos that would slow economic
recovery. Those opposed voiced concerns about inappropriately
taking advantage of the pandemic crisis to bail out spending
mismanagement by some state and local governments over
decades, including not fully funding promised pension benets.
4
CRF Allocations
In addition to broad-based rm and household allocations
detailed later that supported state General Fund revenues,
the CARES Act allocated $150 billion to the U.S. Treasury for
Coronavirus Relief Fund (CRF) direct exible allocations to states,
local, tribal, and territorial governments based on population,
subject to a $1.25 billion combined state and local minimum
allocation per state. Of the $139 billion allocated to states, cities,
and counties after $11 billion in tribal and territorial allocations
(see Table 2), 55% of the CRF funds were intended for states and
45% for cities and counties (U.S. Treasury 2022).
However, the U.S. Treasury only directly allocated funds to
cities and counties with a population size over 500,000, with
the remaining “local” funds allocated to states. The CARES Act
did not explicitly require states to allocate to cities and counties
the remaining “local” 45% funding share sent directly to states.
However, many states did so (National Conference of State
Legislatures 2022 and Paul G. Peterson Foundation 2022). CARES
Act local government funding allocations eased signicant
pressure on state budgets that would have otherwise occurred.
CRF Challenges
While states and local governments welcomed exible
CRF funds in the chaotic and uncertain environment of the
early pandemic, funding requirements also created some
challenges. One challenge related to fund use restrictions.
Per specic statutory language, funds explicitly could not be
used to oset government revenue declines and had to tie to
a “necessary” response to the pandemic. Unclear and evolving
U.S. Treasury guidance on “necessary” expenditures left states
to make allocations in a highly uncertain environment, with
the nal formal guidance promulgated after the original due
date for spending funds (U.S. Treasury 2021). Given the ongoing
pandemic’s enormous public health uncertainty, it was also
unclear how much funding should be reserved specically for
direct public health response, such as disease treatment, testing,
and contact tracing, and what portion should be allocated to
economic or other responses, such as osetting business impacts
or providing housing assistance.
The originally-enacted December 30 spending deadline also
created challenges. By the time CRF funds arrived beginning
in April 2020, governments had about eight months to actual-
ly spend funds by constructively receiving goods and services.
Although some government procurement provisions worked
through expedited processes, this was a very short time frame
to (a) decide how to allocate funds to dierent purposes, (b)
Table 2: Combined State, County, and City CARES
Act Coronavirus Relief Fund (CRF) Allocations in
Western States
State and
Local CRF
Allocations,
by State
Total
Amount
(in $ billions)
CRF Total
Amount
Per Capita
(whole dollars)
CRF State 55%
Allocation as % of
State General Fund
2019 Spending
Alaska $1.25 $1,709 12%
Arizona $2.82 $388 14%
California $15.32 $388 7%
Colorado $2.23 $388 9%
Hawaii $1.25 $883 9%
Idaho $1.25 $699 19%
Montana $1.25 $1,170 30%
Nevada $1.25 $406 15%
New Mexico $1.25 $596 11%
Oregon $1.64 $388 9%
Utah $1.25 $390 9%
Washington $2.95 $388 7%
Wyoming $1.25 $2,160 46%
U.S. Total $139 $423
Source: U.S. Treasury, U.S. Census Bureau, NASBO
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procure goods and services in an environment of supply chain
disruptions and constrained labor availability, and (c) receive de-
livery of those goods and services prior to the statutory deadline.
Yet another challenge for CARES Act CRF and other one-time
state and local funding streams relates to limitations the non-re-
curring nature of the funds put on potential fund uses. Many pro-
posed uses would establish permanent programs with ongoing
costs, such as funding permanent employees, whereas the feder-
al revenues were only one-time. That is, because this funding was
not expected to be permanently available, states and local gov-
ernments that set up permanent programs using this one-time
funding would face future structural budget decits. This limited
the scope of the types of budget items the funds could cover
(such as pilot programs, equipment, buildings, and technology
acquisition) for those intent on avoiding future budget problems.
Education Funding
Beyond the mostly-exible state and local CRF allocations,
the CARES Act specically allocated funds to K-12 and higher
education agencies. Because education makes up about 45%
of state General Fund spending, including K-12 education (36%)
and higher education (9%) (NASBO 2020), federal scal relief for
education relieved pressure on state budgets that would have
otherwise occurred. Major programs included the Governor’s
Emergency Education Relief Fund (GEER), Elementary and
Secondary School Emergency Relief Fund (ESSER), and Higher
Education Emergency Relief Fund (HEERF). Table 3 shows K-12
and higher education pandemic allocations for western states,
including later bills (U.S. Department of Education 2022). For K-12
education, these allocations amounted to 2–3 times standard
annual federal funding.
Table 3: Education Pandemic Allocations to Western States
State
Public K -12 Higher Education
GEER and ESSER
Pandemic Funding
Increase ($ in billions)
Regular Pre-Pandemic
FY 2019 Funding
($ in billions)
Pandemic Funding
Per Enrolled Pupil
(whole dollars)
Pandemic Funding
Increase
($ in billions)
Pandemic Funding
Per Enrolled Student
(whole dollars)
Alaska $0.57 $0.40 $4,289 $0.08 $1,975
Arizona $4.11 $1.40 $3,567 $1.44 $1,637
California $23.95 $8.06 $3,885 $10.05 $2,649
Colorado $1.86 $0.72 $2,033 $0.98 $1,940
Hawaii $0.65 $0.30 $3,611 $0.27 $3,428
Idaho $0.71 $0.28 $2,272 $0.26 $1,361
Montana $0.61 $0.27 $4,079 $0.23 $3,747
Nevada $1.71 $0.49 $3,433 $0.41 $2,546
New Mexico $1.56 $0.54 $4,709 $0.45 $2,665
Oregon $1.79 $0.58 $3,070 $0.78 $2,353
Utah $1.00 $0.46 $1,461 $0.76 $1,540
Washington $2.98 $1.07 $2,607 $1.29 $2,561
Wyoming $0.48 $0.13 $5,055 $0.08 $1,933
U.S. Total $193.70 $60.34 $3,210 $74.90 $3,112
Source: U.S. Department of Education
Paycheck Protection Program (PPP) and Economic Injury
Disaster Loans (EIDL)
The Paycheck Protection Program provided a lifeline to
businesses by making forgivable loans to rms that retained
employees through the early pandemic. Spending funds
on specic eligible expenses, particularly employee payroll,
allowed the loan to become a grant. While operating more
like a typical loan to be repaid, Economic Injury Disaster Loans
provided low-interest working capital loans to pay business
operating expenses and debt.
Including later allocations in other bills, these two business-
oriented programs ultimately totaled $1.1 trillion, including
about $800 billion in PPP loans (about $700 billion of which
has been forgiven), and over $300 billion in EIDL loans. Table 2
shows PPP and EIDL loan amounts for western states allocated
from the major scal response bills. These two programs allowed
employers to retain employees, supporting state individual and
corporate income tax revenue streams (U.S. Small Business
Administration 2020, 2021, and 2022).
Unemployment Insurance Benet Expansions
Most employers are required to pay unemployment insurance
taxes, which fund unemployment insurance benets that are
distributed to laid o employees who meet certain conditions.
During the pandemic, the federal government, through the
CARES Act and other scal response bills, augmented traditional
unemployment insurance benets.
These augmented benets included an extended time period
to claim benets, allowing previously-ineligible gig workers to
receive benets, and providing a $600 (and later $300) weekly
benet increase–all above the traditional benet, which on
average replaces roughly half of wages. The over $670 billion in
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Table 4: Paycheck Protection Program and Economic Injury Disaster Loans in Western States
State
2020 PPP
($ in billions)
2021 PPP
($ in billions)
EIDL
($ in billions)
TOTAL
($ in billions)
Total PPP and EIDL Per
Capita (whole dollars)
Total PPP and EIDL Per Labor Force
Participant (whole dollars)
Alaska $1.3 $0.7 $0.7 $2.7 $3,649 $7,651
Arizona $8.7 $3.9 $4.8 $17.4 $2,430 $5,069
California $68.6 $35.9 $54.6 $159.1 $4,020 $8,196
Colorado $10.4 $4.7 $4.8 $19.9 $3,443 $6,418
Hawaii $2.5 $1.4 $1.5 $5.4 $3,699 $7,886
Idaho $2.6 $0.9 $1.0 $4.5 $2,446 $5,060
Montana $1.8 $0.8 $0.8 $3.4 $3,119 $6,270
Nevada $4.2 $2.8 $3.3 $10.3 $3,312 $6,683
New Mexico $2.3 $1.1 $1.2 $4.6 $2,170 $4,773
Oregon $7.1 $3.1 $3.2 $13.4 $3,160 $6,397
Utah $5.2 $1.8 $2.1 $9.1 $2,774 $5,765
Washington $12.5 $5.9 $5.8 $24.2 $3,135 $6,152
Wyoming $1.1 $0.6 $0.5 $2.2 $3,793 $7,604
U.S. Total $525 $278 $305 $1,108 $3,347 $6,776
*numbers may not sum precisely due to rounding
Source: U.S. Small Business Administration
increased allocations (see Table 5) stabilized household income
streams and increased consumer purchasing power for those
who lost their jobs or gig work, all of which improved state tax
collections (U.S. Department of Labor 2022).
The initial $600 weekly enhancement (which equates to a
$15 hourly increase on top of the traditional benet for a forty-
hour work week) in particular received widespread attention
because of concerns about economic disincentives to work. For
example, in the early months of the pandemic, Ganong, Noel,
and Vavra (2020) estimated that 76% of workers were eligible
for income replacement rates at or above 100% (meaning
full income replacement or greater), with a median income
replacement rate of 145% and those in the bottom two deciles
Table 5: Unemployment Insurance Increases Above Traditional Unemployment Insurance in Western States
State
$600 / $300 weekly
add-on benet
($ in billions)
Federal Pandemic
Unemp. Assistance (FPUC)
Self-employed
independent contractors
($ in billions)
Pandemic Unemp.
Assistance (PUA)
Extended benet
time period
($ in billions)
Pandemic Emergency Unemp.
Compensation (PEUC)
Other
($ in billions)
Total
($ in billions)
Total Unemp.
Augmentations
Per Capita
(whole dollars)
Alaska $0.7 $0.1 $0.1 $0.02 $1.0 $1,351
Arizona $8.6 $2.7 $0.8 $0.1 $12.2 $1,704
California $87.3 $32.1 $12.1 $3.0 $134.5 $3,398
Colorado $4.6 $2.6 $1.5 $0.4 $9.1 $1,574
Hawaii $2.6 $0.7 $1.0 $0.1 $4.4 $3,014
Idaho $0.7 $0.1 $0.1 $0.02 $1.0 $543
Montana $0.8 $0.2 $0.1 $0.03 $1.1 $1,009
Nevada $6.1 $1.3 $1.4 $0.3 $9.2 $2,958
New Mexico $2.2 $0.5 $0.5 $0.1 $3.3 $1,557
Oregon $5.2 $1.1 $1.4 $0.2 $7.9 $1,863
Utah $1.4 $0.1 $0.2 $0.05 $1.4 $427
Washington $9.5 $2.5 $2.7 $0.6 $15.3 $1,969
Wyoming $0.2 $0.03 $0.05 $0.01 $0.3 $517
U.S. Total $442 $131 $84 $15 $672 $2,030
*numbers may not sum precisely due to rounding
Source: U.S. Department of Labor
of the income distribution eligible for an income replacement
rate of over 200%.
In other words, rather than layos substantially decreasing
incomes, layos actually increased incomes, particularly for
those with lower pre-pandemic wages. After expiration of the
initial $600 weekly enhancement at the end of July 2020, the
Trump administration supported a continued $300 weekly
benet using workaround authority through the Federal
Emergency Management Agency (FEMA). The Response and
Relief Act and ARPA bills later statutorily renewed the $300
weekly benet. However, over half of the states opted to end
the benet toward the middle of 2021 prior to ocial program
expiration, due to labor shortage concerns.
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Household Economic Impact Payments. Another major
CARES Act economic stabilization program administered by the
IRS provided economic impact payments up to $1,200 per adult
and $500 per child, for households below certain income levels.
To exclude the highest income households, the bill reduced
payments for individuals with adjusted gross income (AGI)
greater than $75,000 ($150,000 for married couples ling a joint
return). While not included in income tax taxable income, the
economic impacts of these payments supported state revenues
as they facilitated increased sales taxable spending.
This CARES Act provision, which provided over $270 billion
directly to most U.S. households, represents the rst of three
rounds of direct broad-based pandemic economic impact
payments to most U.S. households. Each round included
dierent amounts for lers and their children, and dierent
phaseout ranges for those with higher incomes. Although
average payments varied slightly based on income and age mix
in dierent states, on average, the three rounds of IRS economic
impact payments provided about $2,400 per person (or about
$6,300 per household). Table 6 shows the combined amounts
of all three rounds of household economic impact payments
in western states, totaling over $800 billion nationally. As
explained later, these amounts supported, and continue to
support, consumer spending, saving, and debt reduction.
Other Programs. The CARES Act made other signicant
allocations through a large number of new and existing programs,
including $150 billion set aside for health care providers, $25
billion for transit agencies, and $160 billion for tax changes
related to income loss limitations, among many other provisions.
In addition to the $1.7 trillion in spending and tax changes,
the CARES Act authorized over $450 billion in U.S. Treasury
nancial support for various Federal Reserve lending facilities
to ensure liquidity for various large companies, smaller
companies, nonprots, and state and local governments.
Ultimately, the vast majority of these lending authorizations
went unused because normal lending channels remained
functional. This includes the Municipal Liquidity Facility for
state and local governments that only transacted two loans
with a value of $1.7 billion, compared to the $500 billion
authorized by the Federal Reserve using both the CARES Act
$450 billion authorization and the Federal Reserve’s own
discretionary authority. Among all of the CARES-authorized
lending facilities, only about 1% of capacity was utilized (U.S.
Government Accountabilty Oce 2022).
Paycheck Protection Program and Health Care
Enhancement Act (PPPHCEA) ($0.5 trillion)
Following enactment of the CARES ACT, the Paycheck
Protection Program quickly became oversubscribed, with
some business applicants shut out of funds. About a month
after passing the CARES Act, Congress passed the PPPHCEA,
which increased business PPP funding allocations by about
$320 billion. In addition to other provisions, the bill also funded
continued public health response eorts, providing $75 billion
in additional hospital funding and $25 billion for COVID-19
testing (Congressional Budget Oce 2020).
Table 6: IRS Economic Impact Payments to Households in Western States
State
2020 Census
Population
(millions)
Round 1 (CARES)
$1,200 per ler,
$500 per child
($ in billions)
Round 2 (Response &
Relief) $600 per ler,
$600 per child
($ in billions)
Round 3 (ARPA)
$1,400 per ler
and dependent
($ in billions)
TOTAL -
Economic Impact
Payments
($ in billions)
Total Economic Impact
Payments Per Capita
(whole dollars)
Alaska 0.74 $0.6 $0.3 $0.9 $1.8 $2,432
Arizona 7.16 $5.9 $3.1 $8.7 $17.7 $2,472
California 39.58 $29.6 $15.4 $43.5 $88.5 $2,236
Colorado 5.78 $4.6 $2.4 $6.4 $13.4 $2,318
Hawaii 1.46 $1.2 $0.6 $1.7 $3.5 $2,397
Idaho 1.84 $1.6 $0.9 $2.3 $4.8 $2,609
Montana 1.09 $1.0 $0.5 $1.4 $2.9 $2,661
Nevada 3.11 $2.6 $1.4 $3.9 $7.9 $2,540
New Mexico 2.12 $1.8 $0.9 $2.6 $5.3 $2,500
Oregon 4.24 $3.6 $1.8 $5.0 $10.4 $2,453
Utah 3.28 $2.6 $1.4 $3.9 $7.9 $2,409
Washington 7.72 $6.1 $3.2 $8.6 $17.9 $2,319
Wyoming 0.58 $0.5 $0.3 $0.7 $1.5 $2,586
U.S. Total 331 $271 $141 $390 $802 $2,423
Note: Additional amounts may be claimed through income tax credits if qualifying individuals did not receive direct payments
Source: Internal Revenue Service
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Wave 2 – $0.9 Trillion Response and Relief Act (December 2020)
Wave 3 – $1.9 Trillion American Rescue Plan Act (March 2021)
Building on the funding structure created in the CARES Act and
other previous funding bills, the Coronavirus Response and Relief
Supplemental Appropriations Act (CRRSAA) enacted on December
27, 2020 as part of the Consolidated Appropriations Act of 2021
allocated more scal support funds, largely through previously-
created funding channels. By this time, signicant economic
recovery had occurred, including the U.S. unemployment rate
dropping from 14.7% to 6.7% and GDP recovering to near the
pre-pandemic peak. But a COVID-19 surge created uncertainty at
the time, dampening the economic outlook.
This bill allocated nearly $870 billion (Congressional Budget
Oce 2021), including for the following programs:
• Over $300 billion for additional business supports through
PPP, EIDL, and similar programs (see Table 4 for major
allocation amounts)
• Nearly $120 billion to extend enhanced unemployment
insurance benets, at a weekly $300 increase above the
traditional benet (see Table 5 for overall unemployment
insurance summary)
• Nearly $165 billion for additional direct IRS economic
impact payments to households, including $600 payments
per ler and dependent child, with allocation amounts
phasing out at incomes similar to those in the CARES Act
(see Table 6 for allocation payment amounts)
The American Rescue Plan Act allocated an estimated $1.9
trillion in spending and tax changes, making it the single
largest scal response bill in history (Congressional Budget
Oce 2021). The bill passed on a nearly party line vote in both
Houses of Congress, with the only member breaking ranks (Rep.
Golden - D, Maine) voting against the bill (U.S. Congress 2021).
As detailed later, by March 2021, signicant economic recovery
had occurred, prompting many to raise concerns about the
magnitude of the bill and its various broad-based elements that
were not focused specically on those still in need. As discussed
later, this included not only Republicans who opposed the bill,
but some fellow Democrats.
Major allocations include the following:
• Over $410 billion in economic impact payments to individ-
uals ($1,400 per ler and dependent), with steeper income
phaseouts (see Table 6 for allocation payment amounts)
• $350 billion in aid to state, local, territorial, and tribal
governments (see Table 7)
• Over $80 billion for K-12 and higher education (see Table 3)
• Nearly $80 billion for further public health responses,
including funds for vaccine purchase and mitigation,
testing, contact tracing, and mitigation measures
• Over $120 billion for other measures, including
transportation, SNAP benets, child care, rental assistance,
and other programs.
Although passed very close to the CARES Act’s previous
December 30, 2020 deadline, the bill also extended the
deadline for state and local governments to spend CARES Act
Coronavirus Relief Fund allocations.
Notably, the bill excluded new exible aid for states and
local governments. Over the previous months as the economy
recovered, a partisan divide emerged regarding state and
local government assistance levels actually needed given
strengthening state revenues. As early as April 2020, the
National Governors Association had requested $500 billion in
addition to the CARES Act’s $150 billion allocation for state and
local government aid (National Governors Association 2020).
But many questioned the request level, particularly as state
revenues recovered strongly, assisted in large part by massive
federal scal stimulus.
• Over $200 billion to further extend unemployment insur-
ance benets, at the weekly $300 increase level in addition
to traditional unemployment insurance benets (see Table 5)
• Over $175 billion for tax provisions (U.S. Treasury 2021),
including:
o Expansions of the child tax credit, including temporarily
increasing the credit amount from $2,000 to $3,000 per
qualifying child, adding an additional $600 for children
under age 6 (for a total credit of $3,600), allowing the
credit for 17-year-old children, making the credit fully
refundable, and providing advance payments on the
credit from July to December 2021;
o Expanding the child and dependent care tax credit; and
o Expanding the earned income tax credit.
• Nearly $175 billion for health-specic measures
• About $170 billion in educational support (see Table 3)
• Funding for a wide array of other programs, including
targeted small business, rental, and mortgage assistance.
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Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
As mentioned above, the American Rescue Plan Act
includes $350 billion in aid to state, local, territorial, and tribal
governments, which includes $195 billion to states and the
District of Columbia and $130 billion to local governments.
Table 7 shows SLFRF allocations to the western states.
Unlike the much shorter spending time period for CARES Act
allocations, these funds are available for obligation through
2024 (nal spending by 2026), with half of the funds distributed
to state and local governments in May 2021 and the remainder
to be sent in May 2022 (U.S. Treasury 2022).
Eligible funding uses include public health expenditures,
addressing negative economic impacts from COVID-19 (such
as impacts to households and businesses), replacing lost
public sector revenue, providing premium pay to essential
Table 7 – American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Fund (SLFRF) Allocations to Western
States and Local Governments
State
State
($ in billions)
County
($ in billions)
Metropolitan
Cities
($ in billions)
Other
($ in billions)
Total State and
Local SLFRF Amount
($ in billions)
Total SLFRF
Per Capita
(whole dollars)
SLFRF State Allocation
as % of State General
Fund 2019 Spending
Alaska $1.0 $0.1 $0.05 $0.04 $1.2 $1,622 20%
Arizona $4.2 $1.4 $1.0 $0.2 $6.8 $950 9%
California $27.0 $7.7 $7.0 $1.2 $42.9 $1,084 1%
Colorado $3.8 $1.1 $0.6 $0.3 $5.8 $1,003 8%
Hawaii $1.6 $0.3 $0.2 $0.05 $2.2 $1,473 13%
Idaho $1.1 $0.3 $0.1 $0.1 $1.6 $870 27%
Montana $0.9 $0.2 $0.05 $0.1 $1.3 $1,147 43%
Nevada $2.7 $0.6 $0.3 $0.2 $3.8 $1,222 22%
New Mexico $1.8 $0.4 $0.2 $0.2 $2.6 $1,226 16%
Oregon $2.6 $0.8 $0.4 $0.2 $4.0 $943 10%
Utah $1.4 $0.6 $0.3 $0.2 $2.5 $762 13%
Washington $4.4 $1.5 $0.8 $0.4 $7.1 $920 4%
Wyoming $1.1 $0.1 $0.02 $0.05 $1.2 $2,103 66%
U.S. Total $195 $65 $46 $20 $326 $985
Source: U.S. Treasury
workers in critical infrastructure sectors, and investing in water,
sewer, and broadband infrastructure. NASBO (2021) indicates
that of the roughly 40% of funds initially allocated by states
as of the fall 2021 study date, intended uses are as follows:
revenue replacement (32%), negative economic impacts (27%),
infrastructure (16%), services to disproportionately impacted
communities (15%), public health (9%), and other uses (1%).
Of the estimated $5.1 billion total federal scal response,
discretionary aid to states, local, tribal, and territorial
governments totals $500 billion (about 10% of total federal scal
response), including ARPA’s $350 billion for the Coronavirus
State and Local Fiscal Recovery Fund and the CARES Act’s $150
billion for the Coronavirus Relief Fund. The federal government
also provided additional program-specic grants to states and
their local governments.
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Figure 4: U.S. Real GDP Per Capita, 1970–2021
Source: U.S. Bureau of Economic Analysis
n
U.S. Recessions
Percent
Chained 2012 Dollars
Millions of Dollars
PercentBillions of Dollars
Percent Change from Year AgoPercent of GDP
14
13
12
11
10
9
8
35
30
25
20
15
10
5
4,400
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
0
60,000
56,000
52,000
48,000
44,000
40,000
36,000
32,000
28,000
24,000
20,000
7 4
5
6
New 5
8
9
10
19851980 1990 1995 2000 2005 2010 2015 2020
600,000
500,000
400,000
300,000
200,000
100,000
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
-5.0
140
120
100
80
60
40
20
1995 2000 2005 2010 2015 2020
1970 2000199019801950 1960 2010 2020
1970 200019901980 2010 2020
1970 200019901980 2010 2020
19701960 200019901980 2010 2020
19701960 200019901980 2010 2020
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
2000
Billions of Dollars
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Wave 1
Wave 2
Wave 3
Figure 6: U.S. Personal Saving Rate, 1960–2022
Figure 5: U.S. Personal Income, 2000–2022
Source: U.S. Bureau of Economic Analysis
n
U.S. Recessions
Source: U.S. Bureau of Economic Analysis
n
U.S. Recessions
Percent
Chained 2012 Dollars
Millions of Dollars
Percent
Billions of Dollars
Percent Change from Year AgoPercent of GDP
14
13
12
11
10
9
8
35
30
25
20
15
10
5
4,400
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
0
60,000
56,000
52,000
48,000
44,000
40,000
36,000
32,000
28,000
24,000
20,000
7 4
5
6
New 5
8
9
10
19851980 1990 1995 2000 2005 2010 2015 2020
600,000
500,000
400,000
300,000
200,000
100,000
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
-5.0
140
120
100
80
60
40
20
1995 2000 2005 2010 2015 2020
1970 2000199019801950 1960 2010 2020
1970 200019901980 2010 2020
1970 200019901980 2010 2020
19701960 200019901980 2010 2020
19701960 200019901980 2010 2020
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
2000
Billions of Dollars
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Wave 1
Wave 2
Wave 3
Percent
Chained 2012 Dollars
Millions of Dollars
PercentBillions of Dollars
Percent Change from Year AgoPercent of GDP
14
13
12
11
10
9
8
35
30
25
20
15
10
5
4,400
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
0
60,000
56,000
52,000
48,000
44,000
40,000
36,000
32,000
28,000
24,000
20,000
7 4
5
6
New 5
8
9
10
19851980 1990 1995 2000 2005 2010 2015 2020
600,000
500,000
400,000
300,000
200,000
100,000
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
-5.0
140
120
100
80
60
40
20
1995 2000 2005 2010 2015 2020
1970 2000199019801950 1960 2010 2020
1970 200019901980 2010 2020
1970 200019901980 2010 2020
19701960 200019901980 2010 2020
19701960 200019901980 2010 2020
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
2000
Billions of Dollars
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Wave 1
Wave 2
Wave 3
Economic Recovery
As Figure 4 shows, the combined eect of people returning
to more normal economic activity as vaccines became broadly
available, governments easing restrictions, and expansionary
scal and monetary policy helped the United States return to and
now exceed pre-pandemic GDP per capita levels. However, these
benets are not evenly spread throughout society and have
contributed to other economic challenges. This rapid economic
recovery stabilized state budgets, leading to sizable revenue
increases, even though revenue drops were initially anticipated
given widespread layos.
For example, driven by indirect state budget scal stimulus
impacts in the form of increased tax collections as economic
activity quickly recovered, NASBO (2021) indicates that 47 states
saw General Fund revenue collections exceed projections in FY
2021. By spurring additional demand for goods while supply
chains remained constrained, the federal scal response also
contributed to goods shortages and ination.
Incomes Increased During Pandemic
As businesses, particularly many goods-producing rms,
received scal stabilization funds such as the Paycheck
Protection Program, the rms not only received support to
keep existing employees on the job, but began searching
for additional employees as demand dramatically increased,
spurred by consumers ush with cash. This economic activity
initially stabilized, then increased, state income tax revenues.
As households received unemployment insurance compen-
sation and economic stimulus payments, this increased
personal income in the second quarter of 2020 by 8% over the
prior quarter and by nearly 11% over the prior year as shown in
Figure 5 (U.S. Bureau of Economic Analysis 2022).
Households Using Stimulus Funds for Saving, Debt
Reduction, and Spending
With these sizable income increases, households saved
sizable amounts, paid down debt, and increased spending.
Belsie (2020) and Armantier et al. (2020) initially estimate
that for Wave 1 direct stimulus allocations, households spent
about 30-40%, saved about 30-35%, and paid down debt
with about 30-35%. Armantier et al. (2021) further indicate
that households planned to spend even less of their Wave 2
and Wave 3 scal stimulus payments, instead focusing even
more on saving and debt reduction. Although personal saving
rates from current income have returned to more normal
levels (see Figure 6), sizable amounts of accumulated savings
remain available to consumers (see Figure 7). The timing of
households spending these sizable savings remains uncertain,
increasing uncertainty about the economic outlook and
May 2022
I
gardner.utah.edu INFORMED DECISIONS
TM
14
Figure 8: U.S. Household Debt Service Payments as Percent
of Disposable Personal Income, 1980–2021
Source: Board of Governors of the Federal Reserve System (US)
n
U.S. Recessions
Figure 9: Nominal U.S. Retail Sales, 1992–2021 ($ millions)
Source: U.S. Census Bureau
n
U.S. Recessions
600,000
500,000
400,000
300,000
200,000
100,000
1995 2000 2005 2010 2015 2020
Figure 7: Nominal Checkable Deposits and Currency for
Households and Nonprots, 1960–2021 ($ billions)
Source: Board of Governors of the Federal Reserve System (US)
n
U.S. Recessions
Percent
Chained 2012 Dollars
Millions of Dollars
PercentBillions of Dollars
Percent Change from Year AgoPercent of GDP
14
13
12
11
10
9
8
35
30
25
20
15
10
5
4,400
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
0
60,000
56,000
52,000
48,000
44,000
40,000
36,000
32,000
28,000
24,000
20,000
7 4
5
6
New 5
8
9
10
19851980 1990 1995 2000 2005 2010 2015 2020
600,000
500,000
400,000
300,000
200,000
100,000
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
-5.0
140
120
100
80
60
40
20
1995 2000 2005 2010 2015 2020
1970 2000199019801950 1960 2010 2020
1970 200019901980 2010 2020
1970 200019901980 2010 2020
19701960 200019901980 2010 2020
19701960 200019901980 2010 2020
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
2000
Billions of Dollars
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Wave 1
Wave 2
Wave 3
Figure 10: Year-Over Change U.S. Consumer Price Index
(CPI), 1947–2022
Source: U.S. Board of Labor Statistics
n
U.S. Recessions
Percent
Chained 2012 Dollars
Millions of Dollars
PercentBillions of Dollars
Percent Change from Year Ago
Percent of GDP
14
13
12
11
10
9
8
35
30
25
20
15
10
5
4,400
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
0
60,000
56,000
52,000
48,000
44,000
40,000
36,000
32,000
28,000
24,000
20,000
7 4
5
6
New 5
8
9
10
19851980 1990 1995 2000 2005 2010 2015 2020
600,000
500,000
400,000
300,000
200,000
100,000
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
-5.0
140
120
100
80
60
40
20
1995 2000 2005 2010 2015 2020
1970 2000199019801950 1960 2010 2020
1970 200019901980 2010 2020
1970 200019901980 2010 2020
19701960 200019901980 2010 2020
19701960 200019901980 2010 2020
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
2000
Billions of Dollars
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Wave 1
Wave 2
Wave 3
Percent
Chained 2012 Dollars
Millions of Dollars
PercentBillions of Dollars
Percent Change from Year AgoPercent of GDP
14
13
12
11
10
9
8
35
30
25
20
15
10
5
4,400
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
0
60,000
56,000
52,000
48,000
44,000
40,000
36,000
32,000
28,000
24,000
20,000
7 4
5
6
New 5
8
9
10
19851980 1990 1995 2000 2005 2010 2015
2020
600,000
500,000
400,000
300,000
200,000
100,000
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
-5.0
140
120
100
80
60
40
20
1995 2000 2005 2010 2015 2020
1970 2000199019801950 1960 2010 2020
1970 200019901980 2010 2020
1970 200019901980 2010 2020
19701960 200019901980 2010 2020
19701960 200019901980 2010 2020
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
2000
Billions of Dollars
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Wave 1
Wave 2
Wave 3
potentially contributing to inationary pressures if funds are
spent at once.
Household debt service levels as a percentage of GDP
dropped to multi-generational lows (see Figure 8), due in part
to households using stimulus payments to pay down debt and
to monetary policy allowing households to renance into lower
interest rate loans, particularly for mortgages. While savings are
a one-time funding source, these debt reductions create future
ongoing spending capacity likely to prop up future sales tax
collections.
Household spending re-focused on goods because many
services remained heavily restricted. This renewed goods
focus, including on remote sales on which many states began
collecting sales and use tax in the aftermath of a landmark
2018 Supreme Court decision, increased sales tax revenues in
many states.
As shown in Figure 9, this goods re-focusing caused a large
retail sales increase, which supported strong sales tax revenue
collections.
Economic Challenges from Federal Fiscal Response
However, along with the benets of a strong economic
recovery, the federal scal response also sowed seeds of future
economic and state budget challenges, including ination and
increased debt.
Ination. The most prominent short-term impact is that
the scal stimulus has contributed to current inationary
challenges, with U.S. consumer ination spiking to levels not
seen in over forty years (see Figure 10). While many factors
likely contribute to the price spike, including pandemic-specic
impacts (such as supply chain disruptions and labor shortages),
large-scale scal stimulus is a major contributing factor. Initially
projected to be transitory and closely related to pandemic-
specic factors, sustained and accelerating consumer price
ination has raised signicant concerns about long-term
inationary pressures if a wage-price spiral occurs, in which
workers demand higher wages, which rms then pass on to
consumers through higher prices.
gardner.utah.edu
I
May 2022
INFORMED DECISIONS
TM
15
Figure 12: National Debt as a Percent of GDP, 1966-2021
Source: Board of Governors of the Federal Reserve System (US)
n
U.S. Recessions
Percent
Chained 2012 Dollars
Millions of Dollars
PercentBillions of Dollars
Percent Change from Year Ago
Percent of GDP
14
13
12
11
10
9
8
35
30
25
20
15
10
5
4,400
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
0
60,000
56,000
52,000
48,000
44,000
40,000
36,000
32,000
28,000
24,000
20,000
7 4
5
6
New 5
8
9
10
19851980 1990 1995 2000 2005 2010 2015 2020
600,000
500,000
400,000
300,000
200,000
100,000
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
-5.0
140
120
100
80
60
40
20
1995 2000 2005 2010 2015 2020
1970 2000199019801950 1960 2010 2020
1970 200019901980 2010 2020
1970 200019901980 2010 2020
19701960 200019901980 2010 2020
19701960 200019901980 2010 2020
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
2000
Billions of Dollars
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Wave 1
Wave 2
Wave 3
Figure 11: Federal Surplus or Decit as a Percent of GDP,
1929–2021
Source: U.S. Oce of Management and Budget
n
U.S. Recessions
5
0
-5
-10
-15
Percent of GDP
-20
-25
-30
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Especially notable because a prominent critic belonged to the
same political party as the new president, in early 2021, while
debates occurred on the Wave 3 American Rescue Plan Act,
Larry Summers, former U.S. Treasury Secretary in the Clinton
administration and director of the National Economic Council
under the Obama administration, very publicly raised concerns
that the bill was over three times as large as the pandemic’s
economic output shortfall and could “set o inationary
pressures of a kind we have not seen in a generation.”
6
Federal Reserve economists Jordà, Liu, Nechio, and Rivera-
Reyes (2022) recently indicated that “since the rst half of
2021, U.S. ination has increasingly outpaced ination in other
developed countries. Estimates suggest that scal support
measures designed to counteract the severity of the pandemic’s
economic eect may have contributed to this divergence by
raising ination about 3 percentage points by the end of 2021.”
In other words, federal scal stimulus is a major contributing
factor to current ination, although not the only factor.
States have not had to manage budgets in a high ination
environment for many decades, so ongoing future ination
could create future budget challenges. Nominally-increasing
revenue growth may at rst seem like a revenue windfall. But
ination creates higher costs on the spending side just to keep
pace. Said dierently, in such a rapidly changing environment
it is not entirely clear what portion of current state revenue
increases are primarily driven by overall ination, as opposed
to real net ongoing revenue increases that will not need to be
oset with higher spending just to pace with price increases.
Federal Government Debt. As Figure 11 shows, even prior to
the pandemic, the federal scal house was tremendously out of
order. Decits had been growing relative to GDP over the past
two decades, even during good economic times. Increased
federal borrowing nanced the federal pandemic scal
response’s additional decit spending. Figure 12 shows that
the federal scal response’s immediate societal benets came
at the expense of increasing federal government debt, which
has declined moderately relative to GDP as economic activity
rebounded.
But as interest rates rise coming out of the pandemic,
increasing federal debt service payments may create federal
scal pressures that could negatively impact states as the higher
interest payments eventually crowd out other federal spending,
including federal aid to states and local governments, or lead to
federal tax increases that could negatively impact the economy.
Conclusion
In summation, the COVID-19 pandemic initially brought
severe economic impacts, as households, businesses, and
governments responded to an unknown virus. Federal scal
support in excess of $5 trillion (about 25% of 2020 GDP)
propped up an ailing economy during the most severe
economic impacts and helped with the economic recovery
after that.
This massive federal scal support, along with other factors,
stabilized state and local budgets. This stabilization occurred
through federal aid allocated directly to states and through
the larger secondary eects supporting state General Fund
revenues by increasing economic activity that increased tax
revenues. As with states throughout the nation, western states
received signicant benets from the federal scal response,
unexpectedly maintaining and increasing budgets as revenues
increased. At the same time, the federal scal response is
contributing to current economic challenges such as ination
and goods shortages, and to long-term debt challenges.
May 2022
I
gardner.utah.edu INFORMED DECISIONS
TM
16
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Has Generally Improved.” December 2020. https://www.gao.gov/assets/gao-
21-180.pdf
U.S. Oce of Management and Budget. Federal Debt: Total Public Debt as
Percent of Gross Domestic Product [GFDEGDQ188S]. Retrieved from FRED,
Federal Reserve Bank of St. Louis.
U.S. Small Business Administration. “Disaster Assistance Update Nationwide
COVID EIDL, Targeted EIDL Advances, Supplemental Targeted Advances.”
December 2, 2021. https://www.sba.gov/sites/default/les/2021-12/
COVID-19%20EIDL%20TA%20STA_12022021_Public-508.pdf
U.S. Small Business Administration. “PPP Data.” February 20, 2022. https://
www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-
protection-program/ppp-data
U.S. Small Business Administration. “Paycheck Protection Program.” May 24,
2021. https://www.sba.gov/sites/default/les/2021-05/2021.05.24%20-%20
SBA%20COVID%20Relief%20Program%20Report%20-%20vFINALSHARE-508.
pdf
U.S. Small Business Administration. “Paycheck Protection Program (PPP)
Report.” August 8, 2020. https://www.sba.gov/sites/default/les/2021-09/
PPP_Report%20-%202020-08-10-508.pdf
U.S. Treasury. “Coronavirus Relief Fund for States, Tribal Governments, and
Certain Eligible Local Governments.” January 15, 2021. https://home.treasury.
gov/system/les/136/CRF-Guidance-Federal-Register_2021-00827.pdf
U.S. Treasury. “Coronavirus State and Local Fiscal Recovery Fund.” January 27,
2022. https://www.govinfo.gov/content/pkg/FR-2022-01-27/pdf/2022-00292.
pdf
U.S. Treasury. “Coronavirus State and Local Fiscal Recovery Funds.” 2022.
https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-
local-and-tribal-governments/state-and-local-scal-recovery-funds
U.S. Treasury. “Fact Sheet: The American Rescue Plan Will Deliver Immediate
Economic Relief to Families.” March 18, 2021. https://home.treasury.gov/news/
featured-stories/fact-sheet-the-american-rescue-plan-will-deliver-immediate-
economic-relief-to-families
U.S. Treasury. “Payments to States and Eligible Units of Local Government.”
2022. https://home.treasury.gov/system/les/136/Payments-to-States-and-
Units-of-Local-Government.pdf
Endnotes
1. See, for example, Wall Street Journal, “Recession Forces Spending
Cuts on States, Cities Hit by Coronavirus,” (https://www.wsj.com/
articles/recession-forces-spending-cuts-on-states-cities-hit-by-coro-
navirus-11594200600?mod=article_inline), “Coronavirus-Hit State
Budgets Create a Drag on U.S. Recovery,” (https://www.wsj.com/
articles/coronavirus-hit-state-budgets-create-a-drag-on-u-s-recovery-
11597224600?mod=article_inline), and “U.S. States Face Biggest Cash
Crisis Since the Great Depression,” (https://www.wsj.com/articles/u-s-
states-face-biggest-cash-crisis-since-the-great-depression-11603910750).
2. See, for example, Bloomberg, “Mnuchin Warns Virus Could Yield 20%
Jobless Rate Without Action,” (https://www.bloomberg.com/news/arti-
cles/2020-03-17/mnuchin-warns-virus-could-yield-20-jobless-rate-with-
out-action-k7wheob8?srnd=markets-vp) and International Monetary Fund
blog, “The Great Lockdown: Worst Economic Downturn Since the Great
Depression,” (https://blogs.imf.org/2020/04/14/the-great-lockdown-worst-
economic-downturn-since-the-great-depression/)
3. Although initially authorized at $700 billion, this full TARP amount was
never allocated and later statutorily reduced. Allocation amounts were
oset by assets sold later to help cover initial outlays. The Congressional
Budget Oce now estimates the net impact of TARP at just $31 billion.
4. See, for example, media articles at https://www.vox.com/policy-and-pol-
itics/2020/3/23/21190764/senate-cloture-vote-coronavirus-fails, https://
www.nytimes.com/2020/03/25/us/politics/coronavirus-senate-deal.
html, https://www.brookings.edu/blog/up-front/2020/03/23/how-will-
the-coronavirus-aect-state-and-local-government-budgets/, https://
www.npr.org/sections/coronavirus-live-updates/2020/12/08/944199072/
democrats-and-some-republicans-push-to-add-stimulus-checks-to-covid-
19-relief-bi, and https://www.marketplace.org/2020/10/06/aid-for-state-
local-governments-sticking-point-federal-covid-19-stimulus/
5. See USA Today, “What states are ending federal unemployment benets
early? See who has cut the extra $300 a week.” (https://www.usatoday.
com/story/money/2021/07/01/unemployment-benets-covid-feder-
al-aid-ending-early-many-states/7815341002/).
6. See, for example, https://www.washingtonpost.com/opin-
ions/2021/02/04/larry-summers-biden-covid-stimulus/ and https://www.
bloomberg.com/news/videos/2021-02-27/we-are-heading-for-the-worst-
ination-risk-in-40-years-summers-video
7. The CARES Act authorized over $450 billion in U.S. Treasury-backed
Federal Reserve lending facilities, including a Municipal Liquidity Facility
for state and local governments, which are excluded from these gures
because they were oset with assets, align more with monetary policy,
and because they were barely used.
Kem C. Gardner Policy Institute
I
411 East South Temple Street, Salt Lake City, Utah 84111
I
801-585-5618
I
gardner.utah.edu
Kem C. Gardner Policy Institute Sta and Advisors
Leadership Team
Natalie Gochnour, Associate Dean and Director
Jennifer Robinson, Associate Director
Mallory Bateman, Director of Demographic Research
Phil Dean, Chief Economist and Public Finance
Senior Research Fellow
Shelley Kruger, Accounting and Finance Manager
Colleen Larson, Administrative Manager
Dianne Meppen, Director of Survey Research
Nicholas Thiriot, Communications Director
James A. Wood, Ivory-Boyer Senior Fellow
Sta
Eric Albers, Research Associate
Max Becker, Research Associate
Samantha Ball, Senior Research Associate
Andrea Thomas Brandley, Research Associate
Kara Ann Byrne, Senior Research Associate
Mike Christensen, Scholar-in-Residence
Dejan Eskic, Senior Research Fellow
Emily Harris, Senior Demographer
Michael T. Hogue, Senior Research Statistician
Mike Hollingshaus, Senior Demographer
Thomas Holst, Senior Energy Analyst
Jennifer Leaver, Senior Tourism Analyst
Nate Lloyd, Deputy Director of Economics
and Public Policy
Levi Pace, Senior Research Economist
Natalie Roney, Economist
Shannon Simonsen, Research Coordinator
Paul Springer, Senior Graphic Designer
Laura Summers, Senior Health Care Analyst
Faculty Advisors
Matt Burbank, College of Social and
Behavioral Science
Adam Meirowitz, David Eccles School of Business
Elena Patel, David Eccles School of Business
Nathan Seegert, David Eccles School of Business
Senior Advisors
Jonathan Ball, Oce of the Legislative Fiscal Analyst
Silvia Castro, Suazo Business Center
Gary Cornia, Marriott School of Business
Wes Curtis, Community-at-Large
Theresa Foxley, EDCUtah
Dan Griths, Tanner LLC
Emma Houston, University of Utah
Beth Jarosz, Population Reference Bureau
Darin Mellott, CBRE
Pamela S. Perlich, University of Utah
Chris Redgrave, Community-at-Large
Wesley Smith, Western Governors University
Juliette Tennert, Utah System of Higher Education
Kem C. Gardner Policy Institute Advisory Board
Conveners
Michael O. Leavitt
Mitt Romney
Board
Scott Anderson, Co-Chair
Gail Miller, Co-Chair
Doug Anderson
Deborah Bayle
Cynthia A. Berg
Roger Boyer
Wilford Clyde
Sophia M. DiCaro
Cameron Diehl
Lisa Eccles
Spencer P. Eccles
Christian Gardner
Kem C. Gardner
Kimberly Gardner
Natalie Gochnour
Brandy Grace
Rachel Hayes
Clark Ivory
Mike S. Leavitt
Derek Miller
Ann Millner
Sterling Nielsen
Jason Perry
Ray Pickup
Gary B. Porter
Taylor Randall
Jill Remington Love
Brad Rencher
Josh Romney
Charles W. Sorenson
James Lee Sorenson
Vicki Varela
Ex Ocio (invited)
Governor Spencer Cox
Speaker Brad Wilson
Senate President
Stuart Adams
Representative Brian King
Senator Karen Mayne
Mayor Jenny Wilson
Mayor Erin Mendenhall
Partners in the
Community
The following individuals
and entities help support
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Kem C. Gardner Policy Institute.
Legacy Partners
The Gardner Company
Intermountain Healthcare
Clark and Christine Ivory
Foundation
KSL and Deseret News
Larry H. & Gail Miller Family
Foundation
Mountain America Credit Union
Salt Lake City Corporation
Salt Lake County
University of Utah Health
Utah Governor’s Oce of
Economic Opportunity
WCF Insurance
Zions Bank
Executive Partners
Mark and Karen Bouchard
The Boyer Company
Clyde Companies
Salt Lake Chamber
Sustaining Partners
Dominion Energy
Staker Parson Materials and
Construction
(EC) FiscalStimReport May2022