The American Rescue Plan Act (ARPA) of 2021 created a $350 billion state and local fund to help fight the pandemic and support an economic recovery. Sadly, more than $150 billion remains unspent and is sorely needed to bolster public-sector employment and the care economy.

The ARPA dollars earmarked as part of the State and Local Fiscal Recovery Fund (SLFRF) have fueled transformative investments across the country, but there’s more to be done now.

As 2023 begins, state and local governments should prioritize spending relief funds on three critical areas that are incredibly important for the welfare of children and families:

• rebuilding the public sector
• expanding access to paid leave
• bolstering our systems of care through increasing access to quality child care and elder care, and supporting the workers who perform that work.

ARPA was designed to support state and local governments over several years. SLFRF dollars do not need to be obligated (designated for specific uses) until the end of 2024, and do not need to be spent until the end of 2026. As of October 2022, states and the District of Columbia had only spent $74.5 billion of the $195.9 billion they had been allocated (38.1%), and larger local governments spent only $26.5 billion of $99.8 billion (26.6%), according to data released by the U.S. Department of the Treasury.1

As the map below shows, the 10 states with the lowest uptake of the funds have all spent less than 7.5% of their allocation. It’s not clear why those states have not yet made significant use of the money. All 10 states have Republican governors and Republican-controlled state legislatures.

Moreover, since most recipients did not receive their full allocation of SLFRF funding until late spring, much of the money—over $96 billion for states and $60 billion for local governments—had not yet been obligated as of October 2022. The federal government made the correct decision to give state and local governments significant freedom in how to use these funds, offering state and local policymakers a tremendous opportunity to improve their communities—if they use the funds in thoughtful ways.

Restoring the public sector

While private-sector employment has exceeded pre-pandemic levels, public-sector employment is still far below February 2020 levels. In December, there were 452,000 fewer workers in the public sector than before the pandemic, and state and local governments in particular have 2.3% fewer workers than before than pandemic. Fully half those losses are in K-12 public education. Not only are flourishing public schools necessary to the long-term wellbeing of children and communities, but it’s also the case that parents can’t easily re-enter the workforce if safe and nurturing schools aren’t available.

We must also remember that state and local governments never fully recovered from the Great Recession of 2008–09. Public-sector employment stayed below pre-recession levels through the 2010s as policymakers disinvested in public services. A return to the pre-pandemic status quo is not sufficient—we need policymakers to rebuild the public sector so that it can serve its vital roles in public health, safety, education, and more.

The shortfall in state and local government jobs is driven in large part by the inadequate wages paid to public-sector workers. Fully one-third of state and local government workers are paid less than $20 an hour, and 15% are paid less than $15 an hour. Black and Latinx employees are especially likely to be paid inadequate wages in the public sector, which also employs a disproportionate share of women workers. These workers need a raise, and state and local governments will need assistance in raising pay for their workers. Meanwhile, the teacher pay penalty has hit a new high: Teachers are now paid 23.5% less than comparable college-educated, non-teaching peers.

We have already seen SLFRF dollars used to support public-sector workers. For example, San Jose, California, was able to begin filling the more than 800 persistent vacancies in city jobs. Salt Lake City committed $1.5 million to hire unfilled public-sector positions. And, overall, state and local governments have spent $51 billion in “revenue replacement”—much of which prevented further job cuts in vital public services.

Despite that spending, 44 of 50 states are still below pre-pandemic levels of state employees. All are sitting on substantial SLFRF dollars that can and should be used to increase public-sector pay and fill vacant jobs.

 

Supporting working families and children with investments in paid leave and care infrastructure

The pandemic has demonstrated the value of paid sick and family leave. The paid leave provisions of 2020’s CARES Act helped flatten the curve during the initial wave of infection, and cities with paid sick leave have higher rates of COVID vaccination, especially among vulnerable communities. While 77% of private-sector workers have some amount of paid sick time, that share drops to 55% of the bottom quarter of wage earners, and just 38% of the bottom 10%.

This is especially concerning because low-wage workers are 3.5 times more likely to have to miss work due to COVID symptoms than workers earning $100,000 or more. Households with incomes under $25,000 are the least likely to have been vaccinated for COVID, but are the most likely to want a vaccine, with many concerned about missing work due to COVID side effects.

Low-wage workers and their families are also most impacted by disinvestments in care work. The number of workers who missed work because of child care problems was more than twice as high in November 2022 than it was in February 2020. Only 76% of the child care service jobs lost during the pandemic have been recovered. The same is true with care work in nursing and residential care facilities. Despite some improvement in 2022, there are almost 300,000 fewer employees in those facilities, an industry where Black women make up more than 22% of workers despite being only 6.5% of the overall workforce.

Once again, worker wages are a key reason for these shortages, and it is notable that these are professions where women and Black and Brown workers make up a disproportionate share of the workforce. Looking at domestic child care and home health workers, for example, women make up more than 80% of home health aides, and more than 97% of home-based child care workers. Black and Hispanic workers are fewer than 30% of the overall workforce, but are 40% of home child care providers and more than 50% of agency-based home health care aides.

In all of those professions, the median hourly wage is at least $7 below that of all other workers. For residential long-term care workers, median hourly wages are almost $5 below others, and Black, Latinx, and Native American workers make almost $2 an hour less than white workers.

As EPI’s Josh Bivens has noted, investments in child care and long-term care not only improve the lives of those being cared for, they also make it easier for workers to return to the workplace, boosting productivity. The same is true with paid leave policies. Making it possible for employees to better balance work and family responsibilities will benefit both workers and employers.

It is unlikely that federal policymakers will enact significant new paid leave policies in 2023, nor can we expect substantial new federal investments in child care, domestic health care, or long-term residential care. State and local governments can and should use SLFRF dollars to fill the gap, providing needed supports to working families and children.

While SLFRF does not provide an ongoing stream of revenue, expanding the supply of care workers through greater investment now has significant downstream impacts, including an increase in women’s labor force participation and improved care quality. It would also pay for itself in the long run through increased tax revenues.

State and local governments, which spent so much of the Great Recession dealing with the consequences of austerity policies that ravaged public services, may very well be reluctant to spend down their still-ample SLFRF balances. There is, however, no better time than the present. The needs of today demand action. State and local governments have more than $150 billion left to spend, and there is no better use than spending the money on transformative investments that can restore the public sector and provide vital help to low-wage workers and their families.

Note

1. The reports included data on all recipient local governments that had received more than $10 million in SLFRF. No aggregated public data is available for units of local government who received less than $10 million.