A new report released by the Reason Foundation finds that just a small fraction of the American Rescue Plan Act (ARPA) funds directed to state and local governments has been spent.

State and local governments have spent very little of the federal aid they allocated under the American Rescue Plan Act (ARPA) of 2021, according to recovery plan reports filed by states, cities, and counties. With a July 31 cutoff date for the initial reporting period, a review of 142 recovery plans filed with the U.S. Treasury Department by state, county, and city governments show these governments only spent $4.9 billion (2.9 percent) of the $172 billion of ARPA funds they were allocated.

How could this be? We were told by President Biden and others that these funds were urgently needed. But nearly 5 months later, 97 percent of the funds have been left unspent.

Reason provides two main reasons: 1) State and local governments largely saw very minimal dips in revenue, and therefore weren’t in dire need of more funds, and 2) All the strings attached to the ARPA funds severely restricted how the funds could be used, hampering the process of their allocation.

Similarly, my colleague Bob Luebke has documented how nearly 90% of the $6 billion in federal Covid relief funds sent to North Carolina remained unspent in mid July.

Reason further notes that far and away the biggest expenditure by states of ARPA funds has been to replenishing depleted Unemployment Insurance trust funds.

It’s become increasingly clear that state and local governments were not in dire need of the $350 billion disbursed by ARPA.