When Congress passed the American Rescue Plan Act (ARPA) in March of last year, a key point of contention was the provision of hundreds of billions of dollars in additional aid to state and local governments that had by and large gotten their fiscal situations back under control. But excessive as that aid was, the federal government has now twice attempted to use those funds to hold state policymaking hostage.
The first controversy arose from legislative language, inserted at the eleventh hour, that prevented states from using ARPA funds to “directly or indirectly” offset tax cuts. This vague wording raised questions about whether states could cut taxes at all if they accepted federal funds, given that it could conceivably be argued that federal funds were “indirectly” used to offset the revenue reduction.
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