The 2021 American Rescue Plan Act allocated $350 billion to support state and local economic recovery from the pandemic. However, that funding will soon dry up, creating an uncertain outlook for programs aimed at boosting economic development and employment.
A newly released report from the Upjohn Institute for Employment Research examines these challenges and offers innovative pathways to address the funding hurdles. The report is based on input from researchers and policy advisers who convened as part of the Institute’s Promise: Investing in Community place-based research initiative.
The Challenges from Reduced Funds
The report begins by describing the top challenges on the horizon as funding is reduced for programs aimed at supporting local economic opportunity:
- Growing inequality - When there are big differences in economic opportunity between different groups, it can cause feelings of unfairness. This makes it harder for people with different ideas to work together on important issues.
- Short-term thinking - Policies that offer the appearance of immediate benefits may overlook crucial long-term priorities, including infrastructure, education, health care, and environmental sustainability.
- Political polarization - Polarization becomes particularly problematic when politicians prioritize adhering to party positions and maintaining ideological purity over seeking common-sense solutions.
- Underinvestment in higher education - Higher education plays a vital role in the economic renewal of many cities and regions, and any resistance to it can hinder economic progress.
- Lack of child care - To bring about lasting changes in access, affordability, and quality for families, the child care sector requires permanent infrastructural and fiscal intervention.
- Other risks cited in the report include the persistent practice of borrowing from the future, the rise of artificial intelligence, and ongoing labor shortages.
Solutions for Sustainable Jobs Programs
The study also explores various approaches that state and local governments can pursue to sustain programs aimed at fostering prosperity within communities:
- Raise revenue - Communities need to embrace revenue-raising opportunities while ensuring fairness and accountability.
- Evaluate program effectiveness - Providing local officials with impact analyses and return-on-investment calculations allows them to make informed budget decisions.
- Use plain language - Transparency, plain language, and effective communication channels can foster better policy development and implementation.
- Build community trust - Give people a voice in decision-making and act based on community input.
- Invest in upskilling - Look for creative ways to invest in education and training by breaking down silos and leveraging existing institutional capacity.
- Participants in the convening also urged leaders to ensure that all voices are heard and that investments directly support distressed communities.
“In the face of adversity, it is through ingenuity and a commitment to collaboration that state and local governments can navigate the uncertain future and create a foundation for lasting prosperity,” the report concludes. “By learning from the challenges and embracing innovative solutions, communities can emerge stronger, more resilient, and better equipped to tackle future crises.