A small town in Ohio, having used federal pandemic funds to hire five new paramedics, now faces a 30% cut to its emergency services budget as those funds expire this year, according to the Ohio Municipal League. The 30% cut to its emergency services budget directly impacts the community's ability to provide critical, life-saving care.
Federal pandemic aid, specifically American Rescue Plan Act (ARPA) funds, allowed many cities to maintain and even expand critical services, from public safety to social programs. Yet, the temporary nature of these funds has left numerous municipalities without permanent solutions, creating a looming fiscal challenge for city services in 2026.
Given the widespread reliance on one-time federal aid and slow development of alternative revenue streams, many cities will likely face difficult choices regarding service reductions and tax increases in the coming years.
The Unprecedented Scale of Federal Aid
Federal aid comprised an unprecedented 22% of state and local government revenue in 2020-2021, a figure now rapidly declining, according to Pew Charitable Trusts Pew Charitable Trusts. This substantial, but temporary, infusion allowed many municipalities to avoid immediate financial reckoning.
- $350 billion — ARPA provided this amount to state and local governments, an unprecedented sum, according to the U.S. Treasury Department.
- Over 60% — Cities used ARPA funds for one-time infrastructure projects or to cover budget shortfalls, rather than establishing recurring revenue streams, according to the National League of Cities.
- Over 40% — ARPA funds were allocated to revenue replacement, allowing cities to maintain existing service levels temporarily, according to the National Conference of State Legislatures.
