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The stimulus package that President Biden signed into law in March was intended to stabilize state and city finances drained by the coronavirus crisis, providing $350 billion to alleviate the pandemic’s effect, with few restrictions on how the money could be used. Three months after its passage, cash is starting to flow — $194 billion so far, according to the Treasury Department — and officials are devoting funds to a range of efforts, including keeping public service workers on the payroll, helping the fishing industry, improving broadband access and aiding the homeless, the New York Times reported. “It’s not like all places are rushing out to do the most aspirational things, since the first thing they need to do is replace lost revenue,” said Mark Muro, a senior fellow with the Brookings Institution, a nonpartisan Washington think tank. “But there is much more flexibility in this program than in previous stimulus packages, so there is more potential for creativity.” The local decisions are taking on greater national urgency as the Biden administration negotiates with Republicans in Congress over a bipartisan infrastructure package. Some Republican lawmakers want money from previous relief packages to be repurposed to pay for infrastructure, arguing that many states are in far better financial shape than expected and the money should be put to better use. The administration, sensitive to those concerns, has begun bending the program’s rules to allow the money to be spent even more broadly. In May, the Treasury Department told states they could use their funding to pay for lotteries intended to encourage vaccinations. In June, President Biden prodded local governments to consider using the cash to address the recent rise in violent crime, which his aides regard as a serious political hazard heading into the 2022 midterm elections. For the most part, local officials have been focused on undoing the damage of the past year and a half.

New Jersey Governor Phil Murphy (D) signed a record $46.4 billion budget with a biggest-ever pension payment, marking the first time in more than a quarter-century that the state will make the required minimum contribution to its underfunded retirement system, Bloomberg News reported. The spending plan for the fiscal year that starts on July 1 is 24% higher the first one he signed in 2018. It uses an influx of tax revenue to cover free in-state public college tuition for low-income students, rebates for families with at least one child, $750 million in rental and utility assistance and other initiatives that will appeal to low- and middle-income voters in the November election for governor and all 120 legislative seats. New Jersey’s record-high $6.9 billion pension payment, $500 million more than recommended in actuarial reports, is a noteworthy step for a state whose credit rating is second-worst among U.S. state governments, behind Illinois, because of its massive debt to the retirement system. New Jersey hasn’t made a full payment since 1996.

Texas Student Housing Authority filed for chapter 9 bankruptcy protection, listing between $10 million and $50 million of liabilities, Bloomberg News reported. The non-profit, state chartered corporation had assets of $1 million to $10 million, and as many as 199 creditors, according to a June 18 filing in U.S. Bankruptcy Court for the Northern District of Texas. The Southlake, Texas-based organization was established in 1995 to purchase and manage student housing facilities located near the campuses of major colleges and universities, according to its website. It owns housing properties near the University of North Texas in Denton and Texas A&M University in College Station. Both projects offer premium facilities, equipped with resort-style swimming pools and fitness centers. “Both schools have had troubled muni-financed private student housing projects for years,” said Matt Fabian, a partner at Municipal Market Analytics. “So while the pandemic has made student housing financial conditions more challenging generally, that’s not the whole story when it comes to these schools.” In April, the board of the Texas Student Housing Authority met to consider chapter 9 bankruptcy proceedings for “The Cambridge,” its property in College Station.

The wave of U.S. municipal-bond distress set off by the pandemic is still spreading even as the economy recovers from the devastation of the outbreak, Bloomberg News reported. Eight muni borrowers became distressed last week, lifting this year’s tally to 76, according to Municipal Market Analytics. That puts 2021 on track to exceed almost every year since 2012 in terms of impairments. Only 2020, when the coronavirus caused some of the worst market turmoil on record, was worse. The isolated cases of deterioration in certain smaller, typically lower-rated or unrated issuers stand at odds with the optimism in statehouses nationwide, which have been buoyed by strong tax revenue and federal stimulus. It’s been a banner year for munis, with tax-exempt yields near record lows relative to those on Treasuries. Any defaults have mostly been confined to a corner of the market where businesses borrow through government agencies. Overall muni credit health is on the mend as the economy revives. And the tally of issuers in distress is a drop in the bucket when compared to the tens of thousands of separate borrowers that compose the $3.9 trillion market.

Democratic state treasurers are warning Congress against a GOP pitch to repurpose funds from President Biden’s $1.9 trillion coronavirus relief law to pay for infrastructure investments, The Hill reported. In an open letter to lawmakers yesterday, 14 Democratic state treasurers argued that taking funds from the COVID-19 relief measure would imperil the economic recovery. “These investments are already getting shots in arms and protecting the jobs of teachers, firefighters, health care workers and law enforcement. They will ensure not only recovery from the losses of the pandemic, but actually help reach pre-pandemic forecasts of economic growth,” the state treasurers wrote in the letter, which was spearheaded by Invest in America Action, an advocacy group pushing for a robust infrastructure package. “Now that the road to recovery is clear, some members of Congress are considering clawing back these vital funds to pay for other priorities,” the letter continued. “As State Treasurers and guardians of our states’ fiscal health, we urge Congress to resist calls to raid COVID relief funding. The risks are too great and will cause a longer, more difficult economic recovery for everyone.”