You can almost hear the sighs of relief. Only a few months ago, state and local officials across the United States were preparing for the worst. In some cases, the worst was already happening.

As the human and economic impact of the pandemic worsened, massive budget deficits and cuts in essential services seemed inevitable. Many municipalities and private employers had already started furloughs and layoffs. Cities all over the country were seeing record numbers of small business closures, and projecting staggering revenue and budget deficits. Some were starting to see evidence of widening disparities in access to education among children. And state and local leaders knew from hard experience that already-marginalized communities were bearing the brunt of it all.

But now, state and local governments are receiving the largest infusion of direct federal funding in US history: $350 billion dollars to rebuild local economies and systems across the country over the next three years. This American Rescue Plan funding is more than twice the relief funding provided by the federal government during the Great Recession, and a Pew analysis shows that it equals between 5 percent and 20 percent of states’ total spending in the 2020 fiscal year.

America’s state and local leaders might understandably be tempted to play it safe and use this one-time funding to plug budget holes and get back to where they were in late 2019. But stopping there would be a huge mistake. Before leaders start signing contracts, they should take a step back and make sure that the systems and services they are investing in actually help the people and communities hardest hit by the pandemic.

These all exact a terrible human cost, and the broader inequality they produce is a serious threat to economic growth and social stability. The Organization for Economic Cooperation and Development (OECD), a collective of the world’s wealthiest countries, found that rising inequality in the United States from 1990 to 2010 reduced GDP by around 5 percent, primarily by undermining education opportunities for disadvantaged children, in turn impeding their development, decreasing their future earnings, and limiting their participation in the economy. Since the OECD released its analysis in 2014, economic inequality in the United States has only gotten worse.

Just as important, leaders also need to take a close look at what is working. Over the last five or six years, a culture shift has been underway as more and more municipal and state leaders have begun embracing an evidence-driven, resident-centered, equity-advancing approach to local government. A growing number of overlapping lessons are emerging from this work.

Read the full article about the local government using an equity-based approach to funding by Michael Nutter and Simone Brody at Stanford Social Innovation Review.