To amend title 31, United States Code, to provide Federal aid and economic stimulus through a one-time revenue grant to the States and their local governments.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``State and Local Economic Stimulus 
Act''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) State and local governments are a vital part of our 
        economy and American life. States, cities, counties, school 
        districts, and other localities and jurisdictions provide 
        health care, education, public safety, and innumerable social 
        services to hundreds of millions of Americans.
            (2) From September 2007 to June 2008, America's 
        unemployment rate increased from 4.7 percent to 5.5 percent, 
        and hundreds of thousands of additional Americans went without 
        jobs.
            (3) America's economic downturn is causing painful budget 
        problems for State and local governments. The economic slowdown 
        has lowered State and local tax revenues while the need for 
        public service is expanding. As a result, most States and many 
        localities are suffering budget deficits.
            (4) Given that 49 of 50 States, and many local governments, 
        are legally required to balance their budgets, the only way 
        these governments can reduce deficits is to cut public services 
        or raise taxes.
            (5) In 2003, in response to the prior economic downturn, 
        Congress enacted a $20,000,000,000 fiscal relief package for 
        States, including authorizing $10,000,000,000 for flexible 
        anti-recession grants to stimulate the ailing economy and 
        protect vital public services.

SEC. 3. ONE-TIME REVENUE GRANT TO STATES AND LOCAL GOVERNMENTS.

    (a) In General.--Chapter 67 of title 31, United States Code, is 
amended by adding at the end the following new section:
``Sec. 6721. One-time revenue grant to States and local governments
    ``(a) Appropriation.--There is appropriated to carry out this 
section $40,000,000,000 for fiscal year 2009.
    ``(b) Allotments.--From the amount appropriated under subsection 
(a) for fiscal year 2009, the Secretary of the Treasury shall, as soon 
as practicable after the date of the enactment of this section, allot 
to each of the States as follows:
            ``(1) Based on population.--
                    ``(A) State level.--$10,000,000,000 shall be 
                allotted among States on the basis of the relative 
                population of each such State, determined based on data 
                from the 2000 decennial census of the United States.
                    ``(B) Local government level.--$10,000,000,000 
                shall be allotted among such States as determined under 
                subparagraph (A) for distribution to the various units 
                of general local government within such States on the 
                basis of the relative population of each such unit 
                within each such State that is unemployed, determined 
                based on the data referred to in subparagraph (A).
            ``(2) Based on change in unemployment rate.--
                    ``(A) Tier 1.--
                            ``(i) State level.--$7,500,000,000 shall be 
                        allotted among States that have experienced a 
                        tier 1 unemployment rate on the basis of the 
                        relative number of unemployed individuals for 
                        the period beginning on September 1, 2007, and 
                        ending on June 30, 2008, in each such State, 
                        determined based on unemployment levels for 
                        2007 and 2008 from the Bureau of Labor 
                        Statistics' Local Area Unemployment Statistics.
                            ``(ii) Local government level.--
                        $7,500,000,000 shall be allotted among States 
                        that have experienced a tier 1 unemployment 
                        rate as determined under clause (i) for 
                        distribution to the various units of general 
                        local government within such States on the 
                        basis of the relative number of unemployed 
                        individuals for the period beginning on 
                        September 1, 2007, and ending on June 30, 2008, 
                        in each such unit within each such State, 
                        determined based on the civilian labor force 
                        unemployment rate, seasonally adjusted, for 
                        September 2007 to June 2008 from the Bureau of 
                        Labor Statistics' Local Area Unemployment 
                        Statistics.
                    ``(B) Tier 2.--
                            ``(i) State level.--$2,500,000,000 shall be 
                        allotted among States that have experienced a 
                        tier 2 unemployment rate on the basis of the 
                        relative number of unemployed individuals for 
                        the period beginning on September 1, 2007, and 
                        ending on June 30, 2008, in each such State, 
                        determined based on unemployment levels for 
                        2007 and 2008 from the Bureau of Labor 
                        Statistics' Local Area Unemployment Statistics.
                            ``(ii) Local government level.--
                        $2,500,000,000 shall be allotted among States 
                        that have experienced a tier 2 unemployment 
                        rate as determined under clause (i) for 
                        distribution to the various units of general 
                        local government within such States on the 
                        basis of the relative number of unemployed 
                        individuals for the period beginning on 
                        September 1, 2007, and ending on June 30, 2008, 
                        in each such unit within each such State, 
                        determined based on the civilian labor force 
                        unemployment rate, seasonally adjusted, for 
                        September 2007 to June 2008 from the Bureau of 
                        Labor Statistics' Local Area Unemployment 
                        Statistics.
    ``(c) Use of Payments.--
            ``(1) In general.--Subject to paragraph (2), a State or 
        unit of local government shall use the funds provided under a 
        payment made under this section for a fiscal year to--
                    ``(A) provide essential government services;
                    ``(B) cover the costs to the State or unit of local 
                government, respectively, of complying with any Federal 
                intergovernmental mandate (as defined in section 421(5) 
                of the Congressional Budget Act of 1974) to the extent 
                that the mandate applies to the State or unit of local 
                government, respectively, and the Federal Government 
                has not provided funds to cover the costs; or
                    ``(C) compensate for a decline in Federal funding 
                to the State or unit of local government, respectively.
            ``(2) Requirements.--A State or unit of local government--
                    ``(A) may use funds provided as a payment under 
                this section only for types of expenditures permitted 
                under the most recently approved budget for the State;
                    ``(B) may not use the additional Federal funds paid 
                to the State or unit of local government as a result of 
                this section for purposes of increasing any reserve or 
                rainy day fund maintained by the State; and
                    ``(C) shall expend the additional Federal funds 
                paid to the State or unit of local government as a 
                result of this section within 1 year after the date on 
                which the State receives such funds.
            ``(3) Certification.--In order to receive a payment under 
        this section for a fiscal year, a State or unit of local 
        government shall certify to the Secretary of the Treasury with 
        a certification that the proposed use of such funds by the 
        State or unit of local government's, respectively, is 
        consistent with this subsection.
    ``(d) Definitions.--For purposes of this section--
            ``(1) State.--The term `State' means any of the several 
        States, the District of Columbia, and the Commonwealth of 
        Puerto Rico.
            ``(2) Unit of general local government.--
                    ``(A) In general.--The term `unit of general local 
                government' means--
                            ``(i) a county, parish, township, city, or 
                        political subdivision of a county, parish, 
                        township, or city, that is a unit of general 
                        local government as determined by the Secretary 
                        of Commerce for general statistical purposes; 
                        and
                            ``(ii) the District of Columbia, and the 
                        recognized governing body of an Indian tribe or 
                        Alaskan native village that carries out 
                        substantial governmental duties and powers.
                    ``(B) Treatment of subsumed areas.--For purposes of 
                determining a unit of general local government under 
                this section, the rules under section 6720(c) of this 
                title shall apply.
            ``(3) Unemployment.--With respect to any State or unit of 
        general local government--
                    ``(A) Tier 1 unemployment rate.--The term `tier 1 
                unemployment rate' means an unemployment rate for June 
                2008 that is 0.7 or more percentage points greater than 
                such rate for September 2007.
                    ``(B) Tier 2 unemployment rate.--The term `tier 2 
                unemployment rate' means an unemployment rate for June 
                2008 that is less than 0.7 percent points greater than 
                such rate for September 2007.''.
    (b) Conforming Amendment.--The table of sections for chapter 67 of 
title 31, United States Code, is amended by adding at the end the 
following new item:

``6721. One-time revenue grant to States and local governments.''.

Summary: State and Local Economic Stimulus Act - Makes FY2009 appropriations to the Secretary of the Treasury to award one-time revenue grants to state governments for themselves as well as for redistribution to local governments. Sets forth a schedule for allotments based upon relative population and Tier-1 and Tier-2 unemployment rates. Requires a state or local government to use such funds to: (1) provide essential government services. (2) cover the costs of complying with any federal intergovernmental mandate for which the federal government has not provided funds, or (3) compensate for a decline in federal funding.