Using Federal Funds to Advance Paid Leave: New Developments from Colorado and Vermont

In recent weeks, Colorado and Vermont have both used state American Rescue Plan funds to advance paid leave, setting a powerful example for other state and local governments.
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As momentum grows around the country to guarantee paid leave to workers to care for themselves and loved ones, state and local governments have a timely opportunity to use federal funds to advance new paid leave laws and policies. The federal government has confirmed that the state and local fiscal recovery funds made available through the American Rescue Plan Act can be used to create, expand, or financially support paid sick time, COVID-19 emergency leave, and paid family and medical leave. In recent weeks, two states—Colorado and Vermont—have used state American Rescue Plan funds to advance paid leave, setting a powerful example for other state and local governments.

In November 2020, Colorado voters decisively approved a ballot initiative—which our organization helped to draft—establishing a paid family and medical leave insurance (FAMLI) program. In response to Colorado’s unique fiscal requirements, the state legislature decided to pass a bill this year to advance initial start-up costs for FAMLI, until the program is financially self-sufficient. On May 22, 2022, Governor Polis signed this financing bill into law. Using the American Rescue Plan Act’s state fiscal recovery funds, the State will now advance $57 million to the Colorado Department of Labor and Employment to continue implementation of the FAMLI program before its official launch. This funding is essential to the Labor Department’s ability to hire staff, develop systems, and build capacity, so that the program can begin to offer benefits on time. Our organization’s Colorado Office looks forward to continuing to work with the Labor Department and our partners on the ground in Colorado to successfully implement this critically necessary program.  

Vermont is another recent example of a state that has turned to the American Rescue Plan’s state fiscal recovery funds to support paid leave. On June 8th, Governor Scott signed into law a bill that appropriates $15.18 million in American Rescue Plan funds to establish a program that will help employers provide COVID-19 paid leave to their workforce. Through this new grant program, employers in Vermont may apply to the State for quarterly grants to reimburse the cost of providing workers with up to 40 hours of COVID-19-related paid leave, separate from other accrued paid leave. It is noteworthy that the program will also cover paid leave that is provided retroactively to employees who previously took unpaid leave for COVID-19-related reasons. We applaud our partners at Vermont Main Street Alliance on this victory and hope more states and local governments will provide COVID-19 emergency leave, given new variants, case increases, and expanded vaccination eligibility.

The ability to use American Rescue Plan’s state and local fiscal recovery funds to support, expand, or advance paid leave is incredibly timely, given new progress on this issue in states and cities around the country. In addition to passage of new paid family and medical leave laws in Maryland and Delaware and a growing recognition of the need for paid sick time, we are also seeing more Southern states embracing this issue. For example, South Carolina recently extended paid parental leave to state employees, while Nashville—where our Southern Office is based—announced a plan to expand the city’s paid family leave policy to cover public school educators.

For more information and examples of how American Rescue Plan funds can be used by state and local governments to support paid leave efforts, visit our fact sheet. Our legal team is also ready to provide legal and technical support to advocates and policymakers who are considering use of American Rescue Plan funds for paid sick time, paid family and medical leave, or COVID-19 emergency leave. If you have questions or would like to discuss opportunities around the American Rescue Plan and paid leave, please contact Meghan Racklin at

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