Yellen says state, local aid strengthened U.S. cities' COVID-19 responses

WASHINGTON, Jan 19 (Reuters) - The $350 billion in coronavirus relief aid for state and local governments has allowed U.S. cities to respond faster and stronger to an ever changing COVID-19 pandemic, U.S. Treasury Secretary Janet Yellen said on Wednesday.

Yellen told a meeting of the U.S. Conference of Mayors that the response by state and local governments is helping to blunt the impact of the highly-contagious Omicron coronavirus variant.

"Omicron has presented a challenge and will likely impact some of the data in the coming months, but I am confident it will not derail what has been one of the strongest periods of economic growth in a century," Yellen said.

She said that the $350 billion State and Local Fiscal Recovery Fund, which enabled cities to be flexible in how they aided their populations, had led them to be "much readier to respond."

"Rather than one burst of money that could only be spent in certain ways, it called for sustained funding, and our Treasury team has worked hard so you can use the money as flexibly as possible," Yellen added.

She cited several examples of local uses of the funds, from $1,000 signing bonuses for new teachers at child-care centers in Columbus, Ohio, to Hawaii's move to reverse its decision to furlough 10,000 state employees.

Minnesota has authorized more than $80 million in funds from the program for health needs, ranging from rapid COVID-19 tests to emergency surge staffing in hospitals, while St. Louis used $58 million from its allocation to spare residents from evictions and homelessness, supplementing rental assistance funds, she said.

Yellen added that funding from the Biden administration's $1.9 trillion American Rescue Plan stimulus package allowed cities to move from fighting fires to "start building a better post-COVID world."

The Treasury chief struck an optimistic tone on the White House's sweeping Build Back Better social and climate spending bill, despite contentious congressional negotiations clouding its future.

"While we don’t know the final form this will take, it will revolutionize how we care for children in this country, invest in climate change, and overhaul the international tax system to ensure corporations pay their fair share," Yellen said. (Reporting by David Lawder; Editing by Kim Coghill and Paul Simao)