To require payments to State and local governments for infrastructure and social services needs in the same amount as the amount of relief and reconstruction funds provided to Iraq.

Directs the Secretary of the Treasury to make payments to States and local governments to coordinate their budget-related actions with Federal Government efforts to stimulate the economy. Authorizes appropriations for FY 2003 for such payments in an amount equal to the total amount appropriated for for FY 2003 for the Iraq Relief and Reconstruction Fund in the Emergency Wartime Supplemental Appropriations Act, 2003, and subsequent appropriations Acts.Requires not less than one-third of such amount to be made available to local governments.

Requires the Secretary to establish a formula for determining the allocation of payments, with priority consideration to the relative unemployment rate, median income, population, and poverty rate. Permits the use of funds received by States and local governments only for: (1) ordinary and necessary maintenance and operating expenses for education; public safety; public health; social services; roads, transportation, and water infrastructure; and housing; and (2) ordinary and necessary capital expenditures authorized by law.