The Corner

Hurry Up and Spend!

The strings attached to various parts of President Obama’s stimulus package have baffled state government officials, and it’s not just a Republican-versus-Democratic issue. The White House was to provide additional guidance today about permissible uses of the money, but I’m told that much of the information will not appear for a week or more. This is a problem in many states that are working on their budgets right now.

There are some inherent problems in areas where the rules have already been written. One example: a senior aide to one governor complained to me recently that his state, given its current program structure, cannot possibly handle a seventy-fold expansion of weatherization funding in just 15 months, which appears to be a condition of accepting some of the funds.

As for the remaining unknowns, some states are simply making assumptions about what they can do with the money, which could prove to be wrong. The same is happening at the local level. In upstate New York, there are even two conflicting sets of numbers on how much money various school districts will receive. In Culpepper, Va. the school board is just guessing that it can cover its deficit with the stimulus money. In Brush, Colo. they have received numerous conflicting reports about what strings will be attached, and are waiting for more information.

The grousing of local officials over stimulus money may seem like mere ingratitude. But considering that it’s not free money — the federal government is borrowing and spending a trillion dollars for this — it’s instructive to see what they are saying and what incentives are being created by the funds and the strings attached.

In Geneseo, Ill., they’re happy to get money for infrastructure, but they cannot use any of it on sewers. So in the rush to spend, they’ll just pave over their aging sewers and pray that they’re good for another 7 to 12 years.

“We thought we were going to be able to identify areas in town that needed work and then submit projects and they’d tell us ‘yea’ or ‘nay…Instead, we were notified by mail that we’d been alloted $196,006 and had to submit a project by March 25….”Had we been able to choose the streets we wanted, the money would have been better spent…”.

In Rhode Island, state and local officials are going to war with each other over how the education money can be used, in the absence of clear guidance from the White House. Some Rhode Island schools also complain that the bill requires them to spend money on technology that they consider low-priority and could do without:

Some superintendents were angry that more money would not be used to save and create school jobs — one of President Obama’s stated intents for the stimulus…A portion of the “new” money has strings attached. Districts must dedicate some to technology — computers, Smartboards, software, technology upgrades — between now and June 30…“We have a $4-million problem. I don’t need any more money for technology,” said Michael R. Petrarca, finance director for the West Warwick schools. West Warwick, which faces a $3.7-million deficit, would receive just $219,590 from the stimulus, plus $175,195 for technology.

In western Minnesota, on the other hand, they wish they had more money for technology and school construction. But as one of the conditions for receiving the money, small school districts will have to spend more on special education than they think they need:

[T]he money that schools may get could be significantly lower than initially estimated, because of the strings attached. Construction money was cut off the final stimulus package, but school districts received a bump in Title I, which goes towards educating low-income students, and special education programs…

The catch to the money, especially with special education funding, is a requirement called maintenance of effort. In layman’s terms, it means that schools have to spend at least as much on special education as they had in past years….Now with the strings attached, schools will be stretched to spend all of the money that could be available.

There are dozens of other examples across the country, involving not only education and infrastructure funding but also law enforcement. One has to expect some level of confusion and uncertainty with any program so massive and abrupt as the stimulus, but it also serves as a warning for any centralized attempt to disburse massive amounts of money and micromanage it at the local level from Washington, D.C.


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