Stimulus: No Blank Check for States

By: - February 20, 2009 12:00 am


Here is a sampling of how some governors are preparing for the stimulus money:

  • Alabama Gov. Bob Riley (R)appointed his former finance director and current chief justice, Drayton Nabers, to coordinate the state’s share of the funds.
  • California Assemblyman Manuel Perez (D) will head a task force that will hold public hearings and come up with a plan by May.
  • Connecticut Gov. M. Jodi Rell (R) has appointed a working group of municipal officials, business leaders, legislators and state agency chiefs to determine a list of “shovel-ready” projects.
  • Colorado Gov. Bill Ritter (D) appointed a committee headed by Don Elliman, director of the Colorado Office of Economic Development, and composed of elected officials and business leaders.
  • Idaho Gov. Butch Otter (R) wants state agencies to specify by early March how they would use stimulus money, and he wants a special committee to help him evaluate the proposals.
  • Kansas Gov. Kathleen Sebelius’ (D) task force , made up of state Cabinet officials and legislative leaders, has already met to discuss potential projects.
  • Maine Gov. John Baldacci (D) has launched a Web site to track how funds are being used.
  • Massachusetts Gov. Deval Patrick (D) selected real estate professional Jeffrey A. Simon to lead the state’s economic recovery infrastructure program.
  • Minnesota Gov. Tim Pawlenty (R) appointed the state budget office director to be Minnesota’s stimulus coordinator .
  • Missouri Gov. Jay Nixon (D) appointed 26 people to a new “economic stimulus coordination council.”
  • New Hampshire Gov. John Lynch (D) tapped state Deputy Attorney General Orville “Bud” Fitch to head an office to manage the funds.
  • New York Gov. David Paterson (D) launched for people to provide suggestions and created a cabinet to manage projects.
  • North Carolina Gov. Bev Perdue (D) set up an office headed by Dempsey Benton, former secretary of the state Health and Human Services Department.
  • Ohio Gov. Ted Strickland (D) picked a former U.S. diplomat who served in Japan, Ronald Richard, to be his “infrastructure czar.”
  • Rhode Island Gov. Don Carcieri (R) tapped his deputy chief of staff, Beverly Najarian, to run a new office overseeing the state’s share of the federal money.
  • Vermont has created a Vermont Federal Recovery Office .
  • Virginia Gov. Tim Kaine (D) set up to gather project ideas and to track how the funds are spent
  • Washington Gov. Chris Gregoire (D) appointed a former state budget director, Dick Thompson, to head the state’s efforts.
  • Wisconsin Gov. Jim Doyle (D) created and appointed a utility official, Gary Wolter, to head the state’s stimulus office, while the Legislature’s budget-writing panel will review spending.

Of the $200 billion states stand to get from the federal economic stimulus package, governors will have leeway in how to spend about $135 billion with the rest of the money restricted for specific uses.

President Obama is banking on states to spend their money quickly on repairing roads and patching gaps in state budgets to prevent layoffs and cuts to education and other social programs.

Congress didn’t write states a blank check, however, but instead directed much of the money into specific programs, including education, benefits for the unemployed and transportation, and largely used existing formulas to compute each state’s share. In all, the total package provides money for some 40 programs that involve states.

The streams of federal stimulus money that give governors the most flexibility include the $87 billion for Medicaid, the joint federal-state program to provide health insurance for the poor; $39.5 billion for a “state fiscal stabilization” fund designed to help states avoid cutting education; and $8.8 billion in grants for public safety and other government services.

These funds will go to a state’s general fund and can be used to offset cuts states would have had to make to other programs to balance their budgets, said Scott Pattison, executive director of the National Association of State Budget Officers. “The federal funds cover a lot of what states would have had to set aside themselves.”

The $135 billion that governors will get to spend with fewer strings is still about 40 percent of the $250 billion shortfall some experts figure states will face through 2011. States will continue to be under pressure to consolidate and streamline programs to balance their budgets.

“This is going to be a management challenge, because on one hand, you have to spend it rapidly, and the other hand, governors and states have to remember that the money is temporary, and you have to worry about the efficiency of the program and the stability of the program,” said Raymond C. Scheppach, executive director of the National Governors Association.

How to meet that challenge will be a major topic of conversation when the nation’s governors gather in Washington, D.C., for their annual winter meeting Feb. 21-23.

During the weekend, the governors are expected to meet behind closed doors with an Obama administration official, possibly Peter Orszag, director of Office of Management and Budget, to discuss implementing the stimulus package. OMB has already alerted department heads that it will lay out how spending information will be posted on the Web site, , aimed at giving Americans detailed information on how and where recovery dollars are spent.

NGA also is working on providing guidance to help governors meet all the bill’s requirements, including “transparency” and accountability. Governors know they will be under intense scrutiny to show they are spending the money wisely, and many have already appointed stimulus “czars” and created Web sites so that citizens can track the projects getting federal dollars (see list on the right).

Even governors who were the most vocal critics to state fiscal relief , notably South Carolina Gov. Mark Sanford and Texas Gov. Rick Perry, both Republicans, say they will take the stimulus money.

Also tentatively scheduled to meet privately with the governors this weekend are Ben S. Bernanke, chairman of the Federal Reserve, and Mark Zandi, chief economist and cofounder of Moody’s

Rebuilding the nation’s infrastructure will be a major theme of the NGA meeting and not just because of the stimulus package. Pennsylvania Gov. Ed Rendell (D), chairman of the National Governors Association, formally kicked off his infrastructure initiative last July.

In a private meeting, the governors also are expected to discuss ideas for paying for future infrastructure projects. Congress is preparing to overhaul the federal transportation program and replenish the Highway Trust Fund, the states’ main source of federal transportation dollars now supported by a federal gas tax. The American Society of Civil Engineers estimates that $2.2 trillion is needed to repair and upgrade the country’s infrastructure over the next five years.

The governors will go to the White House Monday (Feb. 23) to meet with President Obama and Cabinet members. It will be their first gathering since joining then President-elect Obama in Philadelphia last December to discuss how states can help jumpstart the economy.

Among the Cabinet members who could be on hand include Homeland Security Secretary Janet Napolitano, former Arizona governor, and Agriculture Secretary Tom Vilsack, former Iowa governor.

Another governor could be poised to join the Obama administration. Kansas Gov. Kathleen Sebelius (D) has been rumored as a top pick for secretary of health and human services. The president’s first choice, Tom Daschle, former U.S. senator from South Dakota, withdrew after admitting he failed to pay taxes.

See Related Stories:

Stimulus to ease, not fix, state budget woes (2/14/2009)

States await flood of federal money (2/13/2009)

States brace for new safety net money (2/12/2009)

Stimulus prompts debate over police funds (2/11/2009)

Governors to track stimulus money (2/10/2009)

Governors react to stimulus proposal (2/6/2009)

Medicaid programs feel weight of recession (2/6/20090)

House stimulus plan wins state praise (1/12/2009)

Governors to pare back agendas (1/7/2009)

Budget gap could widen to $200 billion (12/15/2008)

Governors hopeful after Obama meeting (12/3/2008)

Govs turn to fixing infrastructure (7/15/2008)

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