Weekly Wrap: States, Locals Have Spent a Quarter of Stimulus Funds

By: - December 11, 2009 12:00 am

States and localities spent a quarter of the money they are set to receive from the federal stimulus package – an amount that tops .1 billion – by late November, according to a report ( 167-page PDF ) released by federal auditors on Thursday (Dec. 10).

Of that sum, 85 percent was spent on health care, education and training, the Government Accountability Office (GAO) concluded.

Because of the recession, states are grappling with higher enrollment in Medicaid, the state-federal health insurance program for poor Americans. Most of the new enrollees are children, the agency noted.

In discussions with state officials, the federal auditors confirmed that most are worried about what happens when higher Medicaid reimbursement rates included in the stimulus package expire in December 2010.

But some of the strings attached to that money are also causing headaches for state officials. The law, for example, specifies that certain Medicaid providers must be paid promptly, which officials in a sample of 16 states said was the most difficult requirement under the law. Four of the states said, for at least one day, they missed deadlines for on-time payments to providers.

The speed with which states are spending new money for highways and other transportation projects varies greatly, the GAO said. Illinois and Iowa are among the most speedy states, but that’s because both Midwestern states dedicated much of their money to repaving and reconstructing existing roads. Florida and California have been much slower. Florida is using its money to build new highways, while California is funneling most of its money through local governments, which adds more time to the process.

The rush by states to release prisoners early as a budget-balancing tool may be having unintended consequences in Oregon.

Though the aim of a law approved by the Oregon Legislature was to reduce the sentences of nonviolent inmates, The (Portland ) Oregonian examined corrections data and found that nearly 800 of the 2,397 prisoners approved for early release were convicted of serious crimes such as attempted murder, robbery and arson.

“I call it an oversight,” said state Sen. Floyd Prozanski. But Dean Gushwa, the district attorney of Umatilla County, said, “I can’t believe they ever intended for this law to shave time off sentences for violent crimes.”

Meantime, the number of people in U.S. prisons has grown at the slowest pace in nearly a decade, according to a Washington Post article citing figures released Tuesday (Dec. 8) by the Bureau of Justice Statistics. The study also found that incarceration rates in 30 states declined last year.According to the study, the number of people sent to prison last year was down 0.5 percent from the previous year, while the number of people released from prison increased by 2 percent.

See related story:
Strapped states eye prison savings , Stateline.org (1/26/2009)

When the Ohio attorney general recently sued the top three credit-rating agencies, it was a reminder that Congress had pledged to include the agencies as part of its reform of the financial regulation system.

Now it turns out that the agencies – Standard & Poor’s, Moody’s and Fitch Ratings – may be largely escaping the reform effort, according to a piece in The New York Times on Dec. 8. The article details how the overhaul of the ratings agencies fell apart because of Congress’ concern that the reform proposals could backfire. The firms are central to the recovery of the nation’s credit system. See related story:
States spar with credit agencies , Stateline.org (3/31/2009)

With 14 shopping days until Christmas, Business Week’s Dec. 14 issue has a pretty good review of the year’s best books on the Great Recession.

Stateline.org Staff Writer Daniel C. Vock contributed.

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Stephen Fehr

Stephen Fehr is a senior officer with Pew’s government performance portfolio. He is a lead writer on many of the products generated by the portfolio, specializing in state and local fiscal health.