Billions Left Unspent from Recovery Act

According to White House data recently requested by The Council of State Governments, over $66 billion worth of funds1 from the American Recovery and Reinvestment Act remain unspent.  While nearly 85 percent of stimulus dollars have been paid out and almost all of the remaining funds have been obligated for projects, the 15 percent left to be spent adds up to a hefty sum.  And as states continue to feel the fiscal and economic effects of the Great Recession, $66 billion could go a long way in helping states get on the road to recovery.

According to the National Association of State Budget Officers, states spent $53 billion in Recovery Act funds in fiscal 2009 and an estimated $112 billion in fiscal 2010. Those funds helped cushion states from having to make even more drastic spending cuts than they did, especially in the areas of health care and education.  The Congressional Budget Office reports that stimulus spending lowered the unemployment rate by as much as 1.6 percent, and increased the number of people employed by nearly three million.

Recovery Act Funding

Source: Government Accountability Office, May 2011

Last week, the Director for the Office of Management and Budget Jack Lew met with representatives of the Big Seven2 to discuss how to get those unspent stimulus dollars flowing and serving their original intent – to “drive the economy forward and create jobs.”

“With the Job’s Act dead on arrival in Congress, the White House is pinning its hope on kick starting stalled stimulus projects as a means to boost the economy in the short term,” said Chris Whatley, director of CSG’s Washington, D.C., office.

The Big Seven meeting follows up on a Sept. 15 memo from Lew that directed agencies to accelerate the spending of remaining Recovery Act funds in discretionary grant programs. “In light of the current economic situation and the need for further economic stimulus, it is critical that agencies spend these remaining funds as quickly and efficiently as possible,” said Lew.

A total of $261 billion dollars were obligated to programs through the stimulus, of which $195 billion has been spent, leaving $66 billion unspent, or just over a quarter of the original funds that were obligated.

On a state-by-state basis, the amount of unspent funds ranges considerably, from a low of $95.8 million (Wyoming) to a high of $7.6 billion (California). The states with the largest populations are also the states with the largest amount of obligated but unspent funds, which includes Illinois ($3.46 billion), New York ($4.38 billion), and California ($7.6 billion). 

The amount of unspent of dollars as a percentage of obligated funds ranges from a low of 13.7 percent (Idaho) to a high of 55.7 percent (Delaware). The states with the largest amount of unspent dollars as a percentage of obligated funds includes Hawaii (34.7 percent), Vermont (35.9 percent) and Delaware (55.7 percent).  

 Download the state-by-state chart HERE

Of the $66 billion yet to be spent, over one-third ($23.2 billion) can be found in four categories:

  • Capital Assistance for High Speed Rail Corridors and Intercity Passenger Rail Service: $7.46 billion
  • Energy Efficiency and Renewable Energy: $6.54 billion
  • State Fiscal Stabilization Fund: $5.04 billion
  • Highway Infrastructure Investment: $4.12 billion

Highway Infrastructure Funding

Of these four categories, transportation-related areas (including high speed rail and highway infrastructure) add up to a total of $11.57 billion in unspent funding.

California ($640 million), Texas ($480 million), Florida ($364 million) and Virginia ($271 million) have the highest total amount of highway infrastructure funding left on the table, while Hawaii (55%) and Virginia (43%) have the highest percentages of unspent funds.

Sean Slone, CSG’s senior transportation policy analyst, explains that the unpredictable nature of transportation projects may be part of the reason why some funds have been spent more slowly than expected, saying “although a project may have been viewed as “shovel-ready”—meaning aspects of planning, design and environmental permitting were already complete—there may be other aspects of the project, such as right-of-way acquisition or archaeological finds, that ultimately take more time and make some less shovel-ready than initially thought.”

Slone also says that while a highway project may already be underway, federal dollars are not actually paid out to reimburse states until a certain phase of the project is complete. “If the construction phase takes three years, for example, the state would not receive reimbursement of the money they paid to highway contractors until after the project’s completion,” said Slone. These accounting procedures could be inflating the unspent percentage figures and should be taken into account when evaluating how best to move forward.   

High Speed Rail Funding

When it comes to the $7.79 billion obligated to 21 states and D.C. to assist high speed rail, less than five percent has actually been spent – primarily due to the controversial political climate surrounding those funds. Thirteen of the states plus D.C. with obligated high speed rail dollars still have 100 percent or nearly 100 percent of that funding left.

In 2010, several governors were elected who explicitly opposed funding for high-speed rail projects.  “High speed rail has emerged as one of the most politically charged aspects of the Recovery Act with a wave of newly elected GOP governors electing to turn back funds,” said Whatley. “The White House has indicated that funds refused by states will be reallocated, but it is unclear yet how it will all play out.”

Energy Efficiency and Renewable Energy Funding

The stimulus obligated $16.65 billion in funds for energy efficiency and renewable energy projects, but over one-third (39 percent) remains unspent. Those funds included project funding for energy efficiency retrofits to public buildings, investments in wind and solar manufacturing, and a host of other initiatives.  Many of these dollars are dedicated to the weatherization program, and other project accounts, designed to retrofit public buildings with energy saving improvements. 

During a hearing before the House Oversight Committee earlier this month, the Inspector General of the Department of Energy,Gregory Friedman, told the committee that billions in recovery dollars were still waiting to be used.

At several points in his testimony, Friedman was critical of the Recovery Act’s implementation, saying that the huge influx of money “overwhelmed” his department and that the newly funded programs required “extensive advance planning, organizational enhancements, and additional staffing and training” which slowed down the spending process.  “Despite a major effort in a high pressure environment, the Department struggled to obligate and expend Recovery Act funds on a timely basis,” said Friedman.  “We found this to be true at the Federal, state, and local levels.”

The federal weatherization Program, for example, received $5 billion in Recovery Act funding – a big jump from its fiscal year 2009 budget of $450 million. That led to both growing pains for the program and a significant amount of focused attention. “Through the Recovery Act, the weatherization program alone received more than a 10-fold increase in funding,” said Whatley. “Given the exponential growth in their program dollars and the unprecedented scrutiny they are facing, it is not surprising that they have been slow to spend down their funds.”

State Fiscal Stabilization Fund

The State Fiscal Stabilization Fund infused states with over $48 billion and was designed to help state and local governments avoid major budget cuts during the downturn. A majority of the Fund went to a block grant for states that was earmarked for education.  Another chunk came in the form of flexible block grants that could be used to fund education or other essential state services, like law enforcement, public safety, services for the elderly or disabled and child care. 

Ninety percent of these funds have been spent, which, according to Whatley “is not a bad pace of spending given that the program received such huge sums in such a short period of time.” While the program has succeeded in distributing a majority of its funds, the ten percent left unspent still equals a significant amount: $5 billion. 

The unspent stabilization funds are not evenly distributed across states. New York ($837 million), Florida ($826 million), Tennessee ($456 million), Ohio ($407 million) and Georgia ($393 million) have the largest quantity of unspent funds.  Four states – New Jersey, South Dakota, Nevada and Nebraska – have spent all or nearly all of their funds, while Rhode Island (36 percent), Delaware (42 percent) and D.C. (49 percent) have the highest percentage of obligated funds yet to spend.

What's Next?

Moving forward, states will likely be placing more scrutiny on how they can utilize these limited remaining funds, making it a hot topic during oversight hearings in many state capitols in 2012. And although the stimulus as a whole or certain components of it (like high speed rail) have been controversial, difficult state fiscal conditions mandate practicality when it comes to accessing and using these funds effectively. “Although support for the Recovery Act within states has been divided largely along political party lines, few states are going to be eager to leave money on the table when we still have a nine percent national unemployment rate,” said Whatley.

State-By-State: Percentage of Obligated Funds Not Spent


 

 

1 All data referencing unspent or obligated Recovery Act dollars were provided to CSG by the White House Office of Intergovernmental Affairs. These figures are based on what was reported to the Recovery Board by Federal agencies for the week of November 4th and are also available publicly at www.recovery.gov. Note that data are specific only to discretionary funds and reflect both funds that are slated to be spent by the federal government in a state (i.e. military construction) and funds that have been granted to states for program costs (i.e. transportation).

2 The “Big Seven” refers to a group of seven associations that represent state and local government members, including The Council of State Governments, the International City/County Management Association (ICMA), the National Association of Counties (NACo), the National Conference of State Legislatures (NCSL), the National Governor's Association (NGA), the National League of Cities (NLC), and the U.S. Conference of Mayors (USCM).