Stimulus Funds Still Unspent

E-newsletter Issue #83 | Dec. 8, 2011

As states continue to feel the fiscal and economic effects of the Great Recession, the $66 billion in American Recovery and Reinvestment Act funding that remains unspent 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 the 2009 fiscal year and an estimated $112 billion in the 2010 fiscal year.  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 3 million.

“With the Jobs 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.

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

  1. Capital Assistance for High-Speed Rail Corridors and Intercity Passenger Rail Service: $7.46 billion

  2. Energy Efficiency and Renewable Energy: $6.54 billion

  3. State Fiscal Stabilization Fund: $5.04 billion

  4. 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.

Sean Slone, CSG’s senior transportation policy analyst, said the unpredictable nature of transportation projects may be part of the reason some funds have been spent more slowly than expected. Although the project may be deemed “shovel ready,” he said, “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 said that while a highway project may be under way, federal dollars are not paid out to reimburse states until a certain phase of the project is complete. These accounting procedures could be inflating the unspent percentage figures.  

High-Speed Rail Funding

When it comes to the $7.79 billion obligated to 21 states and Washington, D.C., to assist high-speed rail, less than 5 percent has been spent--primarily due to the controversial political climate surrounding those funds. Thirteen states and Washington, D.C.,  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 and turned back those funds.

“The White House has indicated that funds refused by states will be reallocated, but it is unclear yet how it will all play out,” Whatley said.

Energy Efficiency and Renewable Energy Funding

The stimulus obligated $16.65 billion for energy efficiency and renewable energy projects, but more than one-third (39 percent) remains unspent.  Much of the funding was dedicated to the home weatherization program and the retrofit of public buildings with energy saving improvements. 

During a hearing before the House Oversight Committee, the Inspector General of the Department of Energy, Gregory Friedman, said 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. 

State Fiscal Stabilization Fund

The State Fiscal Stabilization Fund infused states with more than $48 billion to help state and local governments avoid major budget cuts. A majority of the funds went to education block grants and 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. The remaining 10 percent still equals a significant amount--$5 billion. 

What's Next?

Moving forward, states will likely be placing more scrutiny on how they can utilize these 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.

The complete blog posting can be read here.

Also in this Issue: