Big chunk of economic stimulus yet to be spent by state, local governments

By Alec MacGillis
Washington Post Staff Writer
Saturday, August 14, 2010

As Americans puzzle over why the economic stimulus package enacted more than a year ago has failed to restore vigorous job growth, one explanation has emerged from new reports: A lot of the money is not yet out the door.

Detroit is struggling with 14 percent unemployment, but as of June 30 the city had spent less than 1 percent of the $8.8 million in stimulus funds it received for energy-efficiency initiatives. In budget-strapped Arizona, Phoenix has spent even less of its $15.2 million, and in hard-hit South Florida, Fort Lauderdale has spent $66,000 of its $2 million.

The $862 billion package was divided roughly in thirds among tax cuts, aid to states and the unemployed, and investments in infrastructure, health care and other areas. The first two have delivered most of their boost, but much of the investment spending is moving far more slowly. At the end of July, nearly 18 months after the stimulus passed, more than half of the $275 billion in investments had yet to be spent.

Underlying the slow pace is a defining tension: Officials want to get money out the door to jolt the economy but want to spend it carefully enough to meet long-term policy aims -- and avoid headlines about waste or fraud.

"This is federal money we are stewards of, and we have to make sure we're spending it well," said Eric Coffman, senior energy planner for Montgomery County. By the end of June, the county had spent none of its $7.6 million in energy-efficiency funds. "Spending fast is not the only thing in the world. We want to make sure we get results."

Administration officials say the stimulus remains on schedule, with 70 percent expected to be spent by Sept. 30. And some economists note that the sluggish economy will still need a boost until 2012, the deadline for spending most stimulus cash.

"Some stuff is taking a longer time to have an impact, but we still have over 9 percent unemployment," said John Irons of the Economic Policy Institute. "The fact that we still have dollars coming on line now should not be seen as a negative."

Many of the unspent funds lie in programs portrayed from the outset as true long-term investments, such as $8 billion for high-speed rail, $17 billion for health information technology and $10 billion for the National Institutes of Health. But other programs that had been viewed as quicker job-generators are also taking a while to get rolling.

'Green jobs' programs

Take, for instance, three programs meant to improve energy efficiency and produce "green jobs." The $5 billion program for weatherizing low-income homes is recovering from a slow start as officials wrestled with rules on wages and historic preservation, and as providers struggled to expand capacity.

Only 3,000 homes were weatherized last summer, a sliver of the program's goal of 600,000 by March 2012. The pace has picked up, with 25,000 now being weatherized monthly. Still, barely a quarter of the funds were spent by the end of last month.

Moving more slowly are two other energy-efficiency initiatives, one for states and one for cities and counties. Of their combined $6.3 billion, $556 million had been spent by the end of July. Officials note that some of the remaining money is already at work but that states and cities will not pay out until projects are done.

In the Washington area, Prince William County, with $3.2 million, had not spent any money by June 30, while Arlington County had spent only $4,000 of its $2 million. Fairfax County had spent $236,000 of its $9.6 million and Loudoun County $239,000 of its $2.2 million. Prince George's County passed much of its $6.6 million to towns, but many had yet to spend it.

Virginia, which is investing much of its energy-efficiency money in biomass energy production, had spent $10.2 million by the end of June -- a fraction of its $70 million but enough to put it in the top five nationally. Maryland has spent 10 percent of its $51.8 million but says it has millions more at work in retrofitting apartments.

As of June 30, the District had spent $373,000 of its $22 million in state-level funds -- enough for a few TV ads and billboards promoting its tax on plastic bags -- but officials say millions more are being put to work modernizing schools. The District also received $9.6 million in city-level energy-efficiency funds; as of June 30, it had passed along $1.5 million, mainly to nonprofits. It says more will be spent on retrofitting fire stations and libraries.

The slow spend-out seems incongruous considering how desperate state and local governments are for funding; on Tuesday, the House passed $26 billion in aid to states to prevent additional layoffs of public employees. But most stimulus programs must be used for specific purposes, not to plug budget holes.

Many local and state governments say budget troubles have left them short-staffed, slowing their stimulus spending, though several have used some of the money to hire managers to oversee their spending. Louisiana is paying a company $5.7 million to handle its entire $85 million in energy-efficiency spending.

Mix of projects

After waiting for Energy Department guidelines last year, state and local officials spent months deciding how to use their funding. They opted for a mix of retrofits of public buildings; installation of low-energy streetlights and traffic lights; rebates for solar installations or insulation upgrades by residents and businesses; and workforce development.

Some of the projects are less jobs-intensive than others. Loudoun, like many counties, is spending heavily on an energy audit by a consulting firm. Fairfax is investing in making its computer systems more energy efficient.

The plans then went to the Energy Department, which decided, among other things, whether projects needed a full environmental review. The department told Florida that several of its proposals did not pass muster, and until recently the state was still unsure how to redeploy $12 million.

Fairfax was told that a proposal to replace windows conflicted with historic-preservation rules.

And Alexandria, along with many other cities, has run up against Fannie Mae and Freddie Mac objections to a program that would let homeowners pay for energy-efficiency upgrades over time by attaching the cost to their property tax bill.

Now that the Energy Department has approved most plans, cities and states must still put projects out to bid and draft agreements with local partners. Matt Rogers, who is overseeing the Energy Department's stimulus spending, said he hoped monthly spending by both the state and city programs would soon reach $100 million, up from $60 million in July. Local officials also promised a surge.

"The good news is that there will be a lot of spending in September. You'll see money being spent in big chunks," said Matt Groff, who is managing Prince William's grant. "Although it's taken a little while to get off the ground, there'll be less mistakes than there could've been if they were quick to approve early on."

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