GAO Report Finds Underperformance of Recovery Act Spending

Abstract

The sluggish return of jobs during the economic recovery may be due, in part, to the slower-than-expected spending of stimulus money. Most states lag behind in getting started on the local level, and much of the state spending has not gone into programs that actually create new jobs.

Article

Part of the reasoning for giving federal stimulus money to the states was that they could spend it more quickly on “shovel-ready” projects and other immediate needs. But they have not been spending at the expected pace. And there are other reasons we may not be getting the most bang for the buck from the stimulus spending that they passed on to the states. For starters, by far the biggest chunk was the Federal Medical Assistance Percentage (FMAP) funds, Most states reported that the increased FMAP funds were used to maintain current benefits and services, to avoid further program reductions. In other words, that spending produced virtually no new jobs (though you could argue that it reduced the number of layoffs that would have happened otherwise). DOE, who’s focus is to create Clean Energy technology and ‘green jobs’, has only spent about 7% of its allotted funds.

Another big chunk went to transportation infrastructure spending. This was supposed to hold more promise for new jobs because the Recovery Act’s “maintenance-of-effort” requirement is designed to prevent states from substituting federal funds for state funds already allocated for projects. However, the GAO said that has “proven to be challenging.” Many states haven’t completed a maintenance-of-effort certification that the DOT accepts. Given the states’ financial challenges, it has proven very tempting to use those funds to balance their own budgets, rather than for brand new projects.

You can track reporting of government stimulus spending on the General Accountability Office’s Website here.


To view other articles from this issue of the brief, click here.

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