States Spending Stimulus As Congress Intended

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Here’€™s an important read for you if interested in some actual facts to counter the nonsense being spun by Fox News, Rush Limbaugh and the Congressional Republicans who want to see America fail so they can wrestle back the power to continue the same failed Bush policies which destroyed our economy.

The non-partisan Center on Budget and Policy Priorities released an important report about how states are using the federal stimulus dollars. Here’€™s a portion of their report summary [with Wisconsin-specific data bolded in brackets]:

The federal aid is enough to close, on average, roughly 30-40 percent of state budget shortfalls. The $787 billion American Recovery and Reinvestment Act (ARRA) included approximately $135 billion to $140 billion for states to maintain current programs, which are being squeezed between rising demand for services and sharply declining tax revenues. These ARRA dollars closed 31 percent of New York’€™s budget gap and 37 percent of Virginia’€™s. Other states, such as Georgia, Maryland, Utah, Washington, and West Virginia report similar outcomes. [This is also the case in Wisconsin where $2.2 billion in federal aid was used to help plug the $6.6 billion budget deficit.] States [including Wisconsin] are closing the remaining gaps with a mix of spending cuts, revenue increases, withdrawals from reserve funds, and other measures. [Wisconsin balanced its budget by cutting $3 billion from state agencies, the largest in state history, raising $2.1 billion through taxes on the wealthiest one percent and certain fee increases, spending $2.4 billion in federal economic stimulus money, and reducing aid to local governments and schools.]

The federal aid is arriving at a crucial time. States were seriously considering even more severe cuts than were enacted in such services as health care, education, and public safety prior to passage of federal stimulus legislation. Those cuts very likely would have taken place in the absence of the federal aid. [For example, Wisconsin would have faced cutting an additional $1.2 billion in aid to schools without the federal stimulus assistance. See Wisconsin stimulus spending data below.]

The flexibility afforded by ARRA dollars is important. ARRA’€™s state fiscal assistance consisted primarily of $87 billion in increased Medicaid funding and a creation of the $50 billion State Fiscal Stabilization Fund administered by the federal Department of Education. As ARRA requires, states are using most of these dollars for health care and education. However, the availability of the federal funds also allows states to use available state money to protect other important programs not specifically supported through ARRA. [The bulk of the nearly $7.7 billion in stimulus money received by Wisconsin as of June 24th is being distributed as follows: $1.2 billion for tax cuts for the middle class; $1.1 billion designated for education; $1.6 billion to programs for needy families through Medicaid; $610 million for road and transit projects that create jobs; $303 million for clean energy projects that create jobs; $875 million in unemployment benefits and programs; and $130 million for rural development.]

Federal aid will continue to play an important role as states ‘€” and the national economy ‘€” recover. Most expect budget problems to continue at least through 2011, and many states are planning to time the use of federal dollars so that some of the funds will be available for that year (which the federal law allows). This gradual expenditure also will allow the states to adapt to unforeseen circumstances over the next year.

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