The Institute's Staff

August 2009  

ARRA SPENDING ON MARYLAND

An Overview

Joel Yesley, PhD

Maryland Budget & Tax Policy Institute

Federal Program Overview and Reporting Procedures

The American Recovery and Reinvestment Act (ARRA) directs the federal government to inject $787 billion into the economy, including $280 billion in grants for state and local governments, to cushion the effects of the current recession.  The largest component of the program will provide relief from taxes for individuals amounting to $288 billion.  The five other largest categories of assistance would go to infrastructure and science ($111 billion, including $48.1 billion for transportation), protecting the vulnerable ($81 billion), health care ($59 billion), and education and job training ($53 billion), and $43 billion for energy-related programs.  Planners anticipate that $3.8 billion of these funds will flow into Maryland, resulting in the creation of 66,000 jobs over the next two years.

ARRA includes some unprecedented measures for reporting expenditures and tracking performance as part of its transparency and accountability provisions.   In furtherance of that goal, the Recovery Act established the Recovery Accountability and Transparency Board to coordinate and conduct oversight of funds distributed under the Act in order to prevent fraud, waste, and abuse.  This board was directed to establish a web site (www.recovery.gov) to foster greater transparency.  This site currently includes overview information that features projections for how, when, and where the funds will be spent but little information regarding actual disbursements to date.  Over time, additional information should appear as the money flow increases.  In fact, the Office of Management and Budget has released detailed guidance regarding the type of information that recipients of these funds will be required to collect.  The latest guidance released on June 22 stipulates that by the 10th day of each quarter, prime stimulus recipients must publicly report the total amount of recovery funds received from each federal agency, the amount obligated as well as spent on all projects exceeding $25,000, a description of each project and its completion status, an estimate of the number of jobs created or saved, and a rationale for cases of infrastructure projects.   The first reports are due to the federal agencies within 10 days of the end of each quarter (beginning in Oct. 2009) and are required to be published by the Recovery Board within 30 days of the quarter’s end.

Overview of Maryland’s System for Tracking Funds

Governor O’Malley has also committed the state to providing detailed information on how stimulus funds are intended to be spent as well as actual spending levels.  For this purpose, Maryland’s highly acclaimed StateStat reporting system has been adapted to incorporate the commitment and spending of stimulus funds (www.statestat.maryland.gov/recovery.asp).  This site groups allocated expenditures by broad category (e.g., health and human services, transportation, education) as well as by county.  Individual projects are also delineated.  Although there is comprehensive information on the allocation of funds by major category for each county, there is a total absence of information pertaining to actual spending as well as the estimated number of jobs created or saved.  All of the listed individual projects involve either road or water quality improvements, but little money had been allocated to these projects as of May 1, 2009, the date when the map was last updated.  Although news reports indicate that several of these projects are already underway (indeed, Maryland was the first state to commit all of its expected transportation stimulus funds), there is no indication to date of the rate of actual spending and the number of jobs retained or created that is readily accessible to the public on this site.

Health and Human Services

The largest category of needs for which stimulus funds have been committed in Maryland is health and human services, which is due to receive 43.5 % of the anticipated total of $3.9 billion or $1.7 billion (see pie chart).  The federal matching share is scheduled to increase from the current $.50 for each state dollar spent on medical assistance payments to approximately $.60, which will account for nearly approximately three-quarters of the expected increase in this category.  The increased funding will allow the state to continue providing coverage for more than 650,000 residents.  In addition, Maryland will receive an additional $24 million in funding for the Child Care and Development Block Grant.  The state has also received and spent about $3.7 million to support food costs in the Women, Infant, and Child Program. 

Education

The second largest category is education, which is scheduled to receive 29 % of Maryland’s total or $1.1 billion (see pie chart).  ARRA created a “State Fiscal Stabilization Fund” to funnel money to the states in the form of two block grants, with about 80 % of the total earmarked for education and the remainder to help fund other key services.  About 60 % of the education funds are intended for the Title 1 (Education for the disadvantaged) and IDEA (Special Education) Programs.  Title 1 grants provide supplemental education funding, especially in high poverty areas, to help raise student achievement.  The funds can be used to allow the phase-in of previously enacted equity adjustments.  Most of the remaining education funds are intended to supplement the Pell Grant Program (maximum grants should increase by $500), which should help make higher education more affordable for low-income students.  Substantial funds have also been allocated for educational technology improvements ($8.5 million), the Head Start Program ($7.9 million), and vocational rehab ($6.9 million).  The 20 % portion of the total that can be spent for non-educational purposes (“flexible block grant”) is likely to be used for basic services, such as public safety, services for the elderly or people with disabilities, or child care ($24 million) assistance to low-income families in addition to education. 

Six local school superintendents reported on their use of stimulus dollars at a hearing of the Maryland Senate Budget and Taxation Committee in June. Most of the superintendents expressed their caution about the temporary nature of the funds. They were seeking to use the money for one-time enhancements such as technology and training. In a few cases, positions were added to provide services for special education or disadvantaged students. The superintendents also indicated that funds are being used to “fill holes” and avoid larger cuts to the existing education program in the face of reduced federal and county support.

Transportation

The third largest needs category is transportation, which is scheduled to receive $610 million in ARRA funds, or nearly 16 % of the total.  This total is projected to support 17,500 jobs.  Of this total, $431 million is set for highways and $135 million for transit.  Maryland plans to utilize its $431 million in highway formula funds on both state ($368 million) and local federal aid-eligible projects ($62 million).  Funds will be distributed to the counties based on the number of vehicle registrations and lane miles in a particular county.  In the transit category, $76.5 million will go towards Maryland Transit Administration local bus, light rail, Metro subway, and MARC projects, with the remaining $58 million to be made available to local jurisdictions. 

Housing

The fourth largest category is housing, which is slated to receive about 5 % of the total or $193 million.  Maryland should receive about $32 million to support the new Tax Credit Assistance Program, part of the HOME Investment Partnerships Program.  The purpose of these funds is to provide gap financing for projects approved for federal Low Income Housing Tax Credits that are experiencing problems in raising equity through  tax credits.  ARRA will also provide $48.4 million to local public housing agencies in the state. 

Community Development/Services Block Grant Programs (CDBG, CSBG)

The other major housing-related programs to receive increased funding are the Community Services Block Grant Program (CSBG) and the Community Development Block Grant Program (CDBG).  Under the CSBG Program, community action agencies will receive $13.7 million to help low-income residents through housing assistance, nutrition, emergency shelter and other programs.  The federal legislation makes the program requirements more flexible, increasing the maximum income requirement for eligibility from 125% to 200% of the federal poverty guideline.  Under the CDBG Program, the state will receive $15 million in additional funds, of which $12.8 million is funneled to local governments for use in revitalizing neighborhoods, expanding affordable housing, and improving community facilities and service.  The remaining CBDG funds will be used to support infrastructure projects.

Workforce Development

The Maryland Department of Labor, Licensing, and Regulation is set to receive $44.2 million, which is second only to the Department of Human Resources, which provides most of the funding for the Medicaid Program.  This total will comprise $34 million in Workforce Investment Act (WIA) and Wagner-Peyser funds and about $9 million to administer its unemployment insurance program.  The WIA Program, which is the primary national funding stream for workforce development, is divided into three major components: dislocated workers, low-income adults, and youth.  Adult Program grants support State One Stop Career Centers by providing core assistance (outreach, job search and placement assistance, career planning) and training services (both occupational and basic skills).  These programs would receive nearly $12 million in ARRA funds.  WIA Youth Activities Grants support programs for low-income youth involving educational or occupational training, mentoring, among other activities.  These programs would also receive just under $12 million.  Dislocated Worker Grants provide services to employees that have lost their jobs and are unlikely to return to their previous industry or occupation.  ARRA would provide nearly another $12 million for these programs.  The Wagner Peyser Program provides funds for job search assistance, re-employment services, Unemployment Insurance (UI) claimants, and job referrals.  The UI component of ARRA provides for an extension of the period during which displaced workers are eligible for benefits and a weekly supplement of $25.    

Other Income Support Programs

Two other major federal income support programs will receive ARRA subsidies.  One of these is the Food Stamp Program, which will receive additional funds sufficient to finance a 13.6 % increase in maximum food stamp benefits.  Maryland is slated to receive $219 million for this purpose.  For a family of four, this could mean an additional $80 per month from $588 to $668 at the maximum.  ARRA will also encourage laid off workers to participate in COBRA plans to provide continuing health insurance coverage by subsidizing 65% of the premium cost for 9 months. 

Weatherization Assistance

The state is also scheduled to receive $61 million through the Weatherization Assistance Program.  These funds will include $44.5 million for home improvements and $11 million for training and technical assistance.  ARRA loosened the income restrictions of this program, increasing the maximum level of income for eligibility from 125 to 200 % of federal poverty levels as well as the amount that can be spent per home to $6,500.  Eligible projects will include air infiltration reduction, insulation, hot water system improvements, lighting retrofits, and furnace repairs and improvements. 

Environmental Programs

Environmental programs have been slated to receive $123 million in ARRA funds.  Nearly $100 million of this total will be used to subsidize the Maryland Department of Environment’s (MDE) Water Quality Revolving Loan Fund.  The remaining balance will be added to the MDE’s Drinking Water Revolving Loan Fund.

Conclusion

More than two-thirds of the stimulus funds will be used to support Maryland’s Medicaid program and education (k-12 and higher education).  The bulk of these funds will be distributed through formulas that will permit the state to maintain its recent and planned levels of support to its low-income population in these need categories.  The remaining funds will be widely dispersed among several need categories, where the state will generally have somewhat greater autonomy in targeting the funds within each of these broad areas.     

“Recovery Act: As Initial Implementation Unfolds in States and Localities, Continued Attention to Accounting Issues is Essential,” General Accountability Office, April ’09, page 8.

©2004-2009 Maryland Budget and Tax Policy Institute. All Rights Reserved.