In This Issue:

• US Senate to Vote On Extension Of Federal Aid, Including Immediate Aid To States And Unemployed Workers
• Premature End of Federal Assistance To States Threatens Education Reforms And Jobs
• Update on Recovery Act Funding For Education
• Recovery Act Funding Helps People and Puts Dollars Back into Maryland’s Economy
• Recovery Act Jobs Report: 6,725 in 1st Quarter Of 2010

US SENATE TO VOTE ON EXTENSION OF FEDERAL AID, INCLUDING IMMEDIATE AID TO STATES AND UNEMPLOYED WORKERS

Neil Bergsman, Andrea Payne Roethke and Matthew Weinstein

Recovery Watch Maryland

Maryland’s economy and important services are at risk if federal aid to states is allowed to lapse. A number of key American Recovery and Reinvestment Act (ARRA) provisions expired last week, including emergency unemployment compensation and COBRA subsidies for laid-off workers.  Enhanced Medicaid aid to states is set to expire at the end of this year if Congress fails to act.   Next week, the United States Senate is set to vote on a six-month extension of these critical supports for workers and the local Maryland economy as part of HR 4213, the “American Jobs and Closing Tax Loopholes Act of 2010.”

Unemployment Insurance

Last week’s expiration of Emergency Unemployment Compensation (UEC) affected an estimated 1.2 million workers nationwide.    Fifteen million Americans are now out of work.  While the House voted late last month to extend the now-expired ARRA unemployment insurance package of EUC for the long-term unemployed, thousands of Maryland workers are currently without a safety net as they wait for the Senate to act.  Nationwide, more than 5 million workers rely on EUC, including tens of thousands of Marylanders.  Over the past year, nearly 100,000 recipients in Maryland ran out of state UI benefits without being re-employed.

Medicaid Cut Puts Maryland At Risk

The failure to extend Medicaid aid to states would create a significant gap in Maryland’s FY 2011 state budget.  The state budgets enacted by Maryland and at least 30 other states depend on this aid extension being approved. The extension had been included in bills passed separately by the US Senate and House of Representatives in the winter and spring, but the House of Representatives removed the provision from the bill before recessing last month – eliminating $24 billion for state fiscal aid in the form of Medicaid assistance.

Maryland’s budget relies on $380 million from the enhanced federal Medicaid match provision. Maryland’s share of the aid is now estimated at $447 million in FY 2011. Since states need to maintain balanced budgets, Maryland and other states will need to cut services, increase revenues, or draw down reserves to offset this loss. Cuts would likely affect education and healthcare, because those are the largest portions of state budgets.

In addition to cutting back on services, such cuts would also endanger the US economic recovery as a whole. In May, state and local government employment declined by 22,000 jobs nationally. Overall, the economy added over 400,000 jobs, but most of them were from hiring by the U.S. Census Bureau. In Maryland the state and local governments have shed over 6000 jobs in the last year.

Under the ARRA, the federal Medicaid matching rate was increased by 6.2 percentage points for all states, and by additional percentage points for states with high unemployment. Under the ARRA provisions, Maryland currently receives federal contribution of 61.59%, as opposed to the normal rate of 50%.  These temporary increases were enacted in ARRA in February 2009 in response to the increased Medicaid caseloads and decreasing state revenues resulting from the recession. The increase is scheduled to expire on December 31, 2010. HR 4213 should extend these increases for six months, through June 30, 2011. 

COBRA Cut Costs Maryland

The House also cut $7 billion in COBRA subsidies for unemployed workers’ health insurance.  Unless the Senate restores this provision, workers laid off after May 31, 2010 will no longer receive the 65% subsidy created by ARRA.  Families USA estimates that this will raise the average monthly COBRA premium unemployed Marylanders must pay from $395 to $1,129 – almost as much as the state’s average monthly unemployment benefit of $1,366.   Families USA also estimated that the number of Marylanders losing their insurance last year due to the recession was over 56,000.  

Premature End of Federal Assistance to States Threatens Education Reforms and Jobs
Loss of Education Jobs Stands at 105,000 and Rising; Recovery Act Saved 350,000 Jobs But Will Soon Expire

Phil Oliff and Nicholas Johnson

Center on Budget and Policy Priorities

(Republished with permission)

Recovery Act assistance to states will largely run out this year, which could not only eliminate hundreds of thousands of jobs and undermine basic education services but also impede education reform efforts. As Education Secretary Duncan recently told Congress, “We are gravely concerned that the kind of state and local budget threats our schools face today will put our hard-earned reforms at risk.” [1]

The recession has driven down state revenues by record proportions. Education makes up the largest single item in state budgets, and spending cuts there have been deep and widespread. Federal aid through the American Recovery and Reinvestment Act has lessened the impact of state budget shortfalls on education and other state services, but that aid will soon be depleted. Meanwhile, serious state budget shortfalls will likely persist for at least the next two years, reaching an estimated $180 billion in fiscal year 2011 (which in most states will begin July 1) and $120 billion in 2012. This sets the stage for even more severe cuts as states wait for revenues to recover to pre-recession levels. For 2011, legislatures and governors are enacting budgets with cuts that go even deeper than those enacted over the past two fiscal years.

To prevent the worsening of education cuts, Congress should temporarily extend both the Medicaid and education-related fiscal relief that the federal government provided over the past year through the Recovery Act. The Medicaid extension is included in “jobs” legislation now pending in the House.

Education cuts already have cost jobs in the economy, and the pain is about to get worse. Even though the funding the Recovery Act has provided through the State Fiscal Stabilization Fund (primarily for education) has saved 347,000 jobs, school districts and other local education employers (such as community colleges) have nevertheless cut 105,100 jobs since July of 2008— and this number is very likely to grow. California school districts have notified at least 20,000 teachers that they might be terminated, for example, and Illinois’ governor has proposed education cuts that he estimates would mean layoffs for 17,000 teachers. The end of ARRA funding would likely accelerate this job loss. These job losses — as well as teacher furloughs, salary reductions, cancellation of contracts with private-sector vendors, and other budget-cutting measures — also weaken the overall economy by reducing consumer demand. Without additional federal aid, state budget cuts could cost the economy 900,000 public- and private-sector jobs.

In addition, current and additional education cuts undermine reform initiatives that many states are undertaking with the federal government’s encouragement, such as supporting professional development to improve teacher quality, improving interventions for young children to heighten school readiness, and turning around the lowest-achieving schools, to name just a few. For example, recent state education cuts include reductions in support programs for high-needs students, teacher training and mentoring and funds for professional development, and early childhood programs. The shortage of state and local funding for education is moving programs and policies in a counterproductive direction, and further cuts resulting from the ending of Recovery Act support would exacerbate this trend.

UPDATE ON RECOVERY ACT FUNDING FOR EDUCATION

JaCina Stanton

American Civil Liberties Union of Maryland

The American Recovery and Reinvestment Act provides several federal education funding streams, including:  (1.) State Fiscal Stabilization Fund (2.) Investing in Innovation (3.) School Improvement grants (4.) Race to the Top and (5.) ARRA bonds for school construction/renovation. 

State Fiscal Stabilization Fund

Maryland received $430 million in stabilization funding from the U.S. Department of Education for FY 11.  These funds were allocated toward the Bridge to Excellence “Thornton” education funding formula and the $92 million increase in teacher pension costs. 

Investing in Innovation (I3) grants

Investing in innovation grant applications were due in May 2010 and will be awarded in September 2010.  Thirty-five Maryland organizations and school systems submitted interest applications in April 2010.  $650 million total is available in allotments from $5 million to $50 million.  School systems submitting grants include:  Baltimore City, Harford, Montgomery, Somerset, Prince George’s, St. Mary’s and Washington County Public Schools.  

School Improvement Grants

Maryland received $47 million in school improvement grants to help persistently struggling schools. These grants are given to Title I schools in improvement, corrective action or restructuring.

MSDE rated 72 schools as eligible, but districts can focus on fewer. Baltimore City will receive $30 million to overhaul eight of its 54 eligible schools. Two schools in Baltimore County, 14 schools in Prince George’s, and one school each in Kent and Dorchester are eligible.

Race to the Top
Maryland submitted their Race to the Top (RTTT) application in May 2010.  If chosen, Maryland would be eligible for $250 million over four years.  Maryland’s application emphasized its rating as the top school system, adherence to common core standards, a Breakthrough Center, the new Teach for MD program, P-20 council and early education achievement. The ACLU publicly advocated that MSDE should focus on remedying the inequitable distribution of effective teachers statewide.

Every school district except Frederick and Montgomery County supported the application. The Baltimore Teacher’s Union supported the application, as did the Prince George’s Education Association, but the state MSEA expressed concerns about the teacher evaluation measurements and declined their support. Under MSDE’s plan, teacher effectiveness will be measured by student growth and will be 50% of their evaluation system, with 30% determined by MSDE and 20% by local school systems. 

ARRA Construction Bonds

ARRA set aside $22 billion in school construction/renovation funds through the Qualified School Construction Bond (QSCB) program.  Large school districts with a high Title I student population get a direct allocation, while states get an allocation to distribute to their other school districts competitively. 

The ACLU supported Senate Bill 179 (passed during General Assembly 2010), which will allow Baltimore City schools to increase its debt limit to gain access to its QSCB allocation of $116 million over a two-year period.  Also qualifying for a direct allocation, Baltimore County schools will receive $38.8 million over a 2-year period, and Prince George’s County schools, $50.2 million.  Maryland has applied for its allocation of $100.6 million, and will distribute these funds competitively to the other school districts through the Capital Improvement Program.

RECOVERY ACT FUNDING HELPS PEOPLE AND PUTS DOLLARS BACK INTO MARYLAND’S ECONOMY

Joel Yesley, PhD

Maryland Budget & Tax Policy Institute

This report will focus on the five major forms of cash assistance provided for by the American Recovery and Reinvestment Act (ARRA) that have helped people directly in the state:

• A boost in Food Stamps
• A $25 per week increase in unemployment benefits
• Additional weeks of unemployment benefits through the Extended Unemployment Compensation Program
• A one-time $250 payment for Social Security and SSI recipients (and some others)
• The Making Work Pay tax credit

These five forms of direct assistance benefited Marylanders with immediate funds to cover their daily expenses, thereby pumping additional income into the state’s economy and boosting consumer demand at a time when the economy was in a vicious downward cycle.  We estimate that Marylanders had received a total of $2,383 million as of April 30, 2010 from these programs, which are scheduled to account for about one-fifth of the total federal spending package by the time the program ends.   The effectiveness of these payments in counteracting the recession was enhanced by the fact that they targeted unemployed Marylanders and low-income workers, who were most likely to quickly spend the additional income.

          A more detailed description of these five programs follows:

• Expansion of food assistance benefits ($139 million).  ARRA provided a 13.6 percent boost in monthly Supplemental Nutrition Assistance Program (SNAP) benefits.  For most eligible four-person families, this would amount to an additional $80 per month.   In March 2009, just before the increase went into effect, about 207,000 households were receiving SNAP benefits.  By March 2010 (the most recent available data), this number had increased to over 260,000 households.

• One-Time $250 payments to elderly and disabled ($205 million).  ARRA provided a one-time $250 payment to Social Security and SSI recipients as well as recipients of Railroad Retirement and isabled veterans’ benefits.  More than 831,000 Marylanders received this $250 payment.

• Extension of Unemployment Insurance benefits ($483 million).  In 2008, Congress enacted the Extended Unemployment Compensation (EUC) Program, which provided up to 33 additional weeks of unemployment benefits to workers exhausting their 26 weeks of regular benefits.  ARRA extended this program, which was set to expire in March 2009, through the end of 2009.  Congress has extended this program until June 2010 and is about to consider a jobs bill that would further extend the program through the end of the year.

• Additional $25 per week in Unemployment Insurance benefits($155 million).  More than 282,000 Marylanders had benefited from the unemployment insurance provisions of the in the recovery Act from the beginning of the current fiscal year (July 1, 2009) through February 2010 (the most recent data available).  

• Making Work Pay Credit ($1.4 billion).  ARRA provided a tax credit equal to 6.2 percent of a worker’s earned income, up to a maximum of $800 for couples filing jointly and $400 for single filers.  The credit is in place for the balance of 2010, and most workers receive it through a small increase in each paycheck, as employers reduce withholdings.  The credit is refundable, meaning that workers receive the full amount even if it is more than they owe in taxes.  About 2.2 million taxpayers in the state have been estimated to benefit from the credit.

Although each of these provisions offers varying degrees of economic stimulus, their overall impact has been the key to saving jobs and generating spending in Maryland.  The benefits were designed to reach taxpayers soon after ARRA’s enactment and rapidly pumped additional household income into the state, increasing consumer demand at a time when the economy desperately needed it. Money was injected quickly and efficiently by using existing mechanisms for distributing the funds.  The following chart shows the allocation of the nearly $2.4 billion in total direct payments received by Marylanders as of April 30, 2010 among the five programs covered in this report.

RECOVERY ACT JOBS REPORT:

6,725 IN 1ST QUARTER OF 2010

Joel Yesley, PhD

The data reported for the first quarter of 2010 based on award recipient reports revealed that the state had created or retained 6,725 jobs, which was nearly identical to the total for the final quarter of 2009. 

The state’s website has reported that a total of 13,821 jobs were created by ARRA spending in the first quarter of 2010, but this total is not comparable to the one derived from recipient reports because of two factors.  Most importantly, the state website total includes both indirect and induced impacts that were estimated by an economic model in addition to direct  employment impacts (amounting to 3,547 jobs), in contrast to the federal website total based on recipient reports, which is limited to direct impacts only.  

In addition, the state website total is based solely on awards received by state agencies, excluding those received directly from federal agencies by local governments and contractors.  If one were to apply the same ratio of indirect and induced jobs to direct jobs derived from the state reported data (nearly three to one) to the federal total of 6,725 direct jobs, the overall impact would be estimated at 26,228 jobs. 

State reported data revealed that over one-half of these jobs were in the fields of health and education. 

The US Council of Economic Advisors has estimated that ARRA created 49,000 jobs (including indirect and induced jobs as well as direct jobs) in Maryland since the inception of the program in February 2009, using a macroeconomic model.   The employment generating impact of ARRA spending therefore appears to have accelerated this year. 

There is no meaningful method to calculate the cost per job created or retained, since funds received through ARRA are reported on a cumulative basis since the beginning of the program in February 2009 as opposed to a quarterly basis, which is used for the jobs total.  The February issue of the Monitor reported that Maryland had a higher cost per job created/retained than the national average as well as neighboring states, based on comparable data with respect to time period.  Even though one could justifiably question the accuracy of the absolute cost calculations, the data can still be  used to draw valid comparisons among the states.  The latest quarterly data reveals a continuation of this relatively high job cost pattern in Maryland.

The February Monitor concluded that a net under-reporting of jobs has probably occurred in the state.  In order to determine whether this pattern has become more or less pronounced during the first quarter, we compared results from using data filters to highlight anomalous results for the two quarters.  In the under-reporting category, we looked at the number of cases where zero jobs were reported but the project was listed as completed, zero jobs were reported although the recipient received more than $100,000, and where more than $1 million was received but less than 3 jobs were reported.  Using the first measure, the number of anomalies declined by about 25 percent.  Using the latter two measures, however, the number of anomalous cases increased by nearly 100 percent over the first quarter of 2010.  A somewhat greater incidence of highway infrastructure grants among the projects involving the highest spending in the most recent quarter can explain some of this difference.  These projects tend to involve high capital and materials costs and relatively low labor costs.

To determine the likely influence of over-reporting, we looked at the number of cases involving a relatively small grant (<$50k) and more than two jobs reported and where the number of jobs was greater than zero but the recipient received no money.  The number of these anomalous cases declined considerably from the fourth quarter to the first quarter, with the totals for the former period ranging anywhere from three to five times greater than in the most recent quarter.  

These results from both sets of data therefore support the conclusion that the problem of job under-reporting on both a gross and net basis (i.e., the magnitude of the excess of under-reporting cases compared with those involving over-reporting) has worsened over the past quarter.  The determination of the extent to which this trend is a result of changes in the labor-intensity of projects receiving the most financial support over the two periods as opposed to errors in reporting would require further investigation.  

USDA, Food and Nutrition Service Recovery Act website, Supplemental Nutrition Assistance Program, www.fns.usda.gov/fns/recovery/recovery-snap.htm.

Department of Human Resources, Family Investment Administration website, www.dhr.state.md.us/fia/pdf/statisticalreportsfy10.pdf.

U.S. Social Security Administration data.  Does not include payments made through the Department of Veterans Affairs and the Railroad Retirement Board.

Statestat, Department of Labor, Licensing and Regulation, Division of Unemployment Insurance Monthly Report, February 2010.

Arloc Sherman, “Tax Aid in Recovery Package would Reach Large Numbers of Workers in Every State,” Center on Budget and Policy Priorities, updated February 26, 2009.

http://www.statestat.maryland.gov/recoverymjobs.asp

Council of Economic Advisors, “Impact of the ARRA on Employment by State,” April 2010.

http://www.nelp.org/page/-/UI/JuneBenefitCutoff.pdf

http://www.familiesusa.org/resources/publications/pending-jobs-bill.pdf

http://www.familiesusa.org/assets/pdfs/one-two-punch.pdf

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