The Institute's Staff

November 2009  

1. THIRD QUARTER JOBS REPORT
2. UNEMPLOYMENT INSURANCE REFORMS REQUIRED FOR MARYLAND TO RECIEVE FULL FUNDING

Recipients report 6875 jobs saved created in third quarter

But there are some quality-control issues with the data

Joel Yesley, PhD

Maryland Budget and Tax Policy Institute

Data reported by prime recipients of funds under the ARRA Program covering the third quarter of 2009, released on Oct. 30, indicated that the state had received $685.8 million and used the money to create or maintain 6,875 jobs.  This total includes 4,460 jobs were directly created or saved by state agencies (e.g., State Highway Administration, Department of Education), about 1,450 jobs that were indirectly created through subcontracting, and 965 private sector jobs that were created or saved through federal contracting that by-passed the state.   Nearly 30 % of the total jobs were created or saved through federal stimulus funds given directly to local governments and businesses.  The state’s Department of Education and Department of Transportation were the two largest state agency recipients of awards.

Highlights of the data indicate that the Recovery Act has helped public education the most, creating or saving about 1,800 teacher and administrative positions in primary and secondary schools.  State Law Enforcement agencies, including the state police and correctional institutions, were able to create or save 885 jobs, and the Department of Labor, Licensing, and Regulation has also generated nearly 750 summer jobs for young adults with the help of workforce grants.  Transportation spending led to the creation of nearly 600 jobs.  Although Health and Human Services comprise the largest component of stimulus spending as noted in the first Monitor report, the money has been used to provide transfer payments to those in need and therefore has not directly supported the creation of jobs.  A surprising finding was the relative scarcity of jobs related to infrastructure spending, given the fact that the Recovery Act section of the on-line StateStat reporting system indicated several road resurfacing and water and sewer pipe repair projects underway.  The largest infrastructure project, which involves making improvements in Metro, MARC, and light rail stations, reported the creation of 59 construction jobs.  No other projects reported creating or saving more than 30 jobs.

The national press has reported on several problems challenging the credibility of the reported data, including implausible estimates of job creation relative to the amount of stimulus funds spent and internally inconsistent estimates within individual reports.  These problems appear to be quite prevalent within Maryland, as revealed in an examination of data from the top 25 projects in the state in terms of the number of jobs created or retained.  Fully 40 % of these projects reported that no stimulus funds had been spent, which is of course a logical impossibility.  Another 20 % of these projects indicated that an average of less than $5,000 had been spent per worker.  This is highly unlikely, since paying the minimum wage for one full time equivalent employee would have cost at least $3,600, even assuming that labor costs absorbed all the funds, which is unlikely.  Inconsistencies were also apparent from a comparison with the stage of completion data and the results obtained.  Three projects responsible for creating or retaining 135 jobs were apparently completed without any money having been spent, if the data are to be believed.  Conversely, a cursory review of the entire database comprising over 2,000 projects indicated some instances where contractors reported zero jobs, even though they also indicated a receipt of payments.  The fact that the costs per job created varied so widely (ranging from a few hundred dollars to well over $200,000) is an indication of some serious reporting problems.

These problems could lead to both an under-reporting and an over-reporting of jobs created or saved.  Nevertheless, it would not be fair to conclude that the data are worthless.  Given the serious nature of economic dislocations the program was designed to counteract, government officials were more interested in getting money out the door as fast as possible as opposed to designing an elaborate system of internal controls that could be used to delay further payments until all apparent inconsistencies are resolved.    In the interest of greater transparency, a decision was made to accept reports prepared by recipients of funds at face value, without any attempt to scrub the data to eliminate any reporting anomalies, contrary to the way in which most government spending is reported to the public.  In all likelihood, the reporting errors stemmed more from the haste with which the data was collected or honest misunderstandings regarding expectations than from an attempt to deceive.  If the reverse had been the case, recipients would have taken far more care to avoid attracting attention.  The data do provide a comprehensive picture of the wide range of activities supported with recovery funds, as well as a good indication of the order priorities assigned to the competing needs.

$126.8 Million in Federal Recovery Act Funds Await General Assembly Action

Andrea Payne Roethke

Job Opportunities Task Force

As part of the American Recovery and Reinvestment Act, the federal government made a total of $7 billion available to states that make certain reforms to their unemployment insurance (UI) systems.  Through this provision, known as the Unemployment Insurance Modernization Act, Maryland is eligible for up to $126.8 million.  The funds would provide a major boost to the declining state UI trust fund, but the state has not yet acted to claim the incentive.  Maryland must take a few steps to make this happen.  First, the state must adopt an Alternate Base Period (ABP).  ABP provides coverage to workers who are currently denied UI due to an outdated data collection system that ignores recent work.  The state must also adopt at least one more of a slate of reforms, one of which would provide extended benefits to workers who are participating in job training.  For more details, read the new Special Report from the Job Opportunities Task Force - Unemployment Insurance: Rescuing Maryland Workers & Buoying Local Business.

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