Federal Stimulus Funds for Local Projects Not Yet Spent in Most Cases

Seven months into the “recovery and reinvestment” promised by the federal stimulus act, most of Ventura County’s checks are still in the mail.

Nationwide, only 16 percent of the $581 billion in spending in the act has actually been spent, according to a study by the investigative journalism nonprofit ProPublica. There’s no comparable figure available for Ventura County — and there won’t be until after the Oct. 10 deadline for local agencies to report what they’ve done with stimulus money — but anecdotal evidence suggests that many of the county’s stimulus grants haven’t begun creating any jobs.

The city of Thousand Oaks, for example, has been awarded about $9.25 million for four projects and hasn’t spent a dollar of it yet. Other agencies have made more progress; the county of Ventura has been awarded about $35 million and has put $30 million of it to work already. The county’s 21 school districts and county Office of Education report using one $56.7 million grant partly to save a total of 434 jobs.

But across the county, stimulus grants are still rolling in, and many of the ones that were awarded months ago haven’t been spent.  Some economists say the process is moving too slowly to be considered “stimulus” at all.

When the American Recovery and Reinvestment Act was signed in February, it was meant to inject a shot of money into the economy to help jolt it out of recession. The latest statistics indicate the nation could already be coming out of the recession, which means billions of dollars in stimulus spending will come too late to do much good, said Mark Schniepp, executive director of the California Economic Forecast in Santa Barbara.

To work as a recession-fighting measure, government spending must be “timely, targeted and temporary,” Schniepp said. He believes only about $70 billion out of the stimulus package’s total of $787 billion in spending and tax cuts met those requirements.

“If it’s going out to bid now, it’s not timely,” Schniepp said. “We needed timely spending, and we don’t need it now. I’m thinking they should probably cancel some of that federal stimulus because we’re coming out of the recession.”

Not every economist shares Schniepp’s belief that the economy has bottomed out. Bill Watkins, executive director of the Center for Economic Research and Forecasting at California Lutheran University, said he thinks America is in for a “w-shaped” recovery: a small improvement followed by another downturn. The real recovery, he said, won’t come until sometime in 2011.

Watkins isn’t sold on the idea of stimulus at all. Stimulus spending is much like a one-time tax rebate, he said; everyone knows it’s temporary, so it doesn’t have a lasting effect on anyone’s economic behavior.

But following the logic of the stimulus advocates, Watkins said, means that the money should have been spent as quickly as possible.

“What they were looking for is sort of a shock, where a whole bunch of money dumps into the economy at one time,” he said. “The longer it dribbles out, the less effective it would be.”

U.S. Rep. Lois Capps, D-Santa Barbara, voted for the stimulus act and frequently touts its effects on her district, which includes parts of Ventura, Santa Barbara and San Luis Obispo counties. She defended the pace of the stimulus, noting that it is on pace to match the act’s goal of spending 75 percent of the money in the first 18 months.

“It can’t come fast enough in the sense that there’s tremendous need, but we still are on target,” she said. “It takes time. These are precious tax dollars and we don’t want to waste them. We have a delicate balance of the urgency of getting people back to work and making sure the projects are worthwhile.”

A recent report by the White House Council of Economic Advisers concludes that the stimulus already has “changed the trajectory of the economy” for the better. The country has about 1 million more jobs than it would have had without the stimulus, the report says.

But job creation is notoriously tricky to measure, and the president’s advisers note that their estimates are “subject to considerable uncertainty.” The first solid estimates of job creation won’t come until after the data that stimulus recipients turn in on Oct. 10 has been analyzed, and even that will be inexact, the council’s report says.

U.S. Rep Elton Gallegly, R-Simi Valley, represents most of Ventura County and voted against the stimulus bill. In an e-mailed statement, he said he thinks the bill was larded with too much spending on social services, like the $1.9 million recently awarded to Ventura County agencies to help the homeless and near-homeless stay off the streets.

“While the goal may be laudable, it will not create jobs,” Gallegly said.

Local officials say the pace of the stimulus is actually faster than that of the typical government funding process. The stimulus act allocated money in multibillion-dollar chunks to various purposes and assigned state or federal agencies to make the specific allocations using formulas or competitive grants. Once the money is awarded to a local agency, it must usually open a competitive bidding process, which adds more time.

“It’s very similar to the process we go through for any federal money, such as the federal highway bills, but the approvals are happening faster than normal,” said Jay Spurgin, deputy public works director at the city of Thousand Oaks. “At Caltrans, when there’s a regular project and a stimulus project on somebody’s desk, they do the stimulus project first.”

Road work was one of the first categories of spending funded by the stimulus, and paving and other road projects are now among the first that are wrapping up. Other early stimulus programs include infrastructure projects that were “shovel-ready” — in other words, work that was already in the planning stages when the act passed.

One of those projects was a sewage plant being built by the county in Piru. The stimulus package provided an $8.55 million grant, and the county will pay for the rest of the project with a low-interest $5.55 million loan from the state.

Because the project was in the works before the stimulus, it started almost immediately. The grant was awarded in February and work started March 1, said Reddy Pakala, the director of the county Water and Sanitation Department.

It didn’t create any jobs, since the project would have happened with or without the stimulus. But it did save the people of Piru millions of dollars over the 30-year term of the loan.

Sewage bills in Piru will stay at around $57 a month, Pakala said. Without the grant and the loan, they probably would have risen above $100.

If Schniepp is right and the recession is ending, then the economy will recover with or without the hundreds of billions that hasn’t been spent yet. Stimulus spending isn’t free — it will bring huge deficits and perhaps the risk of inflation down the line — so if it’s not necessary for recovery, it should be re-evaluated, he said.   He holds little hope that it will be.  “Politically speaking, they’re not going to cancel the projects,” he said.

Capps pointed out that recovery was only one facet of the stimulus. It also attempts to rebuild much of the country’s aging infrastructure and direct it toward a greener future.

“Maybe we won’t have to spend all of the money,” she said. “I won’t say we should or we shouldn’t, but we don’t want to get ourselves back into what created this recession. We want to get out of the recession and into a growth phase, not a bubble, but a real growth phase, where we can be the leaders in the world in green technology.”

The stimulus did have an important psychological benefit, Schniepp said. The fact that the government was taking large and visible action helped boost confidence in the economy.

But the only parts of the act that had a clear economic benefit were the early “shovel-ready” projects, the tax credit for homebuyers, and the Cash for Clunkers program, he said.

Watkins had a similar opinion, calling the overall stimulus effect “small and temporary.”

In his view, the nation is in for a rough ride as the economy dips into recession again next year. California will recover even more slowly than the rest of the nation and, as usual, the job market will be the last thing to heal.

“People are still losing their jobs — the number of unemployed over the past six months is huge — and we don’t think the holiday season is going to be good,” Watkins said. “We think California is going to be weak for quite awhile. It’s looking pretty rough for the long term.”

Source: Ventura County Star & WIH Resource Group

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