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August 5, 2010

Economist: Stimulus money saved state of Alabama from devastation

Source:  http://blog.al.com/breaking/2010/08/economist_stimulus_money_saved.html

MONTGOMERY, AL - Alabama was allocated more than $3 billion in federal stimulus money, but only $2.22 billion has been spent, according to a new report.

Under the stimulus program, states did not receive lump sum payments, but are getting money through draw-downs, reimbursements or invoices, according to state Finance Director Bill Newton, whose department is overseeing the program.

The most visible evidence of the stimulus program to many Alabamians may be road and bridge projects, the appliance rebate and weatherization programs or the thousands of school teachers jobs that have been saved.

"This is a $3 billion to $4 billion addition over a 24-month period of time, and that's a relatively significant percentage (of overall state funds)," Newton said. "It has assisted the state departments in performing their functions in an economic downturn. That was the whole motive."

While Alabama's unemployment rate in July was 10.3 percent, the stimulus package has been reported as saving and/or creating thousands of jobs. Estimates vary wide - from about 9,000 to more than 17,000.

Newton says it's been difficult to project the number of jobs affected by the program because of changing criteria.

"It changed during the process - what we were reporting per their requirements," he said. "We're not required to keep a total, only a total for quarters."

Dr. Craig Pouncey, deputy state school superintendent, said the jobs of more than 3,200 teachers and support staff were saved in fiscal 2010-11 because of an injection of $2.1 billion of stimulus funds in the 2010-11 education budgets.

The stimulus also allowed the state Department of Education to offer $180 million in tax-free bonds for school construction. Madison City Schools took advantage of those bonds, and Limestone County is also eligible.

Dr. Keivan Deravi, an economist at Auburn University Montgomery, says state government would have been devastated without the federal assistance.

"Had we not had this in the budget, the outcome would have been absolutely dreadful," he said. "The impact on the education side would have been unimaginable, to be honest with you."

The American Recovery and Reinvestment Act will eventually send an estimated $3.57 billion to Alabama over the life of the program.

The recession has caused spending for elementary-secondary education to decline from $6.69 billion in 2008 to $5.32 billion in 2010.

Pouncey said his greatest concerns are for 2013 when the stimulus funds are gone.

"The real puzzle to put together is how to get ourselves out of this," he said. "To get back to the 2009 level of appropriation, you would have to have a 17.5 percent growth in tax revenues."

But Deravi says it will be at least 2012 before there will be any improvements in Alabama's economy, mostly because it's tied too heavily to manufacturing and the auto industry.

"I don't know why anyone wants to be the next governor," he said. "Alabama is going to be in major trouble unless the economy takes a major leap up, and most people don't believe that's going to happen."

Deravi believes Congress should approve a second stimulus program to assist the states, but acknowledges that won't happen.

The top 10 programs in Alabama that have spent stimulus money through the past quarter are Medicaid, $631.04 million; Department of Industrial Relations, $283 million; Alabama Department of Transportation, $272 million; food stamp assistance, $182.8 million; government services through the governor's office, $118.58 million; Title I grants for education, $73.21 million; disabilities act through education, $65.11 million; human resources, $30.98 million and weatherization programs, $16.83 million.

The Alabama Medicaid Program has spent all the grant money it has received because the government changed the federal-state match from 70-30 to 80-20, Newton said.

The Alabama DOT has spent $272 million of the $515.69 million it was allocated for highway infrastructure, said DOT spokesman Tony Harris.

Newton said DOT has been working as fast as it can in signing contracts on highway and bridge work, but he said it must comply with federal guidelines.

"Even if they're doing a good job of getting contracts, the quick pace of spending is still slower than Medicaid."

Of the five top highway projects awarded by DOT with stimulus funds, Harris said the fourth largest was in Huntsville for $17.27 million for paving, lighting and retaining walls on Memorial Parkway from the north side of Oakwood Avenue to the north side of Sparkman Drive.