Fighting for Transparency, Equity, and Accountability in Maryland’s Economic Recovery
JANUARY 2010
Council of Economic Advisors Reports on ARRA Economic Impact
Neil Bergsman
Maryland Budget & Tax Policy Institute
The Recovery Act requires the Council of Economic Advisers to produce quarterly reports estimating the impact of the Act on the economy. The Council released its second report, for the fourth quarter of 2009. Here is the link:
- The report estimates that as of the fourth quarter the Recovery Act had saved or created between 1.5 million and 2.0 million jobs.
- The report estimates that ARRA funding created or saved 36,000 jobs in Maryland.
- It estimates the Act boosted gross domestic product (GDP) by 2-3 percentage points in the second quarter, 3-4 percentage points in the third quarter, and 1 ½ to 3 percentage points in the fourth quarter.
- It includes estimates by the Congressional Budget Office and leading private forecasters on the jobs and GDP impact of the Act. These estimates are broadly consistent with the CEA estimates. According to the report, the Congressional Budget Office estimates between 800,000 and 2.4 million jobs saved or created by the Act as of the fourth quarter.
- It finds that as of the end of December, one-third of Recovery Act funds have been spent or sent to households and businesses as tax cuts. A little over one-half of the funds have been either spent or obligated.
Next round of recipient reporting: January 30
On January 30, the second round of jobs reports by recipients of ARRA grants, contracts, and loans will be posted on www.recovery.gov. Even though they cover only a portion of ARRA spending, these reports have gotten much more press attention than the CEA reports. The recipient reports will cover the fourth quarter of 2009.
In response to recommendations from the Government Accountability Office and to improve the Act’s transparency, the White House has changed the way it is asking recipients to count the job impacts. Rather than subjectively estimating how many jobs were saved or created by direct recipients of ARRA funds, recipients are now asked to count the number of hours funded by the Act and divide these hours by the number of hours in a full-time work schedule for the quarter. The new reports will not be cumulative (the first recipients reports, released in October, were cumulative). Because of these changes, the figures will not be consistent with the figures reported in October and cannot be added to the October numbers to get an accurate, cumulative total.
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Do Recovery Funds Hit Their Targets?
Targeting works best in workforce and safety net programs. Not as well in housing
Joel Yesley, PhD
Maryland Budget and Tax Policy Institute
This article examines patterns in the allocation of ARRA funds among the eight counties in the state with a population exceeding 200,000. The objective is to determine the extent to which these funds are being directed to the counties with the greatest needs as evidenced by measures pertaining to the degree of hardship experienced by their residents in terms of three basic categories: unemployment, income levels, and the affordability of housing. The eight largest counties in terms of population cover a broad spectrum of need, with unemployment ranging from 5.0 % to 10.1 % as of March 2008 (the latest available data) and poverty rates ranging from 4.5 % to nearly 20 % as of 2007. These three categories of assistance were selected based on their relatively high sensitivity to the effects of the recession at least compared with other major broad categories of assistance, such as education, transportation needs, and health.
Programs Examined
The Workforce Investment Act of 1998 was designed to improve the prospects for finding jobs of individuals most in need of governmental assistance. Three programs were created to fulfill this goal:
- Dislocated Worker Program, which provides funds for training and reemployment services for workers who have lost their jobs and are unlikely to return to their previous industry or occupation;
- Adult Program, which provides placement assistance and training services to eligible low-income adults; and
- Youth Program, which is geared toward facilitating the entry of young people (ages 14 to 21) into the workforce, including summer jobs programs, occupational training, and mentoring.
Safety net programs provide cash assistance to the low-income population, often of a temporary nature.
- The largest ARRA-funded program in this category is the Supplemental Nutrition Assistance Program (formerly Food Stamps), which provides for an increase in benefit levels (an average of 13.6 %).
- The Temporary Assistance to Needy Families Program (TANF) provides basic cash assistance of an emergency nature as well as one-time grants to prevent eviction or utility shutoff.
- ARRA funds are being used to supplement Foster Care and Adoption Programs by paying for out-of-home placement of children as well as adoption subsidies.
The major housing-related programs include:
- The Tax Credit Assistance Program (TCAP), The TCAP Program provides gap financing for the Low Income Tax Credit Program, which provides tax credits to individuals and firms that invest in the construction of low-income housing.
- The Weatherization Assistance Program, The Weatherization Assistance Program is aimed at reducing energy costs for low-income households by increasing the energy efficiency of their homes.
- the Homeless Prevention and Rapid Re-housing Program (HPRP), The HPRP Program provides a wide range of services to the homeless or those at risk of becoming so, including housing search and placement, credit repair, and short- and medium-term rental assistance.
- The Community Development Block Grant Program (CDBG). The CDBG Program provides competitive rants to local governments for use in revitalizing neighborhoods, expanding affordable housing, and improving community facilities and services.
Methodology
The funding data were normalized, since the county populations differed widely, by dividing the funds allocated to the various programs by the county population. The measures of need that were used included the unemployment rate for the workforce assistance programs, the poverty rate for the family safety net programs, and the percentage of families in a county spending more than 35 % of their income on housing (including mortgage carrying costs, utilities, taxes, and insurance costs). The 8 counties were divided into two roughly equal categories according to whether they exceeded or fell short of the group norm for each of these measures. Within each of these two categories, the individual county measures were averaged to facilitate inter-group comparisons.
Results
As expected, the data generally revealed a fairly strong correlation between the level of need and the amount of ARRA funds allocated to satisfy it. With respect to the workforce development related programs, counties with relatively high unemployment levels had allocated nearly three times as much funds on a per capita basis compared with the low unemployment counties. The counties showed similar patterns in allocating funds for family safety net programs, although the counties with the highest poverty rates had allocated about 3.7 times more funds than had the counties with lower rates. With regard to spending on housing-related programs, the difference was less marked between the more affordable and less affordable counties but in the expected direction, amounting to a 1.73 factor. In general, the counties with more severe affordable housing problems plan to allocate a higher per capita proportion of their ARRA funds to programs designed to mitigate this problem than do their peers with less expensive housing in relation to the incomes earned by residents.
Although most of this spending is formula-driven according to federal government guidelines, as opposed to discretionary, the states still had some latitude in assigning spending priorities on a geographic basis for some of the programs examined in this analysis. Although all of the Workforce Development related programs greatly limit the amount of state discretion in allocating the funds, the two other general categories of assistance programs had a combination of federal formula-driven and local autonomy in the allocation of funds. For example, the Supplemental Nutrition Assistance Program requires that funds be spent according to detailed federal guidelines, while the TANF Program (the successor to the Aid to Families with Dependent Children Program) affords state a broad degree of latitude in determining eligibility. The housing-related programs generally allow the greatest amount of local autonomy in determining the distribution of awards, although the Weatherization Assistance Program is tightly bound by federal guidelines for determining eligibility. The allocation of funds within the states under the Low Income Tax Credit Program is determined on a competitive basis according to state guidelines. The HPRP Program also appears to afford states considerable flexibility in determining the allocation of funds.
The division of authority between the federal and state governments for establishing priorities in the allocation of funds is not necessarily a reliable indicator of whether or not the funds are going to the neediest parties. States may be better positioned to determine the most deserving population and how to get the greatest “bang for the buck." This knowledge advantage does not guarantee that states will make better public policy decisions, however. States may be more vulnerable to parochial interests in allocating funds and more prone to using subsidies to maximize political support than the more removed federal government.
In order to test these opposing points of view, MBTPI compared the distribution of ARRA housing-related funds among the state’s counties, excluding the categories of assistance that were most subject to federal regulations (Weatherization Program, CDBG Program). Counties were divided into more and less needy categories using the affordability measure discussed above, which was highly and inversely correlated with the incidence of foreclosure-related events in the third quarter of last year, as one would expect.
With the exception of Baltimore City, the counties with more success in providing affordable housing to their residents received well over two times as much housing assistance per capita from ARRA funds than those with more dire housing needs. In particular, Harford and Ann Arundel Counties in the less needy (i.e., more affordable) category received considerably higher funding than Montgomery and Prince Georges Counties relative to their populations. A big factor behind this counter-intuitive finding is the much greater ability of these more successful counties to attract TCAP and Section 1602 ARRA funds, which are related to the presence of Low Income Tax Credit Projects that are having trouble in attracting capital. Ann Arundel actually has been allocated more than three-quarters of Baltimore City’s total for this purpose. One should not jump to the conclusion that this situation reflects the heavy influence of parochial considerations in determining which projects are to be rescued, however. It is possible that the assisted projects in Harford and Ann Arundel Counties were initiated more recently than those in the higher need category, making them more vulnerable to the effects of the current recession. More research will be needed to resolve this issue.
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ARRA RACE TO THE TOP UPDATE
JaCina Stantion, ACLU-MD
Mary Cary, Maryland State Department of Education’s Assistant Superintendent for Leadership Development recently spoke to education advocates about the Maryland State Department of Education’s current position on the federal Race to the Top (RTTT) grant.
Maryland was planning to apply for Race to the Top in Round 1, (applications were due this month,) until the Gates Foundation turned down their application for a grant to hire grant-writing consultants. The Gates Foundation provided $250,000 to fund a team of consultants for certain states. MSDE was told that Maryland was denied because it’s the teacher tenure law would make it unlikely to be competitive for a RTTT grant. Maryland is one of only eight states that award tenure in less than three years, according to Carey.
Cary also stated that Maryland’s charter law places Maryland at a slight disadvantage; although there is no current cap on the number of charter schools , certain parts of the law are seen as less supportive of charters. Several pieces of legislation will be proposed in the General Assembly session to address these issues.
Maryland is currently in the second funding tier, which could bring an additional $150-$250 million dollars in education funding through Race to the Top.
This funding would be targeted toward the lowest performing districts and toward developing a comprehensive reform system for improving those schools. The Race to the Top application for the second round is due in June 1, 2010 with funds to be disseminated by September 2010.
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Who we are: Recovery Watch Maryland is an alliance formed to monitor the spending of federal stimulus dollars in the state, promote equity, and ensure transparency. The founding organizations of the alliance – CASA de Maryland, Job Opportunities Task Force, Maryland Budget and Tax Policy Institute, Progressive Maryland Education Fund, and the Safe & Sound Campaign – will fight to ensure that the recovery funds are used to help those most impacted by the recession, including disadvantaged workers, low-income communities, and people of color, among others. The alliance will work to ensure that the City of Baltimore receives its fair share of recovery dollars since it is responsible for a disproportionate share of the state’s most vulnerable populations. Recovery Watch M aryland is made possible through the support of the Open Society Institute-Baltimore.