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Stimulus Delivering Jobs & Preserving State Education Programs

In his major stimulus speech in January, President Barack Obama stated, "I am confident [the stimulus] will save or create at least three million jobs over the next few years."  In particular, he emphasized that state fiscal relief "will save the public sector jobs of teachers, cops, firefighters and others who provide vital services."

Indeed, initial reports demonstrate that the stimulus is achieving one of its primary objectives:  to save and create jobs.  The effect is most notably evident in preserving funds for public education and reducing the prospect of massive teacher layoffs.  In fact, the White House reports that 250,000 education positions have been created or maintained across the country.  Governors and state officials across the country are lauding the progress of the economic recovery.  For instance, Pennsylvania Gov. Ed Rendell, highlighting new projects and offering insight on the overall recovery, commented "[t]he positive impact on the economy is unmistakable...the direct investments translate into about $780 per household in (Pennsylvania)." Other states are reporting similar numbers of jobs either saved or created with stimulus funds, including:

  • California:  100,000 jobs, 62,000 in education
  • Michigan: 19,498 jobs, 14,483 in education
  • Minnesota:  11,800 jobs, 5,900 in education
  • Missouri8,500 public education jobs
  • New Mexico: 4,128 jobs

Additionally, Recovery.gov compiled data from each state on jobs saved or created through the distribution of federal contracts and finds that, to date, this figure has reached 30,383 nationally.

More information will become available later this month. Since reporting requirements mandate that jobs be reported by hours of employment instead of the actual number of people working, the total economic stimulative effect will not be captured by this data release. Moreover, as the Coalition for an Accountable Recovery (CAR) points out, the data released in early October represents less than half of total funding available. It only covers direct jobs created and will not reveal information about the "ultimate recipient of Recovery Act funds." Nevertheless, as early reporting indicates, the stimulus is fulfilling intended objectives and assisting states through the economic crisis, especially considering the major role it has played in maintaining funding for public education.

Concerns about States' Use of Stimulus Funds for Education:  As positive as these reports are, the Inspector General of the U.S. Department of Education (USDE) released an alert memorandum in September, denoting that certain states are improperly using stimulus funds to replace education budget cuts, which "could adversely impact the achievement of the education reform objectives of the SFSF (State Fiscal Stabilization Fund) program."  The Inspector General notes that as a stipulation of receiving federal stimulus dollars, states are required to preserve education funding at FY2006 levels, a provision intended to allow budgeting flexibility.  But, some states, which planned to allocate a certain level of funding towards education before passage of ARRA, utilized this statute to actually reduce funding and still take advantage of the availability of federal dollars.  For instance, before Congress passed the stimulus, Connecticut intended to allocate $1.889 billion to education in FY2010.  After passage, the state reduced the amount to FY2006 levels, representing a 14.3% reduction in funding.

Looking Ahead:  The Center on Budget and Policy Priorities (CBPP) finds that not only is the stimulus achieving certain economic objectives, but it has also assisted six million Americans from falling below the poverty line this year, including almost two million children and 500,000 seniors. ARRA has had an evident impact and alleviated the worst of the economic downturn.

As of August, less than 25% of total stimulus funds had been spent. Accordingly, as states continue to utilize recovery dollars in the upcoming fiscal year, lawmakers should be mindful that proactive investments in vital areas, such as education, augment job growth and improve overall economic conditions. 

Resources:
CAR - What to Expect on Oct. 15, 2009
CAR - Coalition for an Accountable Recovery Praises Timely Release of Recovery Act Recipient Reports; Criticizes Tools for Understanding Data
Christina D. Romer, Chair, Council of Economic Advisers - Back from the Brink
Council of Economic Advisers - The Economic Impact of the American Recovery and Reinvestment Act of 2009, First Quarterly Report
Council of Economic Advisers - Estimates of Job Creation from the American Recovery and Reinvestment Act of 2009
Domestic Policy Council, Executive Office of the President - Educational Impact of the American Recovery and Reinvestment Act
Economic Policy Institute - Recovery.gov's jobs data: A (very) partial monty
Lawrence Mishel, Economic Policy Institute - The Safety Net and the Recession
Recovery.gov - Most Jobs Created by State (Figures shown are for Federal Contracts only)
States for a Transparent and Accountable Recovery - Overcoming ARRA Perception Problems
USDE - Political Consequences of the Maintenance of Effort Requirements under the American Recovery and Reinvestment Act State Fiscal Stabilization Fund