Tracking the recession: Stimulus holds states accountable

by Stephen Fehr
published March 3, 2009
in Stateline.org

Missouri scored a public relations coup when officials announced that the state was the first to begin work on a transportation project financed from the $787 billion economic stimulus package on the same day that President Obama signed the bill into law Feb. 17.

The $8.5 million project, replacing the Osage River Bridge near the Lake of the Ozarks, was relatively small but hugely symbolic in a state that also claimed the first federal interstate highway project in 1956.

Beyond the PR triumph, the Missouri bridge replacement is the first to test Obama’s edict that states must show how many jobs each project creates and how the money was spent. The buzz word for this is transparency. As U.S. Transportation Secretary Ray LaHood wrote in his blog last week, “We will have transparency, we will have accountability and we’re going to do things by the book.”

Missouri can’t say how many jobs the Osage River Bridge will create — not yet, anyway. A state Department of Transportation spokeswoman referred a reporter to the contractor, Oldcastle Materials, Inc. of Atlanta, which said it would be mid-March before the company would hire new help because the two-year project is just starting.

Photo courtesy of the Missouri Department of Transportation
Nixon speaks to some of the workers on the bridge project. The project is expected to create or save about 30 jobs.

But wait, isn’t that a photo of Gov. Jay Nixon (D) talking to workers apparently connected to the project at the Feb. 17 news conference announcing the project was under way?

“I was talking to a work crew from Kansas City,” Nixon said in an interview. “I went over and shook a guy’s hand, an electrician or an iron worker. I said, ”˜Did you get a pay check last week?’ He said no. I said, ”˜Are you going to get one this week?’” He said yeah. That’s what the stimulus is all about.”

It turns out Nixon was wrong. The contractor said the worker did not get paid the previous week because of a mix-up with the company payroll department over changing benefit information. “It wasn’t because he was unemployed,” said a spokeswoman for the Missouri Department of Transportation. He was part of a work crew already employed by the contractor.

As the Missouri example shows, states will have to be careful in identifying jobs created by the stimulus plan. The unprecedented transparency rules contained in the federal economic recovery legislation will have ramifications not only on the centerpiece of Obama’s plan to rescue the economy, but on future federal and state programs in which strict job reporting requirements are involved.

Usually, states receiving federal money are required to account for the spending in various ways, depending on the agency and the program. Some federal agencies ask for results; the school lunch program wants to know how many children are being served lunches, for example. A closer review of spending, especially of contractors, does not happen routinely, because states do not always collect detailed information themselves. No one has asked states before how many jobs were created by a transportation project.

Under the stimulus legislation, states will have to account for every job created because that’s the whole point. Obama is hoping the stimulus will create or save more than over three million jobs, and he wants the documentation to back that up. States will also be required to detail how they spent their federal stimulus money and how long it took to complete the project. All the information will be posted on a federal Web site; several states also are creating their own Web sites. That’s all new, too.

“State leaders face real change, as promised by President Obama. States will need to collect data from agencies, from contractors, from subcontractors, that they have never collected before,” said Nathan Newman, interim executive director of the Progressive States Network, a research group based in New York whose members include many state policymakers.

The network is one of many groups closely following the transparency effort on the federal level and pushing for permanent changes in reporting requirements in state governments. Minnesota, Rhode Island and Illinois already collect job creation information from companies that get state money; Minnesota asks companies to list the hourly wage and the cost of health insurance provided.

Separate from the stimulus requirements, Oregon lawmakers are considering a far-reaching bill asking companies to report to the state the number of employees on each contract, hours worked and compensation.

Many state officials are embracing the movement towards openness, including Iowa, which was not far behind Missouri in launching the first projects from the stimulus bill.

“I think transparency and accountability are critically important to make sure that the general public and Iowans have confidence that we’re spending this money wisely, that we’re making important investments, that there’s not waste, that these projects make sense,” Iowa Gov. Chet Culver (D) said in an interview.

Culver acknowledged, however, mistakes will be made. “I’m optimistic, but it’ll be challenging to figure out all of the federal requirements and to make sure that we comply with those rules and provide accountability and transparency,” he said.

Newman was reluctant to criticize Missouri for the initial mix-up about the first jobs created from the stimulus, saying “there will be an adjustment period” for states. He stressed that the end result could save states money “as poorly performing contractors are eliminated and projects that result in real job creation are identified.”

Eventually, the Osage River Bridge project will add about 20 jobs to Obama’s 3 million goal. Missouri officials say in all, the state hopes to create about 14,000 jobs just from its $787 million in stimulus money for infrastructure projects.

“We want to reform the economy here,” Nixon said. “When this thing is over, if we’re in the same place we were before, we’ve missed a great opportunity.”