When Stimulus Funds Don’t Stimulate

NPR’s Morning Edition had a story about the State of Michigan using part of its American Recovery and Reinvestment Act (ARRA) stimulus funds to pay what amounted to operating expenses of the state government; pretty much to backfill spending cuts it had made.

In effect, the federal program that was created to stimulate economic activity through the creation and retention of jobs will have some of those funds diverted to pay state government bills.

I am not signaling out Michigan. NPR did. However, the news report stated 43 states are using stimulus money to do the same. This has some serious implications that touch on a number of issues ranging from gauging the success or failure of the $787 billion federal program, to how much say citizens have about how the money is spent if it’s not to help protect or create their jobs. There is also the issue of accountability which President Obama stated upfront must be a key component throughout the process. States and local governments are accountable for how they spend their stimulus money. Yet, are they being held accountable in using the funds in this method?
Lansing Mayor Virg Bernero said what Michigan is doing amounts to an “Anti-Stimulus Package” since funds will not be used to help the economy at the state or local levels.

While there is still debate on what defines success of the ARRA, the general idea emerging is around the quality and quantity of jobs to be created or saved through the expended funds. For example, if the State of “X” spent “$Y” amount of stimulus dollars to create/retain “#Z” jobs, then we could determine the cost to create those jobs and then use an econometric model to measure their economic impact to the local community and to the state thereby identifying some ROI.

But if the State of “X” has diverted, say 20% of stimulus money to pay for operations, then less funds would be available to stimulate jobs resulting in a higher cost percentage to create them with a lower number created and less economic impact (so my theory goes, because the base value of available funds decreased from 100% to 80%).
If this becomes a standard practice, then after the funds are spent and the analysis of the ARRA begins, would the Administration be holding the bag for (theoretically) the high cost/low yield when it came to stimulating the economy? Or would the buck stop at the state capitals? If so, would the feds then be open to criticism for lack of oversight to ensure the money went to stimulate jobs and not pay bills? What role, then does the Recovery Accountability and Transparency Board have as an overseer in this case?

And then there are the citizens whose money is being used. Where do they fall in this game of checkers and what say have they in the way the funds are spent? Is this government transparency? I suppose it is. Thanks, in part to the news media which reports this. However, it’s no secret. Perhaps what is more of an issue here is that of fiscal responsibility. And that, arguably, was an issue even before the ARRA existed. What are your ideas about how states are using stimulus money?

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Alice M. Fisher

I just have to add from my wee little person perspective.
If we had given every American the billions and billions and billions of dollars instead,
then people would spend money, pay off debts, stave off foreclosures. In short, a reverse process of how it is currently being done. We are living on a layer of sand.

It is the families, the homeless, the children and the everyday working people who need the immediate and substantive help. And, not just a measly $600.00/$1,200 that has to then be claimed on income taxes as an increase in income….and thereafter puts ever citizen into a higher tax bracket, and ultimately each individual then is charged more income tax in a higher tax bracket, in the end giving them less back money with their Federal income tax returns. In the end it is generating more tax revenue for?

The people need the money. If the people have the money, then they will spend it by paying off credit card debt, buying food, buying or keeping their houses, buying clothes for their kids and school lunches.
This will stimulate the economy.

We can start with the homeless families first and work our way up with the millions of unemployed next.

Here we are rescuing the GIANT Mohemaths by putting kazillions of dollars into numerous gigantic black holes. We do not need more Fiats, or more Cryslers, or Dodge Trucks or other cars, or more banks.
Do we? Really? I drive an 11 year old vehicle. It’s paid for. I do not think I am going to be convinced to buy a new one, not right now. Why would I go into debt with so much fiscal risk and in so much more debt during such economic instability? Why do we have this psychological mind set that we have to have a brand spanking new car? Do we? Really?

I would like to see us tackling the basics, quiet frankly, and at the ground level.

I am not an economist.

But, I do know we need food, we need clothes on our backs and we need to sustain and keep roofs over our peoples heads. We really need to get down into the street level of the towns with the hard working people of America.

This is many peoples reality.
Those unemployment checks of $1,200 a month will not, and do not even pay the rent or mortgage. Nor does it cover Cobra health insurance, the other bills, nor food<—-critical to note.

View more. Why? My humble perspective is different.
This is where we need to be fixing it!.


Tent Cities in the US span from CA, Fl, WA. You name it. Its out there and growing.


Transperently put the money into the people’s hands and don’t punish them by taxing it and making them pay more tax for it later at tax time.

And, (with some caution) please try hard to not pass judgement of those begging at intersections by rolling up your windows, turning up your radios and pretending you do not see them while you sit there waiting at a light. Do something. And, if you do not want to give money, give food, give vouchers.
That is Transparency.

I would like ARRA to put the money directly in peoples hands.
My 02 cents worth, with personal thoughts from the ground up on how the states
should be using the money.

Running and hiding now for the rest of the day for being so vocal and bold.

Daniel Bevarly


Thank you for your thoughtful response. Don’t know why you think you should run and hide. You speak about what’s on the minds of many, many citizens. And your comments are transparent and have real meaning. That comes from personal and professional experience, I am sure. I viewed your profile and I’d say you are most qualified to present this argument and POV. Thanks for enhancing my blog and putting some reality, or practice, to the theory. Dan


Alice- I REALLY enjoyed reading your perspective. That’s definitely an interesting and overlooked perspective on stimulating the economy! Thanks!

Melissa Merrell

I also thought this was a very interesting story when I heard it this morning. I had trouble though that it seems to gloss over several important details of the ARRA legislation. ARRA laid out many different types of funding available to state and local governments. One, the State Fiscal Stabilization Fund includes a block grant designed to prevent state budget cuts, which seems to be the first part of the story.

Here is a link to the Department of Education site (which is overseeing the SFSF) that talks about the funding and here is an interesting report from the Iowa Policy Project that lays out how some of the different streams of aid to state and local governments could be used in Iowa.

The bill also increased funding for several existing grant programs to state and local governments, such as the Byrne Justice Assitance Grants (JAG), that state and local governments can use for law enforcement projects. I’d be interested to know if Lansing will receive an increase in JAG funds and use those funds (instead of state funds) to hire the more officers?

I sympathize with the Lansing Mayor, but state revenues have been impacted by the downturn like everyone else. I wonder if the mayor would rather have the state raise taxes? If, even counting the stimulus funds specfically for state budget issues, there still isn’t enough revenue to balance the budget, the state has to either make cuts or raise taxes.

I’d be interested to hear from some state budget folks on how they are intergrating all the new federal streams of funds into their budget process.

Alice M. Fisher

Thank you Marie. Its’s so deep. How do we get down through policy and budgets?
And, I supportyour last statement Melissa on <<I’d be interested to hear from some state budget folks on how they are intergrating all the new federal streams of funds into their budget process’>>. Thank you.

Daniel Bevarly

Marie – Thank you for commenting. I’ll bet your agency has been struggling throughout this fiscal crises. Human Services is usually an underfunded agency even in times of abundance.

Melissa – Great contribution and assessment. I missed your links, can you (re)post them in a response? Thanks, Dan

Melissa Merrell

oh, I apologize, I was sure I had hyperlinked them.

Here are the direct links:


State Fiscal Stimulus Funds


Alice, your question is so important and I think to answer that, another question would be: How do we get a systemic picture, not just a small slice?

Melissa Merrell

The last paragraph should have been:

Alice, your question about getting down through policy and budgets is very important. And I would add, “How do you make something as big, as complicated, as spread over hundreds of programs, and as interconnected with thousands of government entities, as the ARRA program is – – transparent? How do we get a systemic picture, not just a small slice like is offered in the NPR story?

Alice M. Fisher

I really really think we are on to something not only from the top end so to speak but bottom up as well
Maybe it needs its own social network at the top?

Daniel Bevarly

Alice – it is certainly plausible. It is one of the important ingredients missing throughout the Recovery.gov-like Web sites at all govt levels. I am referring to “dialog.” Seems the definition of “transparency” that is a part of the same breath these days when talking about the ARRA begins and ends with “disclosure.” That’s not enough. In government transparency, w/o dialog as part of the program limits the role for citizens, stakeholders and media to spectators. Instead, we need to have the opportunity to be spectators.

As for a social network at the top, I believe it is at the bottom: at the local level where the funds find the final resting place and point of impact. That’s where role of participant has its most value IMO.