Recovery Act
States' and Localities' Current and Planned Uses of Funds While Facing Fiscal Stresses Gao ID: GAO-09-829 July 8, 2009This report, the second in response to a mandate under the American Recovery and Reinvestment Act of 2009 (Recovery Act), addresses the following objectives: (1) selected states' and localities' uses of Recovery Act funds, (2) the approaches taken by the selected states and localities to ensure accountability for Recovery Act funds, and (3) states' plans to evaluate the impact of the Recovery Act funds they received. GAO's work for this report is focused on 16 states and certain localities in those jurisdictions as well as the District of Columbia--representing about 65 percent of the U.S. population and two-thirds of the intergovernmental federal assistance available. GAO collected documents and interviewed state and local officials. GAO analyzed federal agency guidance and spoke with Office of Management and Budget (OMB) officials and with relevant program officials at the Centers for Medicare and Medicaid Services (CMS), and the U.S. Departments of Education, Energy, Housing and Urban Development (HUD), Justice, Labor, and Transportation (DOT).
Across the United States, as of June 19, 2009, Treasury had outlayed about $29 billion of the estimated $49 billion in Recovery Act funds projected for use in states and localities in fiscal year 2009. More than 90 percent of the $29 billion in federal outlays has been provided through the increased Medicaid Federal Medical Assistance Percentage (FMAP) and the State Fiscal Stabilization Fund (SFSF) administered by the Department of Education. GAO's work focused on nine federal programs that are estimated to account for approximately 87 percent of federal Recovery Act outlays in fiscal year 2009 for programs administered by states and localities. Increased Medicaid FMAP Funding All 16 states and the District have drawn down increased Medicaid FMAP grant awards of just over $15 billion for October 1, 2008, through June 29, 2009, which amounted to almost 86 percent of funds available. Medicaid enrollment increased for most of the selected states and the District, and several states noted that the increased FMAP funds were critical in their efforts to maintain coverage at current levels. States and the District reported they are planning to use the increased federal funds to cover their increased Medicaid caseload and to maintain current benefits and eligibility levels. Due to the increased federal share of Medicaid funding, most state officials also said they would use freed-up state funds to help cope with fiscal stresses. Highway Infrastructure Investment As of June 25, DOT had obligated about $9.2 billion for almost 2,600 highway infrastructure and other eligible projects in the 16 states and the District and had reimbursed about $96.4 million. Across the nation, almost half of the obligations have been for pavement improvement projects because they did not require extensive environmental clearances, were quick to design, obligate and bid on, could employ people quickly, and could be completed within 3 years. State Fiscal Stabilization Fund As of June 30, 2009, of the 16 states and the District, only Texas had not submitted an SFSF application. Pennsylvania recently submitted an application but had not yet received funding. The remaining 14 states and the District had been awarded a total of about $17 billion in initial funding from Education--of which about $4.3 billion has been drawn down. School districts said that they would use SFSF funds to maintain current levels of education funding, particularly for retaining staff and current education programs. They also said that SFSF funds would help offset state budget cuts. Accountability States have implemented various internal control programs; however, federal Single Audit guidance and reporting does not fully address Recovery Act risk. The Single Audit reporting deadline is too late to provide audit results in time for the audited entity to take action on deficiencies noted in Recovery Act programs. Moreover, current guidance does not achieve the level of accountability needed to effectively respond to Recovery Act risks. Finally, state auditors need additional flexibility and funding to undertake the added Single Audit responsibilities under the Recovery Act. Impact Direct recipients of Recovery Act funds, including states and localities, are expected to report quarterly on a number of measures, including the use of funds and estimates of the number of jobs created and the number of jobs retained. The first of these reports is due in October 2009. OMB--in consultation with a broad range of stakeholders--issued additional implementing guidance for recipient reporting on June 22, 2009, that clarifies some requirements and establishes a central reporting framework.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-829, Recovery Act: States' and Localities' Current and Planned Uses of Funds While Facing Fiscal Stresses
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
July 2009:
Recovery Act:
States' and Localities' Current and Planned Uses of Funds While Facing
Fiscal Stresses:
GAO-09-829:
GAO Highlights:
Highlights of GAO-09-831T a testimony before the Committee on Oversight
and Government Reform, House of Representatives.
Why GAO Did This Study:
This testimony is based on a GAO report being released today”the second
in response to a mandate under the American Recovery and Reinvestment
Act of 2009 (Recovery Act). The report addresses: (1) selected states‘
and localities‘ uses of Recovery Act funds, (2) the approaches taken by
the selected states and localities to ensure accountability for
Recovery Act funds, and (3) states‘ plans to evaluate the impact of
Recovery Act funds. GAO‘s work for the report is focused on 16 states
and certain localities in those jurisdictions as well as the District
of Columbia”representing about 65 percent of the U.S. population and
two-thirds of the intergovernmental federal assistance available. GAO
collected documents and interviewed state and local officials. GAO
analyzed federal agency guidance and spoke with Office of Management
and Budget (OMB) officials and with program officials at the Centers
for Medicare and Medicaid Services, and the Departments of Education,
Energy, Housing and Urban Development, Justice, Labor, and
Transportation.
What GAO Found:
Across the United States, as of June 19, 2009, Treasury had outlayed
about $29 billion of the estimated $49 billion in Recovery Act funds
projected for use in states and localities in fiscal year 2009. More
than 90 percent of the $29 billion in federal outlays has been provided
through the increased Medicaid Federal Medical Assistance Percentage
(FMAP) and the State Fiscal Stabilization Fund (SFSF) administered by
the Department of Education.
GAO‘s work focused on nine federal programs that are estimated to
account for approximately 87 percent of federal Recovery Act outlays in
fiscal year 2009 for programs administered by states and localities.
The following figure shows the distribution by program of anticipated
federal Recovery Act spending in fiscal year 2009 for the nine programs
discussed in this report.
Figure: Programs in July Review, Estimated Federal Recovery Act Outlays
to States and Localities in Fiscal Year 2009 as a Share of Total:
[Refer to PDF for image]
Medicaid: 63%;
State Fiscal Stabilization Fund: 13%; Highways: 6%;
Other Selected programs: 5%:
* IDEA, Parts B and C, 1%;
* WIA Youth Programs, 1%;
* ESEA, Title i, Part A: 1%;
* Less than 1%:
- Byrne Grants;
- Weatherization Assistance Program;
- Public Housing Capital Fund;
Other programs not in study: 13%.
Source: GAO analysis of data from CBO and Federal Fund Information for
States.
[End of figure]
Increased Medicaid FMAP Funding:
All 16 states and the District have drawn down increased Medicaid FMAP
grant awards of just over $15 billion for October 1, 2008, through June
29, 2009, which amounted to almost 86 percent of funds available.
Medicaid enrollment increased for most of the selected states and the
District, and several states noted that the increased FMAP funds were
critical in their efforts to maintain coverage at current levels.
States and the District reported they are planning to use the increased
federal funds to cover their increased Medicaid caseload and to
maintain current benefits and eligibility levels. Due to the increased
federal share of Medicaid funding, most state officials also said they
would use freed-up state funds to help cope with fiscal stresses.
Highway Infrastructure Investment:
As of June 25, the Department of Transportation (DOT) had obligated
about $9.2 billion for almost 2,600 highway infrastructure and other
eligible projects in the 16 states and the District and had reimbursed
about $96.4 million. Across the nation, almost half of the obligations
have been for pavement improvement projects because they did not
require extensive environmental clearances, were quick to design,
obligate and bid on, could employ people quickly, and could be
completed within 3 years. Officials from most states considered project
readiness, including the 3-year completion requirement, when making
project selections and only later identified to what extent these
projects fulfilled the economically distressed area requirement. We
found substantial variation in how states identified economically
distressed areas and how they prioritized project selection for these
areas.
State Fiscal Stabilization Fund:
As of June 30, 2009, of the 16 states and the District, only Texas had
not submitted an SFSF application. Pennsylvania recently submitted an
application but had not yet received funding. The remaining 14 states
and the District have been awarded a total of about $17 billion in
initial funding from Education”of which about $4.3 billion has been
drawn down. School districts said they would use SFSF funds to maintain
current levels of education funding, particularly for retaining staff
and current education programs. They also told us that SFSF funds would
help offset state budget cuts.
Overall, states reported using Recovery Act funds to stabilize state
budgets and to cope with fiscal stresses. The funds helped them
maintain staffing for existing programs and minimize or avoid tax
increases as well as reductions in services.
Accountability:
States have implemented various internal control programs; however,
federal Single Audit guidance and reporting does not fully address
Recovery Act risk. The Single Audit reporting deadline is too late to
provide audit results in time for the audited entity to take action on
deficiencies noted in Recovery Act programs. Moreover, current guidance
does not achieve the level of accountability needed to effectively
respond to Recovery Act risks. Finally, state auditors need additional
flexibility and funding to undertake the added Single Audit
responsibilities under the Recovery Act.
Impact:
Direct recipients of Recovery Act funds, including states and
localities, are expected to report quarterly on a number of measures,
including the use of funds and estimates of the number of jobs created
and retained. The first of these reports is due in October 2009. OMB”in
consultation with a range of stakeholders”issued additional
implementing guidance for recipient reporting on June 22, 2009, that
clarifies some requirements and establishes a central reporting
framework.
In addition to employment-related reporting, OMB requires reporting on
the use of funds by recipients and nonfederal subrecipients receiving
Recovery Act funds. The tracking of funds is consistent with the
Federal Funding Accountability and Transparency Act (FFATA). Like the
Recovery Act, FFATA requires a publicly available Web site”[hyperlink,
http://www.USAspending.gov]”to report financial information about
entities awarded federal funds. Yet, significant questions have been
raised about the reliability of the data on www.USAspending.gov,
primarily because what is reported by the prime recipients is dependent
on the unknown data quality and reporting capabilities of
subrecipients.
GAO‘s Recommendations:
Accountability and Transparency:
To leverage Single Audits as an effective oversight tool for Recovery
Act programs, the Director of OMB should:
* develop requirements for reporting on internal controls during 2009
before significant Recovery Act expenditures occur, as well as for
ongoing reporting after the initial report;
* provide more direct focus on Recovery Act programs through the Single
Audit to help ensure that smaller programs with high risk have audit
coverage in the area of internal controls and compliance;
* evaluate options for providing relief related to audit requirements
for low-risk programs to balance new audit responsibilities associated
with the Recovery Act; and;
* develop mechanisms to help fund the additional Single Audit costs and
efforts for auditing Recovery Act programs.
Matter for Congressional Consideration: Congress should consider a
mechanism to help fund the additional Single Audit costs and efforts
for auditing Recovery Act programs.
Reporting on Impact:
The Director of OMB should work with federal agencies to provide
recipients with examples of the application of OMB‘s guidance on
recipient reporting of jobs created and retained. In addition, the
Director of OMB should work with agencies to clarify what new or
existing program performance measures are needed to assess the impact
of Recovery Act funding.
Communications and Guidance:
To strengthen the effort to track funds and their uses, the Director of
OMB should (1) ensure more direct communication with key state
officials, (2) provide a long range time line on issuing federal
guidance, (3) clarify what constitutes appropriate quality control and
reconciliation by prime recipients, and (4) specify who should best
provide formal certification and approval of the data reported.
The Secretary of Transportation should develop clear guidance on
identifying and giving priority to economically distressed areas that
are in accordance with the requirements of the Recovery Act and the
Public Works and Economic Development Act of 1965, as amended, and more
consistent procedures for the Federal Highway Administration to use in
reviewing and approving states‘ criteria.
What GAO Recommends:
GAO makes recommendations and a matter for congressional consideration
discussed on the next page. The report draft was discussed with federal
and state officials who generally agreed with its contents. OMB
officials generally agreed with GAO‘s recommendations to OMB; DOT
agreed to consider GAO‘s recommendation.
View [hyperlink, http://www.gao.gov/products/GAO-09-829] or key
components. For state summaries, see [hyperlink,
http://www.gao.gov/products/GAO-09-830SP]. For more information,
contact J. Christopher Mihm at (202) 512-6806 or mihmj@gao.gov.
[End of section]
Contents:
Letter:
Background:
States and Localities Are Using Recovery Act Funds for Purposes of the
Act and to Help Address Fiscal Stresses:
States Have Implemented Various Internal Control Programs: However,
Single Audit Guidance and Reporting Does Not Adequately Address
Recovery Act Risk:
Efforts to Assess Impact of Recovery Act Spending:
Concluding Observations and Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Office of Management and Budget:
Appendix III: Localities:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Percentage Point Increases in FMAP from Original Fiscal Year
2009 to Third Quarter 2009 (estimated), for 16 States and the District:
Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the
District as of June 29, 2009:
Table 3: Highway Apportionments and Obligations Nationwide and in
Selected States as of June 25, 2009:
Table 4: Nationwide Highway Obligations by Project Improvement Type as
of June 25, 2009:
Table 5: SFSF Recovery Act Allocations and Drawdowns for the 16 States
and the District of Columbia:
Table 6: Education Stabilization Funds Made Available to States and the
Division of Education Stabilization Funds between LEAs and IHEs:
Table 7: Data Source and Data Elements for the Four SFSF Education
Reform Assurances:
Table 8: Title I, Part A Recovery Act Allocations and Drawdowns for 16
States and the District of Columbia:
Table 9: IDEA, Parts B and C Recovery Act Allocations and Draw Downs
for the 16 States and the District of Columbia:
Table 10: Allocations of Recovery Act WIA Youth Funds for 13 States and
the District, as of June 30, 2009:
Table 11: Recovery Act Edward Byrne Memorial Justice Assistance Grant
Program's State Allocations and Pass-Through Percentages, Local
Allocations and Total Allocations for 16 States and the District:
Table 12: Allocation of Edward Byrne Memorial Justice Assistance Grants
for 16 States and the District for Fiscal Years 2007 and 2008, as well
as a Result of the Recovery Act:
Table 13: Planned Use of Recovery Act JAG Funds for 16 States and the
District:
Table 14: Recovery Act Edward Byrne Memorial Justice Assistance Grants
Awarded by the Bureau of Justice Assistance to Localities in 16 States
and the District:
Table 15: DOE's Allocation of the Recovery Act's Weatherization Funds
for 16 States and the District:
Table 16: DOE's Approval of State Plans and Second Allocation of the
Recovery Act's Weatherization Funds for 16 States and the District:
Table 17: States' Proposed Funding Plans for Using the Recovery Act's
Weatherization Funds:
Table 18: Number of Housing Units Expected to Be Weatherized Using
Recovery Act Funds:
Table 19: Single Audit Extensions for June 30, 2008, Fiscal Year End:
Table 20: Local School Districts and Postsecondary Institutions Visited
by GAO:
Table 21: Public Housing Authorities Visited by GAO:
Table 22: Location of Highway Projects visited by GAO:
Table 23: Summer Youth Programs Visited by GAO:
Table 24: Weatherization Programs Visited by GAO:
Figures:
Figure 1: Projected versus Actual Federal Outlays to States and
Localities under the Recovery Act:
Figure 2: Programs in July Review, Estimated Federal Recovery Act
Outlays to States and Localities in Fiscal Year 2009 as a Share of
Total:
Figure 3: Percentage Increase in Medicaid Enrollment from October 2007
to May 2009, for 16 States and the District:
Figure 4: Percentage of Recovery Act Highway Funds Obligated as of June
25, 2009:
Figure 5: Planned Uses of Title I Recovery Act Funds in the School
Districts We Visited:
Figure 6: Officials in Districts We Visited Reported Receiving Guidance
in Many Forms:
Figure 7: Percent of Public Housing Capital Fund Formula Grants
Allocated by HUD that Have Been Obligated and Drawn Down Nationwide, as
of June 20, 2009:
Figure 8: Percent of Public Housing Capital Fund Formula Grants
Allocated by HUD that Have Been Obligated and Drawn Down by 47 Public
Housing Agencies Visited by GAO, as of June 20, 2009:
Figure 9: Unit That the Athens Housing Authority Plans to Renovate with
Recovery Act Funds:
Figure 10: Philadelphia, Pennsylvania, Plans to Rehabilitate Vacant
Units at Scattered Sites:
Figure 11: Siding in the process of completion using Rahway Housing
Authority's Recovery Act funds:
Figure 12: State and Local Government Current Receipts, Fiscal Year
2008:
Figure 13: Year-Over-Year Change in State and Local Government Current
Tax Receipts:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 8, 2009:
Report to Congressional Committees:
As federal funds provided by the American Recovery and Reinvestment Act
of 2009 (Recovery Act)[Footnote 1] flow into the U.S. economy, state
fiscal conditions continue to be stressed. Actual declines in sales,
personal income, and corporate income tax revenues influenced state
actions to begin to fill an estimated $230 billion in budget gaps for
fiscal years 2009 through 2011.[Footnote 2] The national unemployment
rate also increased to 9.5 percent in June 2009, and high unemployment
can place greater stress on state budgets as demand for services, such
as Medicaid, increases. Some economists have pointed to signs of
economic improvement, although associations representing state
officials have also reported that state fiscal conditions historically
lag behind any national economic recovery.
The Recovery Act specifies several roles for GAO, including conducting
bimonthly reviews of selected states' and localities' use of funds made
available under the act.[Footnote 3] This report, the second in
response to the act's mandate, addresses the following objectives: (1)
selected states' and localities' uses of Recovery Act funds, (2) the
approaches taken by the selected states and localities to ensure
accountability for Recovery Act funds, and (3) states' plans to
evaluate the impact of the Recovery Act funds they received.[Footnote
4] The report provides overall findings, makes recommendations, and
discusses the status of actions in response to the recommendations we
made in our April 2009 report. Individual summaries for the 16 selected
states and the District of Columbia (District) are accessible through
GAO's recovery page at [hyperlink, http://www.gao.gov/recovery]. In
addition, all of the summaries have been compiled into an electronic
supplement, GAO-09-830SP.
As reported in our April 2009 review, to address these objectives, we
selected a core group of 16 states and the District that we will follow
over the next few years.[Footnote 5] Our bimonthly reviews examine how
Recovery Act funds are being used and whether they are achieving the
stated purposes of the act. These purposes include:
* to preserve and create jobs and promote economic recovery;
* to assist those most impacted by the recession;
* to provide investments needed to increase economic efficiency by
spurring technological advances in science and health;
* to invest in transportation, environmental protection, and other
infrastructure that will provide long-term economic benefits; and:
* to stabilize state and local government budgets, in order to minimize
and avoid reductions in essential services and counterproductive state
and local tax increases.
The states selected for our bimonthly reviews contain about 65 percent
of the U.S. population and are estimated to receive collectively about
two-thirds of the intergovernmental federal assistance funds available
through the Recovery Act. We selected these states and the District on
the basis of federal outlay projections, percentage of the U.S.
population represented, unemployment rates and changes, and a mix of
states' poverty levels, geographic coverage, and representation of both
urban and rural areas. In addition, we visited a nonprobability sample
of about 178 local entities within the 16 selected states and the
District.[Footnote 6]
GAO's work for this report focused on nine federal programs primarily
because they have begun disbursing funds to states or have known or
potential risks.[Footnote 7] These risks can include existing programs
receiving significant amounts of Recovery Act funds or new programs. We
collected documents from and conducted semistructured interviews with
executive-level state and local officials and staff from state offices
including governors' offices, "recovery czars," state auditors, and
controllers. In addition, our work focused on federal, state, and local
agencies administering the selected programs receiving Recovery Act
funds. We analyzed guidance and interviewed officials from the federal
Office of Management and Budget (OMB). We also analyzed other federal
agency guidance on programs selected for this review and spoke with
relevant program officials at the Centers for Medicare and Medicaid
Services (CMS), the U.S. Departments of Education, Energy, Housing and
Urban Development, Justice, Labor, and Transportation. Where attributed
to state officials, we did not review state legal materials for this
report, but relied on state officials and other state sources for
description and interpretation of relevant state constitutions,
statutes, legislative proposals, and other state legal materials. The
information obtained from this review cannot be generalized to all
states and localities receiving Recovery Act funding. A detailed
description of our scope and methodology can be found in appendix I.
We conducted this performance audit from April 21, 2009, to July 2,
2009, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background:
Our analysis of initial estimates of Recovery Act spending provided by
the Congressional Budget Office (CBO) suggested that about $49 billion
would be outlayed to states and localities by the federal government in
fiscal year 2009, which runs through September 30. However, our
analysis of the latest information available on actual federal outlays
reported on [hyperlink, http://www.recovery.gov][Footnote 8] indicates
that in the 4 months since enactment, the federal Treasury has paid out
approximately $29 billion to states and localities, which is about 60
percent of payments estimated for fiscal year 2009. Although this
pattern may not continue for the remaining 3-1/2 months, at present
spending is slightly ahead of estimates. More than 90 percent of the
$29 billion in federal outlays has been provided through the increased
Federal Medical Assistance Percentage (FMAP) grant awards and the State
Fiscal Stabilization Fund administered by the Department of Education.
Figure 1 shows the original estimate of federal outlays to states and
localities under the Recovery Act compared with actual federal outlays
as reported by federal agencies on www.recovery.gov. The 16 states and
the District of Columbia covered by our review account for about two-
thirds of the Recovery Act funding available to states and localities.
According to the Office of Management and Budget (OMB), an estimated
$149 billion in Recovery Act funding will be obligated to states and
localities in fiscal year 2009.
Figure 1: Projected versus Actual Federal Outlays to States and
Localities under the Recovery Act:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2009;
Projected outlay: $48.9 billion;
Actual outlay: $28.8 billion (as of June 19, 2009).
Fiscal year: 2010;
Projected outlay: $107.7 billion.
Fiscal year: 2011;
Projected outlay: $63.4 billion.
Fiscal year: 2012;
Projected outlay: $23.3 billion.
Fiscal year: 2013;
Projected outlay: $14.4 billion.
Fiscal year: 2014;
Projected outlay: $9.1 billion.
Fiscal year: 2015;
Projected outlay: $5.7 billion.
Fiscal year: 2016;
Projected outlay: $2.5 billion.
Source: GAO analysis of CBO, Federal Funds Information for States, and
Recovery.gov data.
[End of figure]
Our work for this bimonthly report focused on nine federal programs,
selected primarily because they have begun disbursing funds to states
and include programs with significant amounts of Recovery Act funds,
programs receiving significant increases in funding, and new programs.
Recovery Act funding of some of these programs is intended for further
disbursement to localities. Together, these nine programs are estimated
to account for approximately 87 percent of federal Recovery Act outlays
to state and localities in fiscal year 2009. Figure 2 shows the
distribution by program of anticipated federal Recovery Act spending in
fiscal year 2009 to states and localities.
Figure 2: Programs in July Review, Estimated Federal Recovery Act
Outlays to States and Localities in Fiscal Year 2009 as a Share of
Total:
[Refer to PDF for image]
Medicaid: 63%;
State Fiscal Stabilization Fund: 13%;
Highways: 6%;
Other Selected programs: 5%:
* IDEA, Parts B and C, 1%;
* WIA Youth Programs, 1%;
* ESEA, Title i, Part A: 1%;
* Less than 1%:
- Byrne Grants;
- Weatherization Assistance Program;
- Public Housing Capital Fund;
Other programs not in study: 13%.
Source: GAO analysis of data from CBO and Federal Fund Information for
States.
[End of figure]
States and Localities Are Using Recovery Act Funds for Purposes of the
Act and to Help Address Fiscal Stresses:
Increased FMAP Has Helped States Finance Their Growing Medicaid
Programs, but Concerns Remain about Compliance with Recovery Act
Provisions:
Medicaid is a joint federal-state program that finances health care for
certain categories of low-income individuals, including children,
families, persons with disabilities, and persons who are elderly. The
federal government matches state spending for Medicaid services
according to a formula based on each state's per capita income in
relation to the national average per capita income. The rate at which
states are reimbursed for Medicaid service expenditures is known as the
FMAP, which may range from 50 percent to no more than 83 percent. The
Recovery Act provides eligible states with an increased FMAP for 27
months between October 1, 2008, and December 31, 2010.[Footnote 9] On
February 25, 2009, CMS made increased FMAP grant awards to states, and
states may retroactively claim reimbursement for expenditures that
occurred prior to the effective date of the Recovery Act. Generally,
for fiscal year 2009 through the first quarter of fiscal year 2011, the
increased FMAP, which is calculated on a quarterly basis, provides for
(1) the maintenance of states' prior year FMAPs, (2) a general across-
the-board increase of 6.2 percentage points in states' FMAPs, and (3) a
further increase to the FMAPs for those states that have a qualifying
increase in unemployment rates. The increased FMAP available under the
Recovery Act is for state expenditures for Medicaid services. However,
the receipt of this increased FMAP may reduce the funds that states
would otherwise have to use for their Medicaid programs, and states
have reported using these available funds for a variety of purposes.
For the third quarter of fiscal year 2009, the increases in FMAP for
the 16 states and the District of Columbia compared with the original
fiscal year 2009 levels are estimated to range from 6.2 percentage
points in Iowa to 12.24 percentage points in Florida, with the FMAP
increase averaging almost 10 percentage points. When compared with the
first two quarters of fiscal year 2009, the FMAP in the third quarter
of fiscal year 2009 is estimated to have increased in 12 of the 16
states and the District.
Table 1: Percentage Point Increases in FMAP from Original Fiscal Year
2009 to Third Quarter 2009 (estimated), for 16 States and the District:
State: Arizona;
Original fiscal year 2009 FMAP[A]: 65.77;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 75.01;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.24.
State: California;
Original fiscal year 2009 FMAP[A]: 50.00;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 61.59;
Difference between original and adjusted FMAP, third quarter
(estimated): 11.59.
State: Colorado; Original fiscal year 2009 FMAP[A]: 50.00; Adjusted
fiscal year 2009 FMAP, third quarter (estimated): 60.19; Difference
between original and adjusted FMAP, third quarter (estimated): 10.19.
State: District of Columbia;
Original fiscal year 2009 FMAP[A]: 70.00;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 79.29;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.29.
State: Florida;
Original fiscal year 2009 FMAP[A]: 55.40;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 67.64;
Difference between original and adjusted FMAP, third quarter
(estimated): 12.24.
State: Georgia;
Original fiscal year 2009 FMAP[A]: 64.49;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 74.42;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.93.
State: Illinois;
Original fiscal year 2009 FMAP[A]: 50.32;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 61.88;
Difference between original and adjusted FMAP, third quarter
(estimated): 11.56.
State: Iowa;
Original fiscal year 2009 FMAP[A]: 62.62;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 68.82;
Difference between original and adjusted FMAP, third quarter
(estimated): 6.20.
State: Massachusetts;
Original fiscal year 2009 FMAP[A]: 50.00;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 60.19;
Difference between original and adjusted FMAP, third quarter
(estimated): 10.19.
State: Michigan;
Original fiscal year 2009 FMAP[A]: 60.27; Adjusted fiscal year 2009
FMAP, third quarter (estimated): 70.68; Difference between original and
adjusted FMAP, third quarter (estimated): 10.41.
State: Mississippi;
Original fiscal year 2009 FMAP[A]: 75.84;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 84.24;
Difference between original and adjusted FMAP, third quarter
(estimated): 8.40.
State: New York;
Original fiscal year 2009 FMAP[A]: 50.00;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 60.19;
Difference between original and adjusted FMAP, third quarter
(estimated): 10.19.
State: North Carolina;
Original fiscal year 2009 FMAP[A]: 64.60;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 74.51;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.91.
State: Ohio;
Original fiscal year 2009 FMAP[A]: 62.14;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 71.29;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.15.
State: Pennsylvania;
Original fiscal year 2009 FMAP[A]: 54.52;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 64.32;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.80.
State: Texas;
Original fiscal year 2009 FMAP[A]: 59.44;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 68.76;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.32.
Source: GAO analysis of data from Federal Funds Information for States,
as of April 8, 2009.
[A] The original fiscal year 2009 FMAP data were published in the
Federal Register on November 28, 2007.
[End of table]
From October 2007 to May 2009, overall Medicaid enrollment in the 16
states and the District increased by 7 percent.[Footnote 10] In
addition, each of the states and the District experienced an enrollment
increase during this period, with the highest number of programs
experiencing an increase of 5 percent to 10 percent. However, the
percentage increase in enrollment varied widely ranging from just under
3 percent in California to nearly 20 percent in Colorado. (Figure 3.)
Figure 3: Percentage Increase in Medicaid Enrollment from October 2007
to May 2009, for 16 States and the District:
[Refer to PDF for image: vertical bar graph]
Overall Medicaid enrollment increased by 7%.
Quintile category: 0% to less than 5%:
California: 2.73%;
Massachusetts: 4.94%.
Quintile category: 5% to less than 10%:
New Jersey: 5.06%;
Texas: 5.13%;
Mississippi: 5.18%;
New York: 5.52%;
Pennsylvania: 5.84%;
Illinois: 5.93%;
District of Columbia: 6.75%;
Georgia: 7.94%;
Michigan: 8.72%.
Quintile category: 10% to less than 15%:
Ohio: 11.03%;
North Carolina: 11.21%.
Quintile category: 15% to less than 20%:
Iowa: 15.16%;
Arizona: 15.32%;
Florida: 17.96%;
Colorado: 19.76%.
Source: GAO analysis of state data.
Note: The percentage increase for each state is based on actual state
enrollment data for October 2007 to April 2009 and projected enrollment
data for May 2009, with the exception of New York, which provided
projected enrollment data for March, April and May 2009. Three states--
Florida, Georgia, and Mississippi--did not provide projected enrollment
data for May 2009.
[End of figure]
Overall enrollment growth was the most rapid in early 2009--generally
from January through April 2009--an enrollment trend that was mirrored
in several states and the District; however, variation existed. For
example, while Colorado and Mississippi experienced a nearly 5 percent
increase in Medicaid enrollment during this time, Medicaid enrollment
in Illinois remained relatively stable, growing at less than 1 percent.
Most of the increase in overall enrollment was attributable to
populations that are sensitive to economic downturns--primarily
children and families Nonetheless, enrollment growth in other
population groups, such as disabled individuals, also contributed to
enrollment growth.
With regard to the states' receipt of the increased FMAP, all 16 states
and the District had drawn down increased FMAP grant awards totaling
just over $15.0 billion for the period of October 1, 2008 through June
29, 2009 which amounted to 86 percent of funds available. [Footnote 11]
(See table 2.) In addition, except for the initial weeks that increased
FMAP funds were available, the weekly rate at which the sample states
and the District have drawn down these funds has remained relatively
constant.
Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the
District as of June 29, 2009 (Dollars in thousands):
State: Arizona;
FMAP grant awards[A]: $534,576;
Funds drawn: $512,550;
Percentage of funds drawn: 96.
State: California;
FMAP grant awards[A]: $3,330,010;
Funds drawn: $2,753,245;
Percentage of funds drawn: 83.
State: Colorado;
FMAP grant awards[A]: $240,777;
Funds drawn: $197,035;
Percentage of funds drawn: 82.
State: District of Columbia;
FMAP grant awards[A]: $98,339;
Funds drawn: $89,344;
Percentage of funds drawn: 91.
State: Florida;
FMAP grant awards[A]: $1,394,946;
Funds drawn: $1,263,179;
Percentage of funds drawn: 91.
State: Georgia;
FMAP grant awards[A]: $541,145;
Funds drawn: $497,893;
Percentage of funds drawn: 92.
State: Illinois;
FMAP grant awards[A]: $1,040,031;
Funds drawn: $867,909;
Percentage of funds drawn: 83.
State: Iowa;
FMAP grant awards[A]: $136,023;
Funds drawn: $126,815;
Percentage of funds drawn: 93.
State: Massachusetts;
FMAP grant awards[A]: $1,229,501;
Funds drawn: $833,031;
Percentage of funds drawn: 68.
State: Michigan;
FMAP grant awards[A]: $728,425;
Funds drawn: $715,843;
Percentage of funds drawn: 98.
State: Mississippi;
FMAP grant awards[A]: $232,014;
Funds drawn: $206,890;
Percentage of funds drawn: 89.
State: New Jersey;
FMAP grant awards[A]: $579,976;
Funds drawn: $579,976;
Percentage of funds drawn: 100.
State: New York;
FMAP grant awards[A]: $3,312,089;
Funds drawn: $2,643,136;
Percentage of funds drawn: 80.
State: North Carolina;
FMAP grant awards[A]: $710,243;
Funds drawn: $710,243;
Percentage of funds drawn: 100.
State: Ohio;
FMAP grant awards[A]: $832,391;
Funds drawn: $711,435;
Percentage of funds drawn: 85.
State: Pennsylvania;
FMAP grant awards[A]: $1,097,544;
Funds drawn: $957,094;
Percentage of funds drawn: 87.
State: Texas;
FMAP grant awards[A]: $1,444,026;
Funds drawn: $1,351,960;
Percentage of funds drawn: 94.
State: Total;
FMAP grant awards[A]: $17,482,055;
Funds drawn: $15,017,578;
Percentage of funds drawn: 86.
Source: GAO analysis of HHS data.
[A] The FMAP grant awards listed are for the first three quarters of
federal fiscal year 2009.
[End of table]
While the increased FMAP available under the Recovery Act is for state
expenditures for Medicaid services, the receipt of these funds may
reduce the state share for their Medicaid programs. As such, states
reported that they are using or are planning to use the funds that have
become freed up as a result of increased FMAP for a variety of
purposes. Most commonly, states reported that they are using or
planning to use freed-up funds to cover their increased Medicaid
caseload, to maintain current benefits and eligibility levels, and to
help finance their respective state budgets. Several states noted that
given the poor economic climate in their respective states, these funds
were critical in their efforts to maintain Medicaid coverage at current
levels. For example, officials from Georgia, Michigan, and Pennsylvania
reported that the increased FMAP funds have allowed their respective
states to maintain their Medicaid programs, which could have been
subject to cuts in eligibility or services without the increased funds.
Additionally, Medicaid officials in five states and the District
indicated that they used the funds made available as a result of the
increased FMAP to maintain program expansions or local health care
reform initiatives, which in some states would have otherwise been
vulnerable to program cuts. Lastly, all but Texas and the District
reported they are using or planning to use the freed-up funds to help
finance their state budgets. Five states--Arizona, California,
Colorado, North Carolina, and Ohio---reported using or planning to use
these funds solely for this purpose.
For states to qualify for the increased FMAP available under the
Recovery Act, they must meet a number of requirements, including the
following:
* States generally may not apply eligibility standards, methodologies,
or procedures that are more restrictive than those in effect under
their state Medicaid programs on July 1, 2008.[Footnote 12]
* States must comply with prompt payment requirements.[Footnote 13]
* States cannot deposit or credit amounts attributable (either directly
or indirectly) to certain elements of the increased FMAP into any
reserve or rainy-day fund of the state.[Footnote 14]
* States with political subdivisions--such as cities and counties--that
contribute to the nonfederal share of Medicaid spending cannot require
the subdivisions to pay a greater percentage of the nonfederal share
than would have been required on September 30, 2008.[Footnote 15]
Medicaid officials from many states and the District raised concerns
about their ability to meet these requirements and, thus, maintain
eligibility for the increased FMAP. While officials from several states
spoke positively about CMS's guidance related to FMAP requirements, at
least nine states and the District reported they wanted CMS to provide
additional guidance regarding (1) how they report daily compliance with
prompt pay requirements, (2) how they report monthly on increased FMAP
spending, and (3) whether certain programmatic changes would affect
their eligibility for funds. For example, Medicaid officials from
several states told us they were hesitant to implement minor
programmatic changes, such as changes to prior authorization
requirements, pregnancy verifications, or ongoing rate changes, out of
concern that doing so would jeopardize their eligibility for increased
FMAP. In addition, at least three states raised concerns that glitches
related to new or updated information systems used to generate provider
payments could affect their eligibility for these funds. Specifically,
Massachusetts Medicaid officials said they are implementing a new
provider payment system that will generate payments to some providers
on a monthly versus daily basis and would like guidance from CMS on the
availability of waivers for the prompt payment requirement. A CMS
official told us that the agency is in the process of finalizing its
guidance to states on reporting compliance with the prompt payment
requirement of the Recovery Act, but did not know when this guidance
would be publicly available. However, the official noted that, in the
near term, the agency intends to issue a new Fact Sheet, which will
include questions and answers on a variety of issues related to the
increased FMAP.
Due to the variability of state operations, funding processes, and
political structures, CMS has worked with states on a case-by-case
basis to discuss and resolve issues that arise. Specifically,
communications between CMS and several states indicate efforts to
clarify issues related to the contributions to the state share of
Medicaid spending by political subdivisions or to rainy-day funds. For
example, in a May 20, 2009, letter, CMS clarified that California would
not fail to meet the provision of the Recovery Act related to
contributions by political subdivisions if a county voluntarily used
its funds to make up for a decrease in the amount the state
appropriated for the Medicaid payment of wages of personal care service
providers. Similarly, Mississippi clarified with CMS its understanding
that it would not be permissible to deposit general fund savings
resulting from the increased FMAP into the rainy-day fund in state
fiscal year 2010 in order to use those funds in state fiscal year 2011.
[Footnote 16]
Regarding the tracking of the increased FMAP, most of the states and
the District use existing processes to track the receipt of the
increased FMAP separately from regular FMAP, and almost half of the
states reported using existing processes to reconcile these
expenditures. In addition, we reviewed the 2007 Single Audits[Footnote
17] for the states and the District and identified material weaknesses
related to Medicaid, including weaknesses related to provider
enrollment processes and subrecipient monitoring, for most of them.
[Footnote 18] The Single Audits indicated that many states and the
District planned or implemented actions to correct identified
weaknesses. According to CMS officials, CMS regional offices work with
states to address single audit findings related to Medicaid.
States Are Using Highway Infrastructure Funds Mainly For Pavement
Improvements and Are Generally Complying with Recovery Act
Requirements:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The act requires that 30
percent of these funds be suballocated for projects in metropolitan and
other areas of the state. Highway funds are apportioned to the states
through federal-aid highway program mechanisms, and states must follow
the requirements of the existing program, which include ensuring the
project meets all environmental requirements associated with the
National Environmental Policy Act (NEPA), paying a prevailing wage in
accordance with federal Davis-Bacon requirements, complying with goals
to ensure disadvantaged businesses are not discriminated against in the
awarding of construction contracts, and using American-made iron and
steel in accordance with Buy America program requirements. However, the
maximum federal fund share of highway infrastructure investment
projects under the Recovery Act is 100 percent, while the federal share
under the existing federal-aid highway program is generally 80 percent.
In March 2009, $26.7 billion was apportioned to all 50 states and the
District of Columbia (District) for highway infrastructure and other
eligible projects. As of June 25, 2009, $15.9 billion of the funds had
been obligated[Footnote 19] for over 5,000 projects nationwide, and
$9.2 billion had been obligated for nearly 2,600 projects in the 16
states and the District that are the focus of our review.
Table 3: Highway Apportionments and Obligations Nationwide and in
Selected States as of June 25, 2009 (Dollars in millions):
State: Arizona;
Apportionment: $522;
Obligations[A]: Obligated amount: $262;
Obligations[A]: Percentage of apportionment obligated: 50.2.
State: California;
Apportionment: $2,570;
Obligations[A]: Obligated amount: $1,558;
Obligations[A]: Percentage of apportionment obligated: 60.6.
State: Colorado;
Apportionment: $404;
Obligations[A]: Obligated amount: $244;
Obligations[A]: Percentage of apportionment obligated: 60.4.
State: District of Columbia;
Apportionment: $124;
Obligations[A]: Obligated amount: $100;
Obligations[A]: Percentage of apportionment obligated: 81.0.
State: Florida;
Apportionment: $1,347;
Obligations[A]: Obligated amount: $1,049;
Obligations[A]: Percentage of apportionment obligated: 77.9.
State: Georgia;
Apportionment: $932;
Obligations[A]: Obligated amount: $449;
Obligations[A]: Percentage of apportionment obligated: 48.2.
State: Illinois;
Apportionment: $936;
Obligations[A]: Obligated amount: $671;
Obligations[A]: Percentage of apportionment obligated: 71.7.
State: Iowa;
Apportionment: $358;
Obligations[A]: Obligated amount: $319;
Obligations[A]: Percentage of apportionment obligated: 89.2.
State: Massachusetts;
Apportionment: $438;
Obligations[A]: Obligated amount: $174;
Obligations[A]: Percentage of apportionment obligated: 39.6.
State: Michigan;
Apportionment: $847;
Obligations[A]: Obligated amount: $421;
Obligations[A]: Percentage of apportionment obligated: 49.7.
State: Mississippi;
Apportionment: $355;
Obligations[A]: Obligated amount: $276;
Obligations[A]: Percentage of apportionment obligated: 77.9.
State: New Jersey;
Apportionment: $652;
Obligations[A]: Obligated amount: $410;
Obligations[A]: Percentage of apportionment obligated: 62.9.
State: New York;
Apportionment: $1,121;
Obligations[A]: Obligated amount: $589;
Obligations[A]: Percentage of apportionment obligated: 52.6.
State: North Carolina;
Apportionment: $736;
Obligations[A]: Obligated amount: $423;
Obligations[A]: Percentage of apportionment obligated: 57.6.
State: Ohio;
Apportionment: $936;
Obligations[A]: Obligated amount: $384;
Obligations[A]: Percentage of apportionment obligated: 41.1.
State: Pennsylvania;
Apportionment: $1,026;
Obligations[A]: Obligated amount: $729;
Obligations[A]: Percentage of apportionment obligated: 71.0.
State: Texas;
Apportionment: $2,250;
Obligations[A]: Obligated amount: $1,163;
Obligations[A]: Percentage of apportionment obligated: 51.7.
Selected states total;
Apportionment: $15,551;
Obligations[A]: Obligated amount: $9,222;
Obligations[A]: Percentage of apportionment obligated: 59.3.
U.S. total;
Apportionment: $26,660;
Obligations[A]: Obligated amount: $15,867;
Obligations[A]: Percentage of apportionment obligated: 59.5.
Source: GAO analysis of Federal Highway Administration data.
Note: As of June 25, 2009, all states have met the Recovery Act
requirement that 50 percent of apportioned funds be obligated within
120 days of apportionment (before June 30, 2009), as discussed later in
this report. However, this requirement applies only to funds
apportioned to the state and not to the 30 percent of funds required by
the Recovery Act to be suballocated, primarily based on population, for
metropolitan, regional, and local use or to funds transferred to FTA.
This table shows the percentage of all apportioned funds that have been
obligated, which is why some states show an obligation rate of less
than 50 percent.
[A] This does not include obligations associated with $61 million of
apportioned funds that were transferred from the Federal Highway
Administration (FHWA) to the Federal Transit Administration (FTA) for
transit projects. Generally, FHWA has authority pursuant to 23 U.S.C. §
104(k)(1) to transfer funds made available for transit projects to FTA.
[End of table]
Almost half of Recovery Act highway obligations have been for pavement
improvements. Specifically, $7.8 billion of the $15.9 billion obligated
nationwide as of June 25, 2009, is being used for projects such as
reconstructing or rehabilitating deteriorated roads, including $3.6
billion for road resurfacing projects. Many state officials told us
they selected a large percentage of resurfacing and other pavement
improvement projects because they did not require extensive
environmental clearances, were quick to design, could be quickly
obligated and bid, could employ people quickly, and could be completed
within 3 years. For example, Michigan began a $22 million project on
Interstate 196 in Allegan County that involves resurfacing about seven
miles of road. Michigan Department of Transportation officials told us
they focused primarily on pavement improvements for Recovery Act
projects because they could be obligated quickly and could be under
construction quickly, thereby employing people this calendar year.
Since many of the environmental clearances had been completed, Michigan
could accelerate the construction of these projects when Recovery Act
funds became available. Table 4 shows obligations by the types of road
and bridge improvements being made.
Table 4: Nationwide Highway Obligations by Project Improvement Type as
of June 25, 2009 (Dollars in millions):
Pavement projects (percent of total obligations):
New construction: $994 (6.3%);
Pavement improvement: $7,765 (48.9%);
Pavement widening: $2,701 (17.0%).
Bridge projects:
New construction: $418 (2.6%);
Replacement: $708 (4.5%);
Improvement: $851 (5.4%).
Other[A]: $2,429 (15.3%).
Total[B]: $15,867 (100%).
Source: GAO analysis of Federal Highway Administration data.
[A] Includes safety projects such as improving safety at railroad grade
crossings, transportation enhancement projects such as pedestrian and
bicycle facilities, engineering, and right-of-way purchases.
[B] Totals may not add because of rounding.
[End of table]
As table 4 shows, in addition to pavement improvements, $2.7 billion,
or about 17 percent of Recovery Act funds nationally, has been
obligated for pavement-widening projects. These projects provide for
reconstructing and improving existing roads as well as increasing the
capacity of the road to accommodate traffic, which can reduce
congestion. In Florida, around 47 percent of Recovery Act funds were
obligated for widening projects that increase capacity, while about 9
percent was obligated for pavement improvements such as resurfacing.
As of June 25, 2009, around 10 percent of the funds apportioned
nationwide have been obligated for the replacement or improvement or
rehabilitation of bridges. Funding for bridge rehabilitation and
replacement has been a growing national concern since the I-35 bridge
collapse in Minnesota in 2007.[Footnote 20] Eleven of the states we
visited had less than 10 percent of their Recovery Act funds obligated
for bridge replacement and rehabilitation, while two states--New York
and Pennsylvania--and the District each had more than one-quarter of
their funds obligated for bridge replacement and rehabilitation. In the
District, about 36 percent of its obligations are for rehabilitating
bridges, including the District's largest Recovery Act project--a
bridge that has been identified as having potentially significant
safety concerns. Around 2.6 percent of apportioned funds have been
obligated for construction of new bridges.
As of June 25, 2009, $233 million had been reimbursed nationwide by the
Federal Highway Administration (FHWA) and $96.4 million had been
reimbursed to the 16 states and the District. States are just beginning
to get projects awarded so that contractors can begin work, and U.S.
Department of Transportation officials told us that although funding
has been obligated for more than 5,000 projects, it may be months
before states can request reimbursement. Once contractors mobilize and
begin work, states make payments to these contractors for completed
work, and may request reimbursement from FHWA. FHWA told us that once
funds are obligated for a project, it may take 2 or more months for a
state to bid and award the work to a contractor and have work begin.
According to FHWA, depending on the type of project, it can take days
or years from the date of obligation for those funds to be reimbursed.
For example, the North Carolina Department of Transportation (as of
June 30, 2009) had advertised 65 contracts representing $335 million in
Recovery Act funding. Of the 65 contracts, 55, representing $309
million, had been awarded; of these contracts, 33, representing $200
million, are under way. North Carolina has been reimbursed about $4
million of Recovery Act funding for projects as of June 25, 2009.
Approximately 27 of the 65 projects, representing $70 million, are
anticipated to be complete by December 1, 2009.
According to state officials, because an increasing number of
contractors are looking for work, bids for Recovery Act contracts have
come in under estimates. State officials told us that bids for the
first Recovery Act contracts were ranging from around 5 percent to 30
percent below the estimated cost. For example in California, officials
reported they have had 8 to 10 bidders for each contract bid, compared
with 2 to 4 bids per contract prior to the economic downturn, and that
bids are generally coming in 30 percent below estimates. Arizona
officials told us that contractors are willing to bid for contracts
with little profit margin in order to cover overhead and put people to
work, while Mississippi officials told us that material costs had
decreased. Several state officials told us they expect this trend to
continue until the economy substantially improves and contractors begin
taking on enough other work.
Funds appropriated for highway infrastructure spending must be used as
required by the Recovery Act. States are required to do the following:
* Ensure that 50 percent of apportioned Recovery Act funds are
obligated within 120 days of apportionment (before June 30, 2009) and
that the remaining apportioned funds are obligated within 1 year. The
50 percent rule applies only to funds apportioned to the state and not
to the 30 percent of funds required by the Recovery Act to be
suballocated, primarily based on population, for metropolitan,
regional, and local use. The Secretary of Transportation is to withdraw
and redistribute to other states any amount that is not obligated
within these time frames.[Footnote 21]
* Give priority to projects that can be completed within 3 years and to
projects located in economically distressed areas (EDA). EDAs are
defined by the Public Works and Economic Development Act of 1965, as
amended.[Footnote 22] According to this act, to qualify as an EDA, an
area must meet one or more of three criteria related to income and
unemployment based on the most recent federal or state data.[Footnote
23]
* Certify that the state will maintain the level of spending for the
types of transportation projects funded by the Recovery Act that it
planned to spend the day the Recovery Act was enacted. As part of this
certification, the governor of each state is required to identify the
amount of funds the state plans to expend from state sources from
February 17, 2009, through September 30, 2010.[Footnote 24]
All states have met the first Recovery Act requirement that 50 percent
of their apportioned funds are obligated within 120 days. Of the $18.7
billion nationally that is subject to this provision, 69 percent was
obligated as of June 25, 2009. The percentage of funds obligated
nationwide and in each of the states included in our review is shown in
figure 4.
Figure 9: Percentage of Recovery Act Highway Funds Obligated as of June
25, 2009[A]:
[Refer to PDF for image: vertical bar graph]
Level states were required to reach before June 30, 2009: 50%.
State: Nationwide;
Percentage of funds obligated as on June 25, 2009: 69.5%.
State: District of Columbia;
Percentage of funds obligated as on June 25, 2009: 95.5%.
State: Florida;
Percentage of funds obligated as on June 25, 2009: 93.3%.
State: Illinois;
Percentage of funds obligated as on June 25, 2009: 91.3%.
State: Iowa;
Percentage of funds obligated as on June 25, 2009: 89.3%.
State: Mississippi;
Percentage of funds obligated as on June 25, 2009: 86.9%.
State: New Jersey;
Percentage of funds obligated as on June 25, 2009: 83%.
State: Colorado;
Percentage of funds obligated as on June 25, 2009: 74.5%.
State: Arizona;
Percentage of funds obligated as on June 25, 2009: 71.4%.
State: Pennsylvania;
Percentage of funds obligated as on June 25, 2009: 66.9%.
State: California;
Percentage of funds obligated as on June 25, 2009: 66.1%.
State: New York;
Percentage of funds obligated as on June 25, 2009: 62.6%.
State: Michigan;
Percentage of funds obligated as on June 25, 2009: 62.3%.
State: North Carolina;
Percentage of funds obligated as on June 25, 2009: 61%.
State: Texas;
Percentage of funds obligated as on June 25, 2009: 61%.
State: Massachusetts;
Percentage of funds obligated as on June 25, 2009: 59.1%.
State: Georgia;
Percentage of funds obligated as on June 25, 2009: 58.7%.
State: Ohio;
Percentage of funds obligated as on June 25, 2009: 51.7%.
Source: GAO analysis of Federal Highway Administration data.
[A] This figure does not include obligations that are not subject to
the 120-day redistribution requirement (including funds suballocated to
localities) and obligations associated with apportioned funds that were
transferred from FHWA to the Federal Transit Administration (FTA) for
transit projects. Generally, FHWA has authority pursuant to 23 U.S.C. §
104(k)(1) to transfer funds made available for transit projects to FTA.
[End of figure]
The second Recovery Act requirement is to give priority to projects
that can be completed within 3 years and to projects located in
economically distressed areas. Officials from almost all of the states
said they considered project readiness, including the 3-year completion
requirement, when making project selections, and, according to
officials from just fewer than half of the states, project readiness
was the single most important consideration for selecting projects.
Officials from most states reported they expect all or most projects
funded with Recovery Act funds to be completed within 3 years, with the
exception of some larger or more complex projects that may take longer
to complete. For example, Massachusetts chose to use Recovery Act funds
to construct a new highway interchange in Fall River. Although this
project will take longer than other projects to complete, Massachusetts
officials said they selected it because it was located in the state's
only EDA.
We found that due to the need to select projects and obligate funds
quickly, many states first selected projects based on other factors and
only later identified to what extent these projects fulfilled the EDA
requirement. According to the American Association of State Highway and
Transportation Officials, in December 2008, states had already
identified more than 5,000 "ready-to-go" projects as possible
selections for federal stimulus funding, 2 months prior to enactment of
the Recovery Act. Officials from several states also told us they had
selected projects prior to the enactment of the Recovery Act and that
they only gave consideration to EDAs after they received EDA guidance
from DOT. For instance, officials in New York said that in anticipation
of the Recovery Act being enacted the state initially selected projects
that were ready to go and were distributed throughout the state,
without regard to their location in EDAs. Since then, the state has
emphasized the need to identify and fund projects in EDAs, pushing such
projects to the "head of the line." Officials in Pennsylvania said they
selected projects before federal guidance was available and that after
reviewing project selections for compliance with the EDA requirement,
decided to make no changes because their choices provided the greatest
potential to provide jobs in an expeditious manner.
States also based project selection on priorities other than EDAs.
State officials we met with said they considered factors based on their
own state priorities, such as geographic distribution and a project's
potential for job creation or other economic benefits. The use of state
planning criteria or funding formulas to distribute federal and state
highway funds was one factor that we found affected states'
implementation of the Recovery Act's prioritization requirements.
According to officials in North Carolina, for instance, the state used
its statutory Equity Allocation Formula to determine how highway
infrastructure investment funds would be distributed. Similarly, in
Texas, state officials said they first selected highway preservation
projects by allocating a specific amount of funding to each of the
state's 25 districts, where projects were identified that addressed the
most pressing needs. Officials then gave priority for funding to those
projects that were in EDAs.
In commenting on a draft of this report, DOT agreed that states must
give priority to projects located in EDAs, but said that states must
balance all the Recovery Act project selection criteria when selecting
projects including giving preference to activities that can be started
and completed expeditiously, using funds in a manner that maximizes job
creation and economic benefit, and other factors. DOT stated that the
Recovery Act does not give EDA projects absolute primacy over projects
not located in EDAs. However we would note that the Recovery Act
contains both general directives, such as using funds in a manner that
maximizes job creation and economic benefit, and specific directives
which we believe must be seen as taking precedence. While we agree with
DOT that there is no absolute primacy of EDA projects in the sense that
they must always be started first, the specific directives in the act
that apply to highway infrastructure are that priority is to be given
to projects that can be completed in 3 years, and are located in EDAs.
We also found some instances of states developing their own eligibility
requirements using data or criteria not specified in the Public Works
and Economic Development Act, as amended. According to the act, the
Secretary of Commerce, not individual states, has the authority to
determine the eligibility of an area that does not meet the first two
criteria of the act. In each of these cases, FHWA approved the use of
the states' alternative criteria, but it is not clear on what authority
FHWA approved these criteria. For example:
* Arizona based the identification of EDAs on home foreclosure rates
and disadvantaged business enterprises--data not specified in the
Public Works Act. Arizona officials said they used alternative criteria
because the initial determination of economic distress based on the
act's criteria excluded three of Arizona's largest and most populous
counties, which also contain substantial areas that, according to state
officials, are clearly economically distressed and include all or
substantial portions of major Indian reservations and many towns and
cities hit especially hard by the economic downturn. The state of
Arizona, in consultation with FHWA, developed additional criteria that
resulted in these three counties being classified as economically
distressed.
* Illinois based EDA classification on increases in the number of
unemployed persons and the unemployment rate,[Footnote 25] whereas the
act bases this determination on how a county's unemployment rate
compares with the national average unemployment rate. According to
FHWA, Illinois opted to explore other means of measuring recent
economic distress because the initial determination of economic
distress based on the act's criteria was based on data not as current
as information available within the state and did not appear to
accurately reflect the recent economic downturn in the state. Using the
criteria established by the Public Works Act, 30 of the 102 counties in
Illinois were identified as not economically distressed. Illinois's use
of alternative criteria resulted in 21 counties being identified as
EDAs that would not have been so classified following the act's
criteria.[Footnote 26]
In commenting on a draft of this report, DOT stated that the basic
approach used in Arizona and Illinois is consistent with the Public
Works Act and its implementing regulations on EDAs because it makes use
of flexibilities provided by the Act to more accurately reflect
changing economic conditions. DOT recognizes that the Public Works Act
provides the definition of EDAs that states are to follow. DOT
believes, however, that it is appropriate to interpret the requirements
of the Public Works Act flexibly by applying the EDA special needs
criteria to areas that are experiencing unemployment or economic
adjustment problems. We recognize that states may want to reflect their
own particular circumstances in defining EDAs. However, the Public
Works Act states that to apply the definition to a special needs area,
the area must be one "that the Secretary of Commerce determines has
experienced or is about to experience a special need arising from
actual or threatened severe unemployment or economic adjustment
problems..." The result of DOT's interpretation would be to allow
states to prioritize projects based on criteria that are not mentioned
in the highway infrastructure investment portion of the Recovery or the
Public Works Acts without the involvement of the Secretary or
Department of Commerce. We plan to continue to monitor states'
implementation of the EDA requirements and interagency coordination at
the federal level in future reports.
Some states' circumstances served to largely ensure compliance with the
EDA requirement. For instance, all areas within the District of
Columbia, which the Recovery Act treats as a state, are a single EDA,
assuring that the selection of any project that can be completed within
3 years satisfies the statutory priority rules. Mississippi has 75 of
82 counties that qualify as EDAs, and Mississippi reported to FHWA that
87 percent of the funds obligated to date had been obligated for to
projects located in areas classified as economically distressed.
Likewise in Ohio, where 90 percent of all counties qualify as EDAs, a
substantial number of Recovery Act highway projects are located in
EDAs.
DOT and FHWA have yet to provide clear guidance regarding how states
are to implement the EDA requirement. In February 2009, FHWA published
replies to questions from state transportation departments on its
Recovery Act Web site stating that because states have the authority to
prioritize and select federal-aid projects, it did not intend to
develop or prescribe a uniform procedure for applying the Recovery
Act's priority rules. Nonetheless, FHWA provided a tool to help states
identify whether projects were located in EDAs. Further, in March 2009,
FHWA provided guidance to its division offices stating that FHWA would
support the use of "whatever current, defensible, and reliable
information is available to make the case that [a state] has made a
good faith effort to consider EDAs" and directed its division offices
to take appropriate action to ensure that the states gave adequate
consideration to EDAs. FHWA officials we spoke with said they discussed
the priority requirements with states and that the requirements were
taken into consideration when approving projects. They also stated that
whether a state has satisfied the EDA priority requirement will not be
finally determined until the funds apportioned to the state under the
Recovery Act are all obligated, which may not be completed until 2010.
According to FHWA the states have until then to address future
compliance with the EDA priority requirement. By 2010, however, it will
be too late to take corrective action. In each of the cases where a
state used its own criteria, state officials told us they did so with
the approval of the FHWA division office in that state. Without clearer
guidance to the states, it will be difficult to ensure that the act's
priority provision is applied consistently.
Finally, the states are required to certify that they will maintain the
level of state effort for programs covered by the Recovery Act. With
one exception, the states have completed these certifications, but they
face challenges. Maintaining a state's level of effort can be
particularly important in the highway program. We have found that the
preponderance of evidence suggests that increasing federal highway
funds influences states and localities to substitute federal funds for
funds they otherwise would have spent on highways. In 2004, we
estimated that during the 1983 through 2000 period, states used roughly
half of the increases in federal highway funds to substitute for
funding they would otherwise have spent from their own resources and
that the rate of substitution increased during the 1990s. The federal-
aid highway program creates the opportunity for substitution because
states typically spend substantially more than the amount required to
meet federal matching requirements.[Footnote 27] As a consequence, when
federal funding increases, states are able to reduce their own highway
spending and still obtain increased federal funds.[Footnote 28] As we
previously reported, substitution makes it difficult to target an
economic stimulus package so that it results in a dollar-for-dollar
increase in infrastructure investment.[Footnote 29]
Most states revised the initial certifications they submitted to DOT.
As we reported in April, many states submitted explanatory
certifications--such as stating that the certification was based on the
"best information available at the time"--or conditional
certifications, meaning that the certification was subject to
conditions or assumptions, future legislative action, future revenues,
or other conditions. The legal effect of such qualifications was being
examined by DOT when we completed our review. On April 22, 2009, the
Secretary of Transportation sent a letter to each of the nation's
governors and provided additional guidance, including that conditional
and explanatory certifications were not permitted, and gave states the
option of amending their certifications by May 22. Each of the 16
states and District selected for our review resubmitted their
certifications. According to DOT officials, the department has
concluded that the form of each certification is consistent with the
additional guidance, with the exception of Texas. Texas submitted an
amended certification on May 27, 2009, which contained qualifying
language explaining that the Governor could not certify any expenditure
of funds until the legislature passed an appropriation act. According
to DOT officials, as of June 25, 2009, the status of Texas' revised
certification remains unresolved. Texas officials told us the state
plans to submit a revised certification letter, removing the qualifying
language. For the remaining states, while DOT has concluded that the
form of the revised certifications is consistent with the additional
guidance, it is currently evaluating whether the states' method of
calculating the amounts they planned to expend for the covered programs
is in compliance with DOT guidance.
States face drastic fiscal challenges, and most states are estimating
that their fiscal year 2009 and 2010 revenue collections will be well
below estimates. In the face of these challenges, some states told us
that meeting the maintenance-of-effort requirements over time poses
significant challenges. For example, federal and state transportation
officials in Illinois told us that to meet its maintenance-of-effort
requirements in the face of lower-than-expected fuel tax receipts, the
state would have to use general fund or other revenues to cover any
shortfall in the level of effort stated in its certification.
Mississippi transportation officials are concerned about the
possibility of statewide, across-the-board spending cuts in 2010.
According to the Mississippi transportation department's budget
director, the agency will try to absorb any budget reductions in 2010
by reducing administrative expenses to maintain the state's level of
effort.
Other states have faced challenges calculating an appropriate level of
effort. For example, Georgia officials told us the state does not
routinely estimate future expenditures and had to develop an
alternative method for its revised certification using past
expenditures to extrapolate future expenditures. In Pennsylvania,
transportation officials told us that calculating the amounts for the
amended certification involved making estimates over three state fiscal
years and making assumptions about proposed budgets that are subject to
future legislative action.
As discussed earlier, states using Recovery Act funds must comply with
the requirements of the federal-aid highway program, including
environmental requirements, paying a prevailing wage in accordance with
federal Davis-Bacon requirements, complying with goals to ensure
disadvantaged business enterprises are not discriminated against in
awarding construction contracts, and using American-made iron and steel
in accordance with Buy America program requirements. We discussed the
impact these requirements were having on project costs and time frames
with officials in three states.[Footnote 30] Transportation officials
in Arizona, Mississippi, and New Jersey each reported that these
requirements were not causing increases in project costs and were not
delaying projects from moving forward. For example, New Jersey
officials stated that since these requirements apply to all highway
construction using federal highway funds, not solely to Recovery Act
funding, they were accustomed to complying with these requirements and
had a process in place for quickly documenting compliance. In addition,
these officials stated that to meet the Recovery Act's requirements to
spend the funds quickly, the state selected projects that had already
completed the environmental review process or that were relatively
simple projects that would have limited environmental impact.
State Fiscal Stabilization Fund:
The Recovery Act created a State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHEs). The U.S. Department of
Education (Education), the federal agency charged with administration
and oversight of the SFSF, distributes the funds on a formula basis,
with 81.8 percent of each state's allocation designated for the
education stabilization fund for local educational agencies (LEA) and
public IHEs. The remaining 18.2 percent of each state's allocation is
designated for the government services fund for public safety and other
government services, which may include education. Consistent with the
purposes of the Recovery Act--which include, in addition to stabilizing
state and local budgets, promoting economic recovery and preserving and
creating jobs--the SFSF can be used by states to restore cuts to state
education spending. In return for SFSF funding, a state must make
several assurances, including that it will maintain state support for
education at least at fiscal year 2006 levels. In order to receive SFSF
funds, each state must also assure it will implement strategies to
advance education reform in four specific ways as described by
Education:
1. Increase teacher effectiveness and address inequities in the
distribution of highly qualified teachers;
2. Establish a pre-K-through-college data system to track student
progress and foster improvement;
3. Make progress toward rigorous college-and career-ready standards and
high-quality assessments that are valid and reliable for all students,
including students with limited English proficiency and students with
disabilities; and:
4. Provide targeted, intensive support and effective interventions to
turn around schools identified for corrective action or restructuring.
[Footnote 31]
Along with these education reform assurances, additional state
assurances must address federal requirements concerning accountability,
transparency, reporting, and compliance with certain federal laws and
regulations.
Beginning in March 2009, the Department of Education issued a series of
fact sheets, letters, and other guidance to states on the SFSF.
Specifically, a March fact sheet, the Secretary's April letter to
Governors, and program guidance issued in April and May mention that
the purposes of the SFSF include helping stabilize state and local
budgets, avoiding reductions in education and other essential services,
and ensuring LEAs and public IHEs have resources to "avert cuts and
retain teachers and professors." The documents also link educational
progress to economic recovery and growth and identify four principles
to guide the distribution and use of Recovery Act funds: (1) spend
funds quickly to retain and create jobs; (2) improve student
achievement through school improvement and reform; (3) ensure
transparency, public reporting, and accountability; and (4) invest one-
time Recovery Act funds thoughtfully to avoid unsustainable continuing
commitments after the funding expires, known as the "funding cliff."
After meeting assurances to maintain state support for education at
least at fiscal year 2006 levels, states are required to use the
education stabilization fund to restore state support to the greater of
fiscal year 2008 or 2009 levels for elementary and secondary education,
public IHEs, and, if applicable, early childhood education programs.
States must distribute these funds to school districts using the
primary state education formula but maintain discretion in how funds
are allocated to public IHEs. If, after restoring state support for
education, additional funds remain, the state must allocate those funds
to school districts according to the Elementary and Secondary Education
Act of 1965 (ESEA), Title I, Part A funding formula. On the other hand,
if a state's education stabilization fund allocation is insufficient to
restore state support for education, then a state must allocate funds
in proportion to the relative shortfall in state support to public
school districts and public IHEs. Education stabilization funds must be
allocated to school districts and public IHEs and cannot be retained at
the state level.
Once education stabilization funds are awarded to school districts and
public IHEs, they have considerable flexibility over how they use those
funds. School districts are allowed to use education stabilization
funds for any allowable purpose under ESEA, the Individuals with
Disabilities Education Act (IDEA), the Adult Education and Family
Literacy Act, or the Carl D. Perkins Career and Technical Education Act
of 2006 (Perkins Act), subject to some prohibitions on using funds for,
among other things, sports facilities and vehicles. In particular,
Education's guidance states that because allowable uses under the
Impact Aid provisions of ESEA are broad, school districts have
discretion to use education stabilization funds for a broad range of
things, such as salaries of teachers, administrators, and support staff
and purchases of textbooks, computers, and other equipment. The
Recovery Act allows public IHEs to use education stabilization funds in
such a way as to mitigate the need to raise tuition and fees, as well
as for the modernization, renovation, and repair of facilities, subject
to certain limitations. However, the Recovery Act prohibits public IHEs
from using education stabilization funds for such things as increasing
endowments; modernizing, renovating, or repairing sports facilities; or
maintaining equipment. Education's SFSF guidance expressly prohibits
states from placing restrictions on LEAs' use of education
stabilization funds, beyond those in the law, but allows states some
discretion in placing limits on how IHEs may use these funds.
The SFSF provides states and school districts with additional
flexibility, subject to certain conditions, to help them address fiscal
challenges. For example, the Secretary of Education is granted
authority to permit waivers of state maintenance-of-effort (MOE)
requirements if a state certified that state education spending will
not decrease as a percentage of total state revenues. Education issued
guidance on the MOE requirement, including the waiver provision, on May
1, 2009. Also, the Secretary may permit a state or school district to
treat education stabilization funds as nonfederal funds for the purpose
of meeting MOE requirements for any program administered by Education,
subject to certain conditions. Education, as of June 29, 2009, has not
provided specific guidance on the process for states and school
districts to apply for the Secretary's approval.
States have broad discretion over how the $8.8 billion in the SFSF
government services fund are used. The Recovery Act provides that these
funds must be used for public safety and other government services and
that these services may include assistance for education, as well as
modernization, renovation, and repairs of public schools or IHEs.
On April 1, 2009, Education made at least 67 percent of each state's
SFSF funds[Footnote 32] available, subject to the receipt of an
application containing state assurances, information on state levels of
support for education and estimates of restoration amounts, and
baseline data demonstrating state status on each of the four education
reform assurances. If a state could not certify that it would meet the
MOE requirement, Education required it to certify that it will meet
requirements for receiving a waiver--that is, that education spending
would not decrease relative to total state revenues. In determining
state level of support for elementary and secondary education,
Education required states to use their primary formula for distributing
funds to school districts but also allowed states some flexibility in
broadening this definition. For IHEs, states have some discretion in
how they establish the state level of support, with the provision that
they cannot include support for capital projects, research and
development, or amounts paid in tuition and fees by students. In order
to meet statutory requirements for states to establish their current
status regarding each of the four required programmatic assurances,
Education provided each state with the option of using baseline data
Education had identified or providing another source of baseline data.
Some of the data provided by Education was derived from self-reported
data submitted annually by the states to Education as part of their
Consolidated State Performance Reports (CSPR), but Education also
relied on data from third parties, including the Data Quality Campaign
(DQC), the National Center for Educational Achievement (NCEA), and
Achieve.[Footnote 33] Education has reviewed applications as they
arrive for completeness and has awarded states their funds once it
determined all assurances and required information had been submitted.
Education set the application deadline for July 1, 2009. On June 24,
2009, Education issued guidance to states informing them they must
amend their applications if there are changes to the reported levels of
state support that were used to determine maintenance of effort or to
calculate restoration amounts.
Most States We Visited Have Received SFSF Funds and Have Planned to
Allocate Most Education Stabilization Funds to LEAs.
As of June 30, 2009, of the 16 states and the District of Columbia
covered by our review, only Texas had not submitted an SFSF
application. Pennsylvania recently submitted an application but had not
yet received funding. The remaining 14 states and the District of
Columbia had submitted applications and Education had made available to
them a total of about $17 billion in initial funding. As of June 26,
2009, only 5 of these states had drawn down SFSF Recovery Act funds. In
total, about 25 percent of allocated funds had been drawn down by these
states. (See table 5.)[Footnote 34]
Table 5: SFSF Recovery Act Allocations and Drawdowns for the 16 States
and the District of Columbia:
State: Arizona;
Total state allocation: $1,016,955,172;
Phase I funds made available to states as of June 30, 2009:
$681,359,965;
Funds drawn down by states as of June 26, 2009: $0;
Percentage of available funds drawn down by states: 0.
State: California;
Total state allocation: $5,960,267,431;
Phase I funds made available to states as of June 30, 2009:
$3,993,379,179;
Funds drawn down by states as of June 26, 2009: $2,867,792,114;
Percentage of available funds drawn down by states: 71.
State: Colorado;
Total state allocation: $760,242,539;
Phase I funds made available to states as of June 30, 2009:
$509,362,501;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: District of Columbia;
Total state allocation: $89,377,071;
Phase I funds made available to states as of June 30, 2009:
$59,882,637;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Florida;
Total state allocation: $2,700,292,474;
Phase I funds made available to states as of June 30, 2009:
$1,809,195,958;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Georgia;
Total state allocation: $1,541,319,187;
Phase I funds made available to states as of June 30, 2009:
$1,032,683,856;
Funds drawn down by states as of June 26, 2009: $189,592,329;
Percentage of available funds drawn down by states: 18.
State: Illinois;
Total state allocation: $2,055,171,987;
Phase I funds made available to states as of June 30, 2009:
$1,376,965,231;
Funds drawn down by states as of June 26, 2009: $1,038,987,579;
Percentage of available funds drawn down by states: 75.
State: Iowa;
Total state allocation: $472,339,542;
Phase I funds made available to states as of June 30, 2009:
$316,467,493;
Funds drawn down by states as of June 26, 2009: $40,000,000;
Percentage of available funds drawn down by states: 13.
State: Massachusetts;
Total state allocation: $994,258,205;
Phase I funds made available to states as of June 30, 2009:
$666,152,997;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Michigan;
Total state allocation: $1,592,138,132;
Phase I funds made available to states as of June 30, 2009:
$1,066,732,549;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Mississippi;
Total state allocation: $479,300,666;
Phase I funds made available to states as of June 30, 2009:
$321,131,446;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: New Jersey;
Total state allocation: $1,330,483,831;
Phase I funds made available to states as of June 30, 2009:
$891,424,167;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: New York;
Total state allocation: $3,017,796,810;
Phase I funds made available to states as of June 30, 2009:
$2,021,923,863;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: North Carolina;
Total state allocation: $1,420,454,235;
Phase I funds made available to states as of June 30, 2009:
$1,011,164,552;
Funds drawn down by states as of June 26, 2009: $150,867,275;
Percentage of available funds drawn down by states: 16.
State: Ohio;
Total state allocation: $1,789,376,483;
Phase I funds made available to states as of June 30, 2009:
$1,198,882,243;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Pennsylvania;
Total state allocation: $1,905,620,952;
Phase I funds made available to states as of June 30, 2009: [Empty];
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Texas;
Total state allocation: $3,973,437,816;
Phase I funds made available to states as of June 30, 2009: [Empty];
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Total;
Total state allocation: $31,098,832,533;
Phase I funds made available to states as of June 30, 2009:
$16,956,708,637;
Funds drawn down by states as of June 26, 2009: $4,287,239,297;
Percentage of available funds drawn down by states: 25.
Source: U.S. Department of Education.
[End of table]
Three of these states--Florida, Massachusetts, and New Jersey--said
they would not meet the maintenance-of-effort requirements but would
meet the eligibility requirements for a waiver and that they would
apply for a waiver. Most of the states' applications show that they
plan to provide the majority of education stabilization funds to LEAs,
with the remainder of funds going to IHEs. Several states and the
District of Columbia estimated in their application that they would
have funds remaining beyond those that would be used to restore
education spending in fiscal years 2009 and 2010. These funds can be
used to restore education spending in fiscal year 2011, with any amount
left over to be distributed to LEAs. Table 6 shows the amount of SFSF
funds received by states and how the states indicate they will divide
education stabilization funds between LEAs and IHEs, based on the
states' SFSF applications.
Table 6: Education Stabilization Funds Made Available to States and the
Division of Education Stabilization Funds between LEAs and IHEs:
State: Arizona;
Education stabilization funds made available as of June 30, 2009:
$557,352,452;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 57;
IHEs: 43;
Remaining amount: 0.
State: California;
Education stabilization funds made available as of June 30, 2009:
3,266,584,168;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 75;
IHEs: 25;
Remaining amount: 0.
State: Colorado;
Education stabilization funds made available as of June 30, 2009:
416,658,526;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 24;
IHEs: 48;
Remaining amount: 27.
State: District of Columbia;
Education stabilization funds made available as of June 30, 2009:
48,983,997;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 24;
IHEs: 2;
Remaining amount: 74.
State: Florida;
Education stabilization funds made available as of June 30, 2009:
1,479,922,294;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 79;
IHEs: 21;
Remaining amount: 0.
State: Georgia;
Education stabilization funds made available as of June 30, 2009:
844,735,394;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 74;
IHEs: 26;
Remaining amount: 0.
State: Iowa;
Education stabilization funds made available as of June 30, 2009:
258,870,409;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 67;
IHEs: 27;
Remaining amount: 7.
State: Illinois;
Education stabilization funds made available as of June 30, 2009:
1,126,357,559;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 98;
IHEs: 2;
Remaining amount: 0.
State: Massachusetts;
Education stabilization funds made available as of June 30, 2009:
544,913,152;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 60;
IHEs: 26;
Remaining amount: 14.
State: Michigan;
Education stabilization funds made available as of June 30, 2009:
872,587,225;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 95;
IHEs: 5;
Remaining amount: 0.
State: Mississippi;
Education stabilization funds made available as of June 30, 2009:
262,685,523;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 38;
IHEs: 10;
Remaining amount: 52.
State: New Jersey;
Education stabilization funds made available as of June 30, 2009:
729,184,969;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 93;
IHEs: 7;
Remaining amount: 0.
State: New York;
Education stabilization funds made available as of June 30, 2009:
1,653,933,720;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 95;
IHEs: 3;
Remaining amount: 2.
State: North Carolina;
Education stabilization funds made available as of June 30, 2009:
778,494,148;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 62;
IHEs: 11;
Remaining amount: 27.
State: Ohio;
Education stabilization funds made available as of June 30, 2009:
980,685,675;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 27;
IHEs: 21;
Remaining amount: 52.
State: Pennsylvania;
Education stabilization funds made available as of June 30, 2009: 0;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: [Empty];
IHEs: [Empty];
Remaining amount: [Empty].
State: Texas; Education stabilization funds made available as of June
30, 2009: 0;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: [Empty];
IHEs: [Empty];
Remaining amount: [Empty].
Source: GAO analysis of state applications for SFSF that were approved
by Education as of June 30, 2009.
[End of table]
States have flexibility in how they allocate education stabilization
funds among IHEs but, once they establish their state funding formula,
not in how they allocate the funds among LEAs. Florida and Mississippi
allocated funds among their IHEs, including universities and community
colleges, using formulas based on factors such as enrollment levels.
Other states allocated SFSF funds taking into consideration the budget
conditions of the IHEs. For example, Georgia allocated funds to
universities based on the degree to which each institution's budget had
been cut, and Illinois allocated funds among universities to provide
each university a share of SFSF funds proportionate to its share of
state support in fiscal year 2006. New York provided all SFSF funds
slated for IHEs to community colleges to avoid cutting community
college budgets. On the other hand, California planned to provide SFSF
funds to its state university systems and not to community colleges
because the universities had received significant budget cuts. However,
California may change this plan because budget cuts at community
colleges are now likely.
Regarding LEAs, most states planned to allocate funds based on states'
primary funding formulae. Many states are using a state formula based
on student enrollment weighted by characteristics of students and LEAs.
For example, Colorado's formula accounts for the number of students at
risk while the formula used by the District of Columbia allocates funds
to LEAs using weights for each student based on the relative cost of
educating students with specific characteristics. For example, an
official from Washington, D.C., Public Schools said a student who is an
English language learner may cost more to educate than a similar
student who is fluent in English.
States may use the government services portion of SFSF for education
but have discretion to use the funds for a variety of purposes.
Officials from Florida, Illinois, New Jersey, and New York reported
that their states plan to use some or most of their government services
funds for educational purposes. Other states are applying the funds to
public safety. For example, according to state officials, California is
using the government services fund for it corrections system, and
Georgia will use the funds for salaries of state troopers and staff of
forensic laboratories and state prisons.
Plans for SFSF Funds Usually Target Restoring Funding, and Many School
Districts Reported It Would Be Challenging to Use SFSF Funds for
Educational Reform:
Officials in many school districts told us that SFSF funds would help
offset state budget cuts and would be used to maintain current levels
of education funding. However, many school district officials also
reported that using SFSF funds for education reforms was challenging
given the other more pressing fiscal needs.
Although their plans are generally not finalized, officials in many
school districts we visited reported that their districts are preparing
to use SFSF funds to prevent teacher layoffs, hire new teachers, and
provide professional development programs. Most school districts will
use the funding to help retain jobs that would have been cut without
SFSF funding. For example, Miami Dade officials estimate that the
stabilization funds will help them save nearly two thousand teaching
positions. State and school district officials in eight states we
visited (California, Colorado, Florida, Georgia, Massachusetts,
Michigan, New York, and North Carolina) also reported that SFSF funding
will allow their state to retain positions, including teaching
positions that would have been eliminated without the funding. In the
Richmond County School System in Georgia, officials noted they plan to
retain positions that support its schools, such as teachers,
paraprofessionals, nurses, media specialists and guidance counselors.
Local officials in Mississippi reported that budget-related hiring
freezes had hindered their ability to hire new staff, but because of
SFSF funding, they now plan to hire. In addition, local officials in a
few states told us they plan to use the funding to support teachers.
For example, officials in Waterloo Community and Ottumwa Community
School Districts in Iowa as well as officials from Miami-Dade County in
Florida cited professional development as a potential use of funding to
support teachers.
Although school districts are preventing layoffs and continuing to
provide educational services with the SFSF funding, most did not
indicate they would use these funds to pursue educational reform.
School district officials cited a number of barriers, which include
budget shortfalls, lack of guidance from states, and insufficient
planning time. In addition to retaining and creating jobs, school
districts have considerable flexibility to use these resources over the
next 2 years to advance reforms that could have long-term impact.
However, a few school district officials reported that addressing
reform efforts was not in their capacity when faced with teacher
layoffs and deep budget cuts. In Flint, Michigan, officials reported
that SFSF funds will be used to cope with budget deficits rather than
to advance programs, such as early childhood education or repairing
public school facilities. According to the Superintendent of Flint
Community Schools, the infrastructure in Flint is deteriorating, and no
new school buildings have been built in over 30 years. Flint officials
said they would like to use SFSF funds for renovating buildings and
other programs, but the SFSF funds are needed to maintain current
education programs.
Officials in many school districts we visited reported having
inadequate guidance from their state on using SFSF funding, making
reform efforts more difficult to pursue. School district officials in
most states we visited reported they lacked adequate guidance from
their state to plan and report on the use of SFSF funding. Without
adequate guidance and time for planning, school district officials told
us that preparing for the funds was difficult. At the time of our
visits, several school districts were unaware of their funding amounts,
which, officials in two school districts said, created additional
challenges in planning for the 2009-2010 school year. One charter
school we visited in North Carolina reported that layoffs will be
required unless their state notifies them soon how much SFSF funding
they will receive. State officials in North Carolina, as well as in
several other states, told us they are waiting for the state
legislature to pass the state budget before finalizing SFSF funding
amounts for school districts.
IHEs Plan to Use SFSF Funds for Faculty Salaries and Other Purposes and
Expect the Funds to Save Jobs and Mitigate Tuition Increases:
Although many IHEs had not finalized plans for using SFSF funds, the
most common expected use for the funds at the IHEs we visited was to
pay salaries of IHE faculty and staff.[Footnote 35] Officials at most
of the IHEs we visited told us that, due to budget cuts, their
institutions would have faced difficult reductions in faculty and staff
if they were not receiving SFSF funds. In California and North
Carolina, according to the IHE officials, the states instructed their
IHEs to use the funds to cover IHE payroll expenses in certain months
in spring 2009. Other IHEs expected to use SFSF funds in the future to
pay salaries of certain employees during the year. For example,
according to an official at Hillsborough Community College in Florida,
to avoid using the nonrecurring SFSF money for recurring expenses, the
IHE expects to use the funds to pay salaries of about 400 nonpermanent
adjunct faculty members. Georgia Perimeter College plans to use its
SFSF funds to retain 51 full-time and 17 part-time positions in its
science department, and the University of Georgia plans to use the
funds to retain approximately 160 full-time positions in various
departments.
Several IHEs we visited are considering other uses for SFSF funds.
Officials at the Borough of Manhattan Community College in New York
City want to use some of their SFSF funds to buy energy saving light
bulbs and to make improvements in the college's very limited space such
as, by creating tutoring areas and study lounges. Northwest Mississippi
Community College wants to use some of the funds to increase e-learning
capacity to serve the institution's rapidly increasing number of
students. Several other IHEs plan to use some of the SFSF funds for
student financial aid. For example, Hudson Valley Community College
plans to use some SFSF funds to provide financial aid to 500 or more
low-income students who do not qualify for federal Pell Grants or New
York's Tuition Assistance Program.
Because many IHEs expect to use SFSF funds to pay salaries of current
employees that they likely would not have been able to pay without the
SFSF funds, IHEs officials said that SFSF funds will save jobs.
Officials at several IHEs noted that this will have a positive impact
on the educational environment such as, by preventing increases in
class size and enabling the institutions to offer the classes that
students need to graduate. In addition to preserving existing jobs,
some IHEs anticipate creating jobs with SFSF funds. For example, New
York IHEs we spoke with plan to use SFSF funds to hire additional staff
and faculty. The University of South Florida is considering using some
SFSF money to hire postdoctoral fellows to conduct scientific research,
and Florida A&M University plans to use the funds to hire students for
assistantships. Besides saving and creating jobs at IHEs, officials
noted that SFSF monies will have an indirect impact on jobs in the
community. For example, University of Mississippi officials noted that,
without the SFSF funds, the university probably would have shut down
ongoing capital projects building dormitories and upgrading campus
heating and cooling systems, and this would have had a negative impact
on construction and engineering jobs in the community. Jackson State
University officials said SFSF monies will help local contractors and
vendors who conduct business with the university because the funds will
enable the university to recover from severe budget cuts and resume
normal spending. IHE officials also noted that SFSF funds will
indirectly improve employment because some faculty being paid with the
funds will help unemployed workers develop new skills, including skills
in fields, such as health care, that have a high demand for trained
workers.
State and IHE officials also believe that SFSF funds are reducing the
size of tuition and fee increases. For example, Florida officials said
that the 8 percent tuition increase approved by the Florida Legislature
likely would have been much higher if the state had not received SFSF
funds. Officials estimated that without SFSF funds, the increase in
tuition necessary to compensate for decreases in state funding would
have been 21 percent for students at community colleges and 35 percent
for students at universities. A University of California official
stated that, if the university system had not received SFSF funds and
had to use fee increases to cover its budget shortfall, system-wide
fees would have increased by about 24 percent instead of the approved
9.3 percent increase.
Education Provided Preliminary Baseline Data to States to Ease the
Application Process but Plans to Implement a New Approach for the
Second Round of Applications:
U.S. Department of Education officials told us that to benchmark
states' current position on the four education reform assurances and to
ease the application process, they had provided base-line data for each
state and asked states to certify their acceptance of these data as
part of their application for SFSF funding, or provide alternate data.
In their applications to Education for SFSF funds, states were required
to provide assurances that they were committed to advancing education
reform in these four areas. The table below lists the four assurances
and the data elements and sources Education chose to set base-line
benchmarks for states. Education officials told us that these data,
while not perfect, were the best available. Officials also told us that
the data in the application package were preliminary, and that they
plan to develop a more complete set of performance measures under each
assurance for states to use or develop for the final SFSF application.
Table 7: Data Source and Data Elements for the Four SFSF Education
Reform Assurances:
Assurance: 1. Increasing Equity in Teacher Distribution;
Data source: States report these data annually on their Consolidated
State Performance Report (CSPR);
Data element: The number and percentage of core academic courses that
are taught by highly qualified teachers in high-poverty schools and low-
poverty schools (presented separately for elementary and high schools).
Assurance: 2. Improving Collection and Use of Data;
Data source:
* The Data Quality Campaign and National Center for Education
Achievement 2008 survey assessing the status of state educational data
systems;
* State officials, primarily K-12 state data managers, self-report on
the capabilities of their data systems;
Data element:
* The survey identifies 10 essential elements of a longitudinal data
system;
* Survey results indicate which states have achieved which elements
(e.g., 28 states reported being able to match student-level preschool-
12 data with higher education data.)
Assurance: 3. Standards and Assessments: 3-1. Enhancing the Quality of
Academic Assessments;
Data source:
1. State information chart, available at [hyperlink,
http://www.ed.gov.policy/elsec/guid/stateletters/ssc/xls];
2. State-specific letters the U.S. Department of Education sent to
state education agency officials in January and February 2009;
Data element:
1. This chart identifies whether a state's assessment systems are
"approved" or "pending" or not yet approved or pending for reading and
mathematics and for science, based on the results of Education's peer
review process;
2. These letters describe what states must do to satisfy assessment
requirements set forth in NCLB.
Assurance: 3. Standards and Assessments: 3.2 Inclusion of Children with
Disabilities and Limited English Proficient Student;
Data source: State information chart, available at [hyperlink,
http://www.ed.gov.policy/elsec/guid/stateletters/ssc/xls];
Data element:
1. This chart identifies whether a state's assessment systems are
"approved," "not approved" or "pending";
2. These letters describe the state's current status related to the
inclusion of children with disabilities and limited English proficient
students in state assessments, the validity and reliability of the
assessments for such children, and the provision of accommodations.
Assurance: 3. Standards and Assessments: 3.3 Improving State Academic
Content and Achievement Standards;
Data source: Achieve's 2009 report Closing the Expectations Gap, a
report based on a survey of state policymakers to assess states'
policies regarding standards and assessments;
Data element: The survey provides information on what states are
currently doing to align their standards, graduation requirements, and
assessments with college and career expectations.
Assurance: 4. Supporting Struggling Schools;
Data source: States report these data annually on their Consolidated
State Performance Report (CSPR);
Data element: The number and names of schools in corrective action and
restructuring for the 2008-2009 school year; These data are based on
assessments in the 2007-2008 school year.
Source: GAO analysis of SFSF applications and descriptions of Achieve
and Data Quality Campaigns Surveys.
[End of table]
While Education officials told us that the base-line data are
preliminary, staff working at Achieve and the Data Quality Campaign--
the two educational advocacy groups whose survey data are being used to
measure two of the assurances--told us that while they believed their
data set appropriate baselines, they did not believe measuring change
against these baselines would be the best accountability mechanism. One
staff member said that since many states were already poised to make
substantial progress in implementing improved data systems in the next
two years, it would not be appropriate to automatically attribute state
progress in implementing the elements of a longitudinal data system to
Recovery Act funds. Staff at the Data Quality Campaign said that they
have told Education that it was fine to use their survey as a baseline,
but that they were not comfortable with the survey becoming a primary
auditing tool; doing so could change the incentives for states to
respond to the survey. Moreover, staff at the Data Quality Campaign
believe the more appropriate way to monitor progress is to ask states
to publicly post information and analyses on a series of metrics,
because by posting such information states would be verifying the
capacity of their longitudinal data systems.
Education officials told us that in making phase II SFSF funding
available to states, Education will ask states to report on a series of
performance measures for each of the four major themes for reform,
which align with the education reform assurances. According to these
officials, the performance measures developed for the second and final
application will allow Education to fulfill three main purposes: (1) to
get a status report on states' progress in developing performance
measures, (2) to put plans in place to gather the relevant information
if performance measures are not available, and 3) to be able to track
how states are progressing over time with respect to education reform.
Education officials also said that they were aware of potential issues
regarding data quality and that they plan to conduct an initial staff
review and may later conduct an external review of the reliability of
data used for its performance measures.
Seven States We Visited Have Drawn Down Title I Recovery Act Funds and
Made Funds Available to Local Educational Agencies:
The Recovery Act provides $10 billion to help local educational
agencies educate disadvantaged youth by making additional funds
available beyond those regularly allocated through Title I, Part A of
the Elementary and Secondary Education Act (ESEA) of 1965.[Footnote 36]
The Recovery Act requires these additional funds to be distributed
through states to local educational agencies (LEAs) using existing
federal funding formulas, which target funds based on such factors as
high concentrations of students from families living in poverty. In
using the funds, local educational agencies are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of these funds by September 30, 2010.[Footnote 37] The
Department of Education is advising LEAs to use the funds in ways that
will build the agencies' long-term capacity to serve disadvantaged
youth, such as through providing professional development to
teachers.[Footnote 38] The Department of Education made the first half
of states' Recovery Act Title I, Part A funding available on April 1,
2009, with the 16 states and the District in our review receiving more
than $3 billion of the $5 billion released to all of the states and
territories. The initial state allocations and amounts drawn down as of
June 26, 2009, are shown in table 8 below.
Table 8: Title I, Part A Recovery Act Allocations and Drawdowns for 16
States and the District of Columbia:
State: Arizona;
Total state allocation: $195,087,322;
Funds made available to states as of April 1, 2009: $97,543,661;
Funds drawn down by states as of June 26, 2009: $16,000;
Percentage of available funds drawn down by states:
