Recovery Act
Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed Gao ID: GAO-09-1016 September 23, 2009This report, the third 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 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 (District)-- representing about 65 percent of the U.S. population and two-thirds of the intergovernmental federal assistance available. Under the Recovery Act, GAO collected and analyzed documents and interviewed state and local officials. GAO also analyzed federal agency guidance and spoke with Office of Management and Budget (OMB) officials and with program officials at the federal agencies overseeing Recovery Act programs.
Across the United States, as of September 11, 2009, the Department of the Treasury had outlayed about $48 billion of the estimated $49 billion in Recovery Act funds projected for use in states and localities in federal fiscal year 2009, as shown in the figure. More than three quarters of the 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. All 16 states and the District have drawn down increased Medicaid FMAP grant awards of just over $20.3 billion for October 1, 2008, through September 15, 2009, which amounted to over 87 percent of funds available. All states and the District experienced Medicaid enrollment growth. 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. Most states also reported that they would use freed-up funds to finance general state budget needs. A substantial portion of the approximately $35 billion the Recovery Act appropriated for highway infrastructure projects and public transit has been obligated nationwide and in the states and the District that are the focus of GAO's review. As of September 1, the Department of Transportation (DOT) had obligated approximately $11 billion for almost 3,800 highway infrastructure and other eligible projects in the 16 states and the District and had reimbursed these 17 jurisdictions about $604 million. As of September 15, 2009, the District and 15 of the 16 states covered by our review had received approval from Education for their initial SFSF funding applications. Pennsylvania had submitted an application to Education, but it had not yet been approved. As of August 28, 2009, Education had made $21 billion in SFSF grants for education available to the 15 states and the District--of which over $7.7 billion had been drawn down. While many program officials, employers, and participants believe the Workforce Investment Act summer youth program activities have been successful, measuring actual outcomes has proven challenging and may reveal little about what the program achieved. 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. Moreover, current guidance does not achieve the level of accountability needed to effectively respond to risks. States and localities as nonfederal recipients of Recovery Act funds are required to report quarterly on a number of measures, including the use of funds and estimates of the number of jobs created and retained. This unprecedented level of detailed information to be reported by a large number of recipients into a new centralized reporting system raises possible risk for the quality and reliability of these data.
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-09-1016, Recovery Act: Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed
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Report to the Subcommittee on Oversight of Government Management, the
Federal Workforce, and the District of Columbia, Committee on Homeland
Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
September 2009:
Report to Congressional Committees:
Recovery Act:
Funds Continue to Provide Fiscal Relief to States and Localities, While
Accountability and Reporting Challenges Need to Be Fully Addressed
GAO-09-1016:
GAO Highlights:
Highlights of GAO-09-1016, a report to the Senate and House Committees
on Appropriations, Senate Committee on Homeland Security and
Governmental Affairs, and House Committee on Oversight and Government
Reform.
Why GAO Did This Study:
This report, the third 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 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 (District)”
representing about 65 percent of the U.S. population and two-thirds of
the intergovernmental federal assistance available. Under the Recovery
Act, GAO collected and analyzed documents and interviewed state and
local officials. GAO also analyzed federal agency guidance and spoke
with Office of Management and Budget (OMB) officials and with program
officials at the federal agencies overseeing Recovery Act programs.
What GAO Found:
Across the United States, as of September 11, 2009, the Department of
the Treasury had outlayed about $48 billion of the estimated $49
billion in Recovery Act funds projected for use in states and
localities in federal fiscal year 2009, as shown in the figure. More
than three quarters of the 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.
Figure:
[Refer to PDF for image: vertical bar graph]
Federal Fiscal Year (Oct. 1 - Sept. 30): 2009;
Original estimate: $48.9 billion;
Actual as of September 11, 2009: $48 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2010;
Original estimate: $107.7 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2011;
Original estimate: $63.4 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2012;
Original estimate: $23.3 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2013;
Original estimate: $14.4 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2014;
Original estimate: $9.1 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2015;
Original estimate: $5.7 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2016;
Original estimate: $2.5 billion.
Source: GAO analysis of CBO, Federal Funds Information for States, and
Recovery.gov data.
[End of figure]
Increased Medicaid FMAP Funding:
All 16 states and the District have drawn down increased Medicaid FMAP
grant awards of just over $20.3 billion for October 1, 2008, through
September 15, 2009, which amounted to over 87 percent of funds
available. All states and the District experienced Medicaid enrollment
growth. 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. Most states also
reported that they would use freed-up funds to finance general state
budget needs. The increased FMAP continues to help states finance their
growing Medicaid programs, but state and District officials expressed
concern about the longer term sustainability of their Medicaid programs
after the increased FMAP funds are no longer available, beginning in
January 2011.
Highway Infrastructure Investment and Transit Funding:
A substantial portion of the approximately $35 billion the Recovery Act
appropriated for highway infrastructure projects and public transit has
been obligated nationwide and in the states and the District that are
the focus of GAO‘s review. As of September 1, the Department of
Transportation (DOT) had obligated approximately $11 billion for almost
3,800 highway infrastructure and other eligible projects in the 16
states and the District and had reimbursed these 17 jurisdictions about
$604 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, and could employ people quickly. For transit funds, GAO focused
on the Transit Capital Assistance Program, which received $6.9 billion”
or 82 percent”of the Recovery Act public transit funds. Recovery Act
funds obligated under this program are primarily being used for
upgrading transit facilities, improving bus fleets, and conducting
preventive maintenance. Recipients of highway and transit Recovery Act
funds, such as state departments of transportation and transit
agencies, are subject to multiple reporting requirements. Although some
guidance has been provided from OMB and DOT, state highway and transit
officials expressed concerns and challenges about reporting
requirements. GAO recommends that the Secretary of DOT continue to
reach out to state transportation departments and transit agencies to
identify common problems in accurately fulfilling reporting
requirements and provide additional guidance, as appropriate.
State Fiscal Stabilization Fund:
As of September 15, 2009, the District and 15 of the 16 states covered
by our review had received approval from Education for their initial
SFSF funding applications. Pennsylvania had submitted an application to
Education, but it had not yet been approved. As of August 28, 2009,
Education had made $21 billion in SFSF grants for education available
to the 15 states and the District”of which over $7.7 billion had been
drawn down. GAO has previously reported that school districts said they
would use SFSF funds to maintain current levels of education funding,
particularly for retaining teachers and staff and current education
programs. They also told GAO that SFSF funds would help offset state
budget cuts. Education has not completed monitoring plans for SFSF, and
it is not clear that states have begun to put in place subrecipient
monitoring systems that comply with Education‘s requirements. GAO
recommends that Education take further action to ensure states
understand and carry out their responsibility to monitor subrecipients
of SFSF funds and consider providing training and technical assistance
to states to help them develop state monitoring plans for SFSF.
Other Recovery Act Programs:
GAO makes recommendations in this report on other Recovery Act
programs, as well. While many program officials, employers, and
participants believe the Workforce Investment Act summer youth program
activities have been successful, measuring actual outcomes has proven
challenging and may reveal little about what the program achieved. GAO
recommends that the Secretary of Labor provide additional guidance on
how to measure work readiness”Labor‘s indicator to gauge the effect of
the summer youth activities. Also, to build on the important steps the
Department of Housing and Urban Development (HUD) has already taken to
monitor housing agencies‘ use of Recovery Act funds, GAO recommends
that the Secretary of HUD expand criteria for selecting housing
agencies for onsite reviews to include housing agencies with open
Single Audit findings that may affect the use of and reporting on
Recovery Act funds. In addition, the Recovery Act appropriated $5
billion over 3 years for the DOE Weatherization Assistance Program.
However, most states have not begun to weatherize homes, partly because
of concerns about prevailing wage rate requirements. Labor completed
its determination of the wage rates on September 3, 2009.
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. Moreover, current guidance does not achieve the level of
accountability needed to effectively respond to risks. OMB is vetting a
pilot program for early written communication of internal control
deficiencies for Recovery Act programs that, if properly scoped to
achieve sufficient coverage of Recovery Act programs, could address
concerns about the timeliness of Single Audit reporting. Finally, state
auditors need additional flexibility and funding to undertake the added
Single Audit responsibilities under the Recovery Act.
Impact:
States and localities as nonfederal recipients of Recovery Act funds
are required to report quarterly on a number of measures, including the
use of funds and estimates of the number of jobs created and retained.
This unprecedented level of detailed information to be reported by a
large number of recipients into a new centralized reporting system
raises possible risk for the quality and reliability of these data. The
first of these reports is due in October 2009.
GAO‘s Crosscutting Recommendations:
GAO reports on progress in addressing its prior recommendations that
OMB provide:
* clearer accountability for recipient financial data,
* program-specific examples of recipient reports, outreach to
nonfederal recipients, and further guidance on program performance
measures; and;
* timely notification of funding provided within a state to key state
officials and a master schedule for anticipated new or revised federal
agency guidance.
What GAO Recommends:
GAO makes recommendations to federal agencies to address accountability
and transparency issues. They are discussed on the next page and in the
report. GAO also has recommendations to OMB (on pages 122 and 131-134)
and a matter for congressional consideration (on page 123). The report
draft was discussed with federal and state officials who generally
agreed with its contents.
View [hyperlink, http://www.gao.gov/products/GAO-09-1016] or key
components. For state summaries, see GAO-09-1017SP. For more
information, contact J. Christopher Mihm at (202) 512-6806 or
mihmj@gao.gov.
[End of section]
Contents:
Letter:
Background:
States Continue Use of Recovery Act Funds While Preparing for First
Required Report Cycle:
A Growing Number of Housing Agencies Are Obligating and Beginning to
Draw Down Recovery Act Formula Funds:
DOE‘s Weatherization Assistance Program:
Most States Have Not Begun to Weatherize Homes Partly Because of Their
Concerns about Prevailing Wage Rate Requirements:
Local Agencies Generally Have Responsibility for Procuring
Weatherization Materials:
DOE Has Issued Guidance to Mitigate Risk in the Weatherization Program,
and Some States Have Established Additional Measures:
States Are Beginning to Monitor Recovery Act Weatherization Impacts,
and Most Plan to Meet Reporting Requirements:
Crosscutting Recommendations:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Department of Labor:
Appendix III: Local Entities Visited by GAO in Selected States and the
District of Columbia:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Original and Increased Quarterly FMAPs for Fiscal Year 2009
for 16 States and the District (Percentage Points):
Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the
District, as of September 15, 2009:
Table 3: Recovery Act Highway Apportionments and Obligations Nationwide
and in Selected States as of September 1, 2009:
Table 4: Recovery Act Highway Reimbursements Nationwide and in Selected
States as of September 1, 2009:
Table 5: Recovery Act Highway Apportionments and Obligations for
Suballocated Areas Nationwide and in Selected States as of September 1,
2009:
Table 6: Percentage of Recovery Act Transit Capital Assistance Program
Funds Obligated Nationwide and Selected States and Urbanized Areas as
Reported by FTA:
Table 7: SFSF Education Stabilization Funds Made Available by the U.S.
Department of Education and Funds Drawn Down by States:
Table 8: State Drawdowns of Education Stabilization Funds Compared to
Reported Expenditures by LEAs and IHEs in States We Reviewed That Could
Provide the Information:
Table 9: ESEA Title I, Part A Recovery Act Funds Made Available to and
Drawn Down by States We Reviewed, and Funds Expended by LEAs in States
That Could Provide the Information:
Table 10: IDEA, Part B Recovery Act Funds Made Available to and Drawn
Down by States We Reviewed, and Funds Expended by LEAs in States That
Could Provide the Information:
Table 11: Recovery Act-Funded WIA Youth Participation in Selected
States, as of July 31, 2009:
Table 12: Selected States‘ Drawdowns as of August 31, 2009:
Table 13: Comparison of the Average Percentage of Funds Obligated and
Drawn Down among Housing Agencies Grouped by Size of Recovery Act
Grant, as of September 5, 2009:
Table 14: DOE‘s Allocation of the Recovery Act‘s Weatherization Funds
for 16 States and the District of Columbia, as of August 31, 2009:
Table 15: Use of Recovery Act Weatherization Funds by 14 States, as of
August 31, 2009:
Table 16: Prevailing Wage Rates for Weatherization Work:
Table 17: Selected states and the District implemented tracking
mechanism to identify the state‘s prime recipients and subrecipients
for reporting purposes, in accordance with OMB guidance Section 1512:
Table 18: State Approaches to Recouping Recovery Act Administrative
Costs:
Table 19: Location of Highway Projects Visited by GAO:
Table 20: Location of Transit Projects Visited by GAO:
Table 21: Educational Institutions Visited by GAO (to Review Use of
State Fiscal Stabilization Fund):
Table 22: School Districts Visited by GAO (Local School Districts:
Title I-LEA, IDEA):
Table 23: Workforce Investment Act Youth Programs Visited by GAO:
Table 24: Weatherization Programs Visited by GAO:
Table 25: Localities Visited by GAO to Assess Other Recovery Act
Programs and Issues:
Figures:
Figure 1: Estimated versus Actual Federal Outlays to States and
Localities under the Recovery Act:
Figure 2: Distribution of Federal Outlays to States and Localities by
Function as of September 11, 2009:
Figure 3: Percentage Increase in Medicaid Enrollment from October 2007
to August 2009, for 16 States and the District:
Figure 4: National Recovery Act Highway Obligations by Project
Improvement Type as of September 1, 2009:
Figure 5: Nationwide Transit Capital Assistance Program Recovery Act
Obligations by Project Type as of September 1, 2009:
Figure 6: National Draw Down Rates for Recovery Act Funds for the WIA
Youth Program, as of August 31, 2009:
Figure 7: Percentage of Public Housing Capital Fund Formula Grants
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide, as
of September 5, 2009:
Figure 8: Percentage 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 September 5, 2009:
Figure 9: Comparison of Troubled Housing Agencies and Nontroubled
Housing Agencies‘ Obligation and Drawdown Rates:
Figure 10: Comparison of Obligation and Drawdown Rates for Nontroubled
Agencies with No Audit Findings, Troubled Agencies, and Nontroubled
Agencies with Audit Findings:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
September 23, 2009:
Report to Congressional Committees:
The Congressional Budget Office (CBO) has reported that various
indicators suggest the recession is likely to end within the next few
months; however, the budget outlook for the states continues to
indicate signs of stress. The National Conference of State Legislatures
reported that states are collectively facing $142.6 billion in budget
gaps for fiscal year 2010 as they enacted their budgets. While the
availability of increased Recovery Act funds will help, states will
continue to be fiscally strained. In addition, states are building new
or augmenting existing reporting systems to comply with the
unprecedented and complex reporting requirements. The first reporting
deadline for prime recipients is October 10, 2009.
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. This report, the third in response to the act‘
s mandate, addresses the following: (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. The report provides overall findings, makes
recommendations, and discusses the status of actions in response to the
recommendations we made in our earlier reports.
As reported in our April and July 2009 reviews, to address these
objectives, we selected a core group of 16 states and the District that
we will follow over the next few years. Individual summaries for this
core group are compiled into an electronic supplement, [hyperlink,
http://www.gao.gov/products/GAO-09-1017SP], and are also accessible
through GAO‘s Recovery Act page at [hyperlink,
http://www.gao.gov/recovery]. Our 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 168 local entities within the 16 states and the District.
Our work for this report focused on nine federal programs primarily
because they have begun disbursing funds to states or have known or
potential risks. 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 leads, 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 Commerce, 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 July 3, to September 18, 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. As we reported in
July, our analysis of actual federal outlays reported on [hyperlink,
http://www.recovery.gov] suggests that Recovery Act spending is
slightly ahead of the initial estimates. In fact, as of September 11,
2009, the federal Treasury has paid out approximately $48 billion to
states and localities, which is about 98 percent of payments estimated
for fiscal year 2009. 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 [hyperlink,
http://www.recovery.gov].
Figure 1: Estimated versus Actual Federal Outlays to States and
Localities under the Recovery Act:
[Refer to PDF for image: vertical bar graph]
[Refer to PDF for image: vertical bar graph]
Federal Fiscal Year (Oct. 1 - Sept. 30): 2009;
Original estimate: $48.9 billion;
Actual as of September 11, 2009: $48 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2010;
Original estimate: $107.7 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2011;
Original estimate: $63.4 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2012;
Original estimate: $23.3 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2013;
Original estimate: $14.4 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2014;
Original estimate: $9.1 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2015;
Original estimate: $5.7 billion.
Federal Fiscal Year (Oct. 1 - Sept. 30): 2016;
Original estimate: $2.5 billion.
Source: GAO analysis of CBO, Federal Funds Information for States, and
Recovery.gov data.
[End of figure]
As of September 11, 2009, 84 percent of the $48 billion in federal
outlays has been provided through two programs: the increased Federal
Medical Assistance Percentage (FMAP) grant awards and the State Fiscal
Stabilization Fund administered by the Department of Education. Highway
spending accounts for an additional 4 percent. The distribution of
total federal outlays to states and localities is shown in figure 2.
Figure 2: Distribution of Federal Outlays to States and Localities by
Function as of September 11, 2009:
[Refer to PDF for image: pie-chart]
Energy and environment: 0.5%;
Income security: 2.7%;
Community development: 2.7%;
Transportation: 5.2%;
Education and training: 26.7%;
Health: 62.3%.
Source: GAO analysis of data from CBO and Federal Funds Information for
States.
[End of figure]
As recipients of Recovery Act funds and as partners with the federal
government in achieving Recovery Act goals, states and local units of
government are expected to invest Recovery Act funds with a high level
of transparency and to be held accountable for results under the
Recovery Act. Under the Recovery Act, direct recipients of the funds
are expected to report quarterly on a number of measures, including the
use of funds and an estimate of the number of jobs created or the
number of jobs retained by projects and activities. These measures are
part of the recipient reports required under Section 1512(c) of the
Recovery Act and will be submitted by recipients starting in October
2009. The Office of Management and Budget (OMB) issued its implementing
guidance for recipient reporting on June 22, 2009. These reporting
requirements apply only to nonfederal recipients of funding, including
all entities receiving Recovery Act funds directly from the federal
government such as state and local governments, private companies,
educational institutions, nonprofits, and other private organizations.
However, the recipient reporting requirement only covers a defined
subset of the Recovery Act‘s funding. OMB‘s guidance, consistent with
the statutory language in the Recovery Act, states that these reporting
requirements apply to recipients who receive funding through
discretionary appropriations, not recipients receiving funds through
entitlement programs, such as Medicaid, or tax programs. Recipient
reporting also does not apply to individuals.
Among other things, the guidance clarified that recipients of Recovery
Act funds are required to report only on jobs directly created or
retained by Recovery Act-funded projects, activities, and contracts.
Recipients are not expected to report on the employment impact on
materials suppliers (’indirect“ jobs) or on the local community (’
induced“ jobs). The OMB guidance also provided additional instruction
on calculating on a full-time-equivalent (FTE) basis the number of jobs
created or retained by Recovery Act funding.
The Recovery Act assigns us a range of responsibilities to help promote
accountability and transparency. In addition to our bimonthly reviews,
we are required to comment on the jobs created and retained as reported
by recipients of Recovery Act funding. Section 1512 of the act requires
each nonfederal entity that has received Recovery Act funds to report
quarterly on the use of the funds, including jobs created and retained
by projects and activities. To implement this requirement, which will
be effective October 10, 2009, OMB is developing a central collection
system. This first report will cover cumulative activity since the
Recovery Act‘s passage in February 2009.
Recipients have 10 days after the end of each calendar quarter to
report. OMB has laid out a reporting and quality review process that
allows recipients and delegated subrecipients to prepare and enter
their information 1 to 10 days following the end of the quarter. During
days 11 through 21, prime recipients will be able to review the data to
ensure that complete and accurate reporting information is provided
prior to a federal agency review and comment period beginning on the
22nd day. During days 22 to 29 following the end of the quarter,
federal agencies will perform data quality reviews and will notify the
recipients and delegated subrecipients of any data anomalies or
questions. The original submitter must complete data corrections no
later than the 29th day following the end of the quarter. Since this is
a cumulative reporting process, additional corrections can take place
on a quarterly basis. We are to comment on the jobs data no later than
45 days after recipients have reported. We expect to issue our report
no later than November 24, 2009.
States Continue Use of Recovery Act Funds While Preparing for First
Required Report Cycle:
Increased FMAP Continues to Help States Finance Their Growing Medicaid
Programs, but States Expressed Concern about the Longer-Term
Sustainability of Their Medicaid Programs:
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
Federal Medical Assistance Percentage (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 1] On February 25, 2009, the Centers for
Medicare & Medicaid Services (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.
Under the Recovery Act, the FMAP rates in the 16 states and the
District were increased an average of 9.01 percentage points for the
first two quarters of fiscal year 2009, with increases ranging from 6.2
percentage points in Iowa to 12.24 percentage points in Florida.
Further, qualifying increases in unemployment rates in the third and
fourth quarters of fiscal year 2009 contributed to additional increases
in FMAP rates in 14 states and the District. The FMAP rates for the 2
remaining states”California and Florida”have not changed since the
second quarter of fiscal year 2009. By the end of fiscal year 2009,
FMAP rates in the sample states and the District will have increased an
average of 10.57 percentage points when compared to the original fiscal
year 2009 FMAP rates.
Table 1: Original and Increased Quarterly FMAPs for Fiscal Year 2009
for 16 States and the District (Percentage Points):
State: Arizona;
Original fiscal year 2009 FMAP[A]: 65.77;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 75.01;
Increased fiscal year 2009 FMAP, third quarter[C]: 75.93;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 75.93;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 9.24;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 10.16.
State: California;
Original fiscal year 2009 FMAP[A]: 50.00; Increased fiscal year 2009
FMAP, first and second quarters[B]: 61.59; Increased fiscal year 2009
FMAP, third quarter[C]: 61.59; Increased fiscal year 2009 FMAP, fourth
quarter[D]: 61.59; Difference between original 2009 FMAP and increased
first and second quarter FMAPs: 11.59;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 11.59.
State: Colorado;
Original fiscal year 2009 FMAP[A]: 50.00;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 58.78;
Increased fiscal year 2009 FMAP, third quarter[C]: 61.59;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.59;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 8.78;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 11.59.
State: District of Columbia;
Original fiscal year 2009 FMAP[A]: 70.00;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 77.68;
Increased fiscal year 2009 FMAP, third quarter[C]: 79.29;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 79.29;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 7.68;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 9.29.
State: Florida;
Original fiscal year 2009 FMAP[A]: 55.40;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 67.64;
Increased fiscal year 2009 FMAP, third quarter[C]: 67.64;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 67.64;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 12.24;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 12.24.
State: Georgia;
Original fiscal year 2009 FMAP[A]: 64.49;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 73.44;
Increased fiscal year 2009 FMAP, third quarter[C]: 74.42;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 74.42;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 8.95;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 9.93.
State: Illinois;
Original fiscal year 2009 FMAP[A]: 50.32;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 60.48;
Increased fiscal year 2009 FMAP, third quarter[C]: 61.88;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.88;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 10.16;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 11.56.
State: Iowa;
Original fiscal year 2009 FMAP[A]: 62.62;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 68.82;
Increased fiscal year 2009 FMAP, third quarter[C]: 68.82;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 70.71;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 6.20;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 8.09.
State: Massachusetts;
Original fiscal year 2009 FMAP[A]: 50.00;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 58.78;
Increased fiscal year 2009 FMAP, third quarter[C]: 60.19;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.59;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 8.78;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 11.59.
State: Michigan;
Original fiscal year 2009 FMAP[A]: 60.27;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 69.58;
Increased fiscal year 2009 FMAP, third quarter[C]: 70.68;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 70.68;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 9.31;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 10.41.
State: Mississippi;
Original fiscal year 2009 FMAP[A]: 75.84;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 83.62;
Increased fiscal year 2009 FMAP, third quarter[C]: 84.24;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 84.24;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 7.78;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 8.40.
State: New Jersey;
Original fiscal year 2009 FMAP[A]: 50.00;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 58.78;
Increased fiscal year 2009 FMAP, third quarter[C]: 61.59;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.59;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 8.78;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 11.59.
State: New York;
Original fiscal year 2009 FMAP[A]: 50.00;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 58.78;
Increased fiscal year 2009 FMAP, third quarter[C]: 60.19;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.59;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 8.78;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 11.59.
State: North Carolina;
Original fiscal year 2009 FMAP[A]: 64.60;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 73.55;
Increased fiscal year 2009 FMAP, third quarter[C]: 74.51;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 74.51;
Difference between original 2009 FMAP and increased
first and second quarter FMAPs: 8.95; Difference between original 2009
FMAP and increased fourth quarter
FMAP[D]: 9.91.
State: Ohio;
Original fiscal year 2009 FMAP[A]: 62.14;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 70.25;
Increased fiscal year 2009 FMAP, third quarter[C]: 72.34;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 72.34;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 8.11;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 10.20.
State: Pennsylvania;
Original fiscal year 2009 FMAP[A]: 54.52;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 63.05;
Increased fiscal year 2009 FMAP, third quarter[C]: 64.32;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 65.59;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 8.53;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 11.07.
State: Texas;
Original fiscal year 2009 FMAP[A]: 59.44;
Increased fiscal year 2009 FMAP, first and second quarters[B]: 68.76;
Increased fiscal year 2009 FMAP, third quarter[C]: 68.76;
Increased fiscal year 2009 FMAP, fourth quarter[D]: 69.85;
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 9.32;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 10.41.
Average FMAP increase:
Difference between original 2009 FMAP and increased first and second
quarter FMAPs: 9.01;
Difference between original 2009 FMAP and increased fourth quarter
FMAP[D]: 10.57.
Source: GAO analysis of HHS data.
[A] The original fiscal year 2009 FMAP rates were published in the
Federal Register on November 28, 2007. A correction for the North
Carolina FMAP rate was published on December 7, 2007.
[B] The increased fiscal year 2009 FMAP rates for the first and second
quarters were published in the Federal Register on April 21, 2009.
[C] The increased fiscal year 2009 FMAP rates for the third quarter
were published in the Federal Register on August 4, 2009. In this
notice, the Department of Health and Human Services (HHS) changed the
methodology it uses to calculate the increased FMAP rates.
Specifically, HHS calculates preliminary FMAP rates prior to the start
of each quarter using Bureau of Labor Statistics preliminary
unemployment estimates and adjusts these FMAP rates once the final
unemployment numbers become available.
[D] The increased FMAP rates listed for the fourth quarter were
provided by CMS on September 16, 2009.
[End of table]
From October 2007 to August 2009, overall Medicaid enrollment in the 16
states and the District increased by 10.4 percent,[Footnote 2] with
nearly two-thirds of the increase attributable to the population group
of children”a group that is sensitive to economic downturns. In
addition, just over one quarter of the overall enrollment increase was
attributable to the population group of adults who are nonaged,
nonblind, or nondisabled. 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.
The percentage increase in enrollment, however, varied widely, ranging
from just under 3 percent in New Jersey to about 27 percent in Arizona.
(See figure 3.) Comparing growth rates within this time period,
enrollment grew most rapidly in early 2009, generally from January to
April 2009. All states experienced an enrollment increase during this
period, and growth was especially pronounced in five states that
reported increases between 4 percent and 5 percent. Overall enrollment
growth in recent months”from May to August 2009”was less rapid, though
variation existed among states. For example, while enrollment in
Illinois and Pennsylvania remained relatively stable, changing less
than 1 percent from May to August 2009, Arizona experienced over 7
percent growth in Medicaid enrollment during that time.
Figure 3: Percentage Increase in Medicaid Enrollment from October 2007
to August 2009, for 16 States and the District:
[Refer to PDF for image: vertical bar graph]
Quintile category: 0% to less than 5%:
State: NJ;
Percentage change: 2.75.
State: MA;
Percentage change: 4.13.
Quintile category: 5% to less than 10%:
State: CA;
Percentage change: 5.56.
State: PA;
Percentage change: 6.12.
State: MS;
Percentage change: 6.96.
State: NY;
Percentage change: 8.28.
State: GA;
Percentage change: 8.36.
State: TX;
Percentage change: 8.49.
State: DC;
Percentage change: 9.1.
State: IL;
Percentage change: 9.29.
Quintile category: 10% to less than 15%:
State: MI;
Percentage change: 10.59.
State: NC;
Percentage change: 13.
Quintile category: 15% to less than 20%:
State: IA;
Percentage change: 17.25.
Quintile category: 20% to less than 25%:
State: CO;
Percentage change: 21.54.
State: OH;
Percentage change: 23.01.
State: FL;
Percentage change: 23.24.
Quintile category: 25% to less than 30%:
State: AZ;
Percentage change: 27.12.
Source: GAO analysis of state data.
Note: The percentage increase is based on state reported Medicaid
enrollment data for October 2007 to August 2009. Five states”Colorado,
Florida, Georgia, Massachusetts, and Mississippi”did not provide
estimated Medicaid enrollment data for August 2009. In addition, two of
these states”Massachusetts and Georgia”did not provide enrollment data
for July 2009.
[End of figure]
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 $20.3 billion for October 1, 2008, through September 15,
2009, which amounted to 87.37 percent of funds available. (See table
2.) In addition, except for the initial weeks that increased FMAP funds
were available, the weekly rate at which the 16 states and the District
have drawn down these funds has remained relatively constant.
Nationally, the 50 states, the District, and several of the largest
U.S. insular areas combined have drawn down nearly $30 billion as of
September 15, 2009, which represents 87.83 percent of the increased
FMAP grants awarded for all four quarters of federal fiscal year 2009.
Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the
District, as of September 15, 2009 (Dollars in thousands):
State: Arizona;
FMAP grant awards[A]: $796,917;
Funds drawn: $731,511;
Percentage of funds drawn: 91.79.
State: California;
FMAP grant awards[A]: $4,369,087;
Funds drawn: $3,661,264;
Percentage of funds drawn: 83.80.
State: Colorado;
FMAP grant awards[A]: $347,181;
Funds drawn: $248,562;
Percentage of funds drawn: 71.59.
State: District of Columbia;
FMAP grant awards[A]: $139,985;
Funds drawn: $121,596;
Percentage of funds drawn: 86.86.
State: Florida;
FMAP grant awards[A]: $1,861,572;
Funds drawn: $1,697,990;
Percentage of funds drawn: 91.21.
State: Georgia;
FMAP grant awards[A]: $706,961;
Funds drawn: $659,852;
Percentage of funds drawn: 93.34.
State: Illinois;
FMAP grant awards[A]: $1,323,337;
Funds drawn: $1,160,455;
Percentage of funds drawn: 87.69.
State: Iowa;
FMAP grant awards[A]: $197,601;
Funds drawn: $162,266;
Percentage of funds drawn: 82.12.
State: Massachusetts;
FMAP grant awards[A]: $1,173,742;
Funds drawn: $1,161,009;
Percentage of funds drawn: 98.92.
State: Michigan;
FMAP grant awards[A]: $1,007,280;
Funds drawn: $933,982;
Percentage of funds drawn: 92.72.
State: Mississippi;
FMAP grant awards[A]: $312,932;
Funds drawn: $277,914;
Percentage of funds drawn: 88.81.
State: New Jersey;
FMAP grant awards[A]: $858,931;
Funds drawn: $798,119;
Percentage of funds drawn: 92.92.
State: New York;
FMAP grant awards[A]: $4,478,505;
Funds drawn: $3,820,719;
Percentage of funds drawn: 85.31.
State: North Carolina;
FMAP grant awards[A]: $904,469;
Funds drawn: $904,469;
Percentage of funds drawn: 100.00.
State: Ohio;
FMAP grant awards[A]: $1,228,943;
Funds drawn: $1,062,898;
Percentage of funds drawn: 86.49.
State: Pennsylvania;
FMAP grant awards[A]: $1,569,221;
Funds drawn: $1,058,644;
Percentage of funds drawn: 67.46.
State: Texas;
FMAP grant awards[A]: $1,985,036;
Funds drawn: $1,862,379;
Percentage of funds drawn: 93.82.
Sample total:
FMAP grant awards[A]: $23,261,701;
Funds drawn: $20,323,630;
Percentage of funds drawn: 87.37.
National total:
FMAP grant awards[A]: $34,141,536;
Funds drawn: $29,988,161;
Percentage of funds drawn: 87.83.
Source: GAO analysis of HHS data as of September 15, 2009.
[A] The FMAP grant awards listed are for all four quarters of federal
fiscal year 2009, through September 15, 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 have
reduced the funds that states would otherwise have to use for their
Medicaid programs, and states have reported using funds that have
become freed up as the result of increased FMAP for a variety of
purposes. Most commonly, states reported using these funds in fiscal
year 2009 to cover increased Medicaid caseloads, maintain Medicaid
eligibility, benefits and services, and finance general state budget
needs. In addition, more than half of the states reported using these
funds to maintain payment rates for practitioners and institutional
providers, and five states reported using these funds to meet prompt
pay requirements. Three states and the District also reported using
these funds to help finance their State Children‘s Health Insurance
Program (CHIP) or other local or state public health insurance
programs. Although virtually all the states and the District reported
using these funds for multiple purposes, two states”North Carolina and
Ohio”reported using the freed-up funds exclusively to finance general
state budget needs”a decrease from the five states that reported doing
so in our July 2009 report. When asked about their planned uses of
these funds in fiscal year 2010, the states and the District provided
similar responses.
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 3]
* States must comply with prompt payment requirements.[Footnote 4]
* 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 5]
* 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 6]
To comply with these requirements, 12 states reported making
adjustments to their Medicaid programs, including rescinding prior
program changes or canceling planned changes that conflicted with these
requirements. For example, 10 states reported making changes to comply
with the act‘s prompt payment requirement, including modifying payment
cycles, reporting processes, or information systems. In addition, 9
states reported making changes to comply with the act‘s requirement
that states may not implement more restrictive eligibility standards,
methodologies, or procedures. Most commonly, these states rescinded or
canceled programmatic changes that conflicted with this requirement.
For example, Arizona had to rescind a programmatic adjustment, which
had changed the frequency of Medicaid eligibility determinations for
certain individuals from 12 to 6 months, and Ohio did not proceed with
a proposal to reduce slots in a waiver program”CMS or the state
determined that these changes constituted a more restrictive
eligibility standard. In addition, three states”Arizona, Illinois, and
New York”made adjustments to meet the requirement related to the
contributions of political subdivisions to the nonfederal share. For
example, according to New York officials, the local share of the
nonfederal share of Medicaid expenditures is based on a statutory
formula that provides for a percentage increase each year, subject to
an existing cap. New York reported that it reduced the local
contribution to the nonfederal share to ensure that the percentage of
the local share will remain at the September 30, 2008, level over the
course of the recession adjustment period. Regarding the Recovery Act
requirement that prohibits states from depositing or crediting amounts
attributable to increased FMAP into any reserve or rainy-day fund, none
of the states reported making adjustments related to this requirement.
When asked about the difficulty of complying with these requirements,
Medicaid officials from over half of the states reported that
compliance had been ’somewhat difficult“ or ’difficult,“ and most
commonly cited the act‘s prompt payment requirement as the most
problematic.[Footnote 7] In addition, several states cited the lack of
timely agency guidance as a factor complicating their efforts to comply
with Recovery Act requirements. To clarify the act‘s requirements
related to prompt payment, CMS issued a State Medicaid Director‘s
letter on July 30, 2009, that defined terms related to prompt payment
and described the method states should use to calculate days during a
quarter that they have met or not met the prompt payment requirement.
CMS officials told us that, in developing the guidance, they sought
comments from states and national organizations. In addition, CMS
officials said that states will use existing electronic reporting
processes to report on the extent to which they comply with this
requirement and to adjust for prior period increased FMAP draw down
amounts for days they were not in compliance.[Footnote 8] In addition,
CMS published another State Medicaid Director‘s letter on August 19,
2009, that, among other things, specified programmatic changes that
could affect states‘ eligibility for the increased FMAP.[Footnote 9]
When asked about whether the increased FMAP funds were sufficient to
protect and maintain their Medicaid programs during the economic
downturn, the 16 states and the District varied in their responses.
Seven states and the District reported that the amount of increased
FMAP funds they received in fiscal year 2009 was sufficient to maintain
their Medicaid programs, including maintaining eligibility, services,
and benefits. In contrast, two states”California and Massachusetts”
reported that the amount of increased FMAP they received in fiscal year
2009 was not sufficient for this purpose. For example, Massachusetts
reported that even with the increased FMAP, increased caseload and
utilization had led the state to reduce its Medicaid expenditures by
freezing many provider rates at prior year levels. The remaining seven
states reported that the funds were only somewhat sufficient to
maintain their Medicaid programs during fiscal year 2009. In looking
forward, fewer states characterized the amount of increased FMAP they
expect to receive in fiscal year 2010 as sufficient to maintain their
Medicaid programs compared to fiscal year 2009. Specifically, some
states indicated that budget conditions in their state are projected to
worsen in state fiscal year 2010 and that the increased FMAP would not
be sufficient to close Medicaid budget shortfalls or avoid provider
rate cuts or other expenditure containment measures.
As for the longer-term outlook for their Medicaid programs, the
District and all but one of the sample states reported concerns about
the sustainability of their Medicaid programs after the increased FMAP
funds are no longer available, beginning in January 2011. When asked
about the nature of their concerns, states generally reported doubt
that their economies and revenues would fully recover before the
increased FMAP funding ended and noted that Medicaid enrollment is
continuing to increase. As a result, states were unsure that they could
maintain eligibility levels, benefits and services, or provider rates
without the increased FMAP. Specifically, several states referred to
the loss of increased FMAP funds as a ’cliff“ over which the state
would fall when funding was no longer available or similarly described
their concern that the change in the state‘s share of funds would be
substantial. For example, New Jersey estimated that it would need $550
million in order to replace the increased FMAP funds in fiscal year
2011. Most states and the District reported that they did not have
definitive plans to address their concerns about sustaining their
programs without the increased FMAP. Four states, however, reported
considering various Medicaid program reductions, such as reductions in
benefits and eligibility, once the increased FMAP funds are no longer
available.
Over Half of All Highway and Transit Recovery Act Funding Has Been
Obligated:
A substantial portion of the approximately $35 billion the Recovery Act
provided for highway infrastructure projects and public transportation
has been obligated nationwide and in the 16 states and the District of
Columbia (District) that are the focus of our review. For example, $18
billion of Recovery Act highway funds had been obligated for almost
7,000 projects nationwide, and $10.6 billion had been obligated for
nearly 3,800 projects in each of the 16 states and the District, as of
September 1, 2009.[Footnote 10] In addition, as of September 1, 2009,
$5.95 billion of the Recovery Act Transit Capital Assistance Program
funds had been obligated nationwide.[Footnote 11] The total
distribution of project funds by improvement type among the 16 selected
states and the District closely mirrors the national distribution, with
pavement improvement projects accounting for almost half of the
obligated funds. However, we found wide differences among selected
states in how funds were used, federal reimbursement rates to states
for payments made for completed work, and in the rate of obligation of
highway funds required by the Recovery Act to be suballocated for
metropolitan, regional, and local use.
For Recovery Act transit funds, we focused our review on the Transit
Capital Assistance Program, which received approximately 82 percent of
Recovery Act transit funds, and eight selected states and the District.
Nationwide, Recovery Act funds obligated under this program are
primarily being used for improving bus fleets, upgrading transit
facilities, and conducting preventive maintenance. The Recovery Act
required that 50 percent of Transit Capital Assistance Program funds be
obligated by September 1, 2009, and the Federal Transit Administration
(FTA) has concluded that all states and urbanized areas met this
requirement. Even though the Department of Transportation (DOT) and OMB
have issued guidance for recipient reporting of job creation and
retention, state highway and transit officials expressed some concern
and challenges with meeting the act‘s reporting requirements, including
the calculation of direct jobs and full-time-employee equivalents from
work hours.
States Continuing to Dedicate Most Recovery Act Highway Funds for
Pavement Projects, but Differences among States‘ Approaches in Use of
Funds Starting to Emerge:
The Recovery Act provides funding to 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 Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to states through federal-aid highway program
mechanisms, and states must follow existing program requirements, 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 Act
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. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
In March 2009, $26.7 billion was apportioned to all 50 states and the
District for highway infrastructure and other eligible projects. As of
September 1, 2009, $18 billion of the funds had been obligated for
almost 7,000 projects nationwide, and $10.6 billion had been obligated
for nearly 3,800 projects in the 16 states and the District. (See table
3).
Table 3: Recovery Act Highway Apportionments and Obligations Nationwide
and in Selected States as of September 1, 2009 (Dollars in millions):
State: Arizona;
Apportionment: $522;
Obligations[A]: Obligated amount: $293;
Obligations[A]: Percentage of apportionment obligated: 56.
State: California;
Apportionment: $2,570;
Obligations[A]: Obligated amount: $1,978;
Obligations[A]: Percentage of apportionment obligated: 77;
State: Colorado;
Apportionment: $404;
Obligations[A]: Obligated amount: $290;
Obligations[A]: Percentage of apportionment obligated: 72.
State: District of Columbia;
Apportionment: $124;
Obligations[A]: Obligated amount: $116;
Obligations[A]: Percentage of apportionment obligated: 94.
State: Florida;
Apportionment: $1,347;
Obligations[A]: Obligated amount: $1,001;
Obligations[A]: Percentage of apportionment obligated: 74.
State: Georgia;
Apportionment: $932;
Obligations[A]: Obligated amount: $546;
Obligations[A] Percentage of apportionment obligated: 59.
State: Illinois;
Apportionment: $936;
Obligations[A]: Obligated amount: $736;
Obligations[A]: Percentage of apportionment obligated: 79.
State: Iowa;
Apportionment: $358;
Obligations[A]: Obligated amount: $319;
Obligations[A]: Percentage of apportionment obligated: 89.
State: Massachusetts;
Apportionment: $438;
Obligations[A]: Obligated amount: $203;
Obligations[A]: Percentage of apportionment obligated: 46.
State: Michigan;
Apportionment: $847;
Obligations[A]: Obligated amount: $575;
Obligations[A]: Percentage of apportionment obligated: 68.
State: Mississippi;
Apportionment: $355;
Obligations[A]: Obligated amount: $289;
Obligations[A]: Percentage of apportionment obligated: 82.
State: New Jersey;
Apportionment: $652;
Obligations[A]: Obligated amount: $473;
Obligations[A]: Percentage of apportionment obligated: 73.
State: New York;
Apportionment: $1,121;
Obligations[A]: Obligated amount: $783;
Obligations[A]: Percentage of apportionment obligated: 70.
State: North Carolina;
Apportionment: $736;
Obligations[A]: Obligated amount: $453;
Obligations[A]: Percentage of apportionment obligated: 62.
State: Ohio;
Apportionment: $936;
Obligations[A]: Obligated amount: $429;
Obligations[A]: Percentage of apportionment obligated: 46.
State: Pennsylvania;
Apportionment: $1,026;
Obligations[A]: Obligated amount: $875;
Obligations[A]: Percentage of apportionment obligated: 85.
State: Texas;
Apportionment: $2,250;
Obligations[A]: Obligated amount: $1,195;
Obligations[A]: Percentage of apportionment obligated: 53.
Selected states total:
Apportionment: $15,551;
Obligations[A]: Obligated amount: $10,554;
Obligations[A]: Percentage of apportionment obligated: 68.
U.S. total:
Apportionment: $26,660;
Obligations[A]: Obligated amount: $17,964;
Obligations[A]: Percentage of apportionment obligated: 67.
Source: GAO analysis of FHWA data.
Notes: 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). 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. 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 $288 million of
apportioned funds that were transferred from FHWA to FTA for transit
projects in Arizona, California, Colorado, Florida, Georgia, Iowa,
Massachusetts, New York, and North Carolina. 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, $8.7 billion of the $18 billion obligated
nationwide as of September 1, 2009, is being used for projects such as
reconstructing or rehabilitating deteriorated roads, including $4.1
billion for road resurfacing projects. As we reported in July 2009,
many state officials told us they selected a large percentage of
resurfacing and other pavement improvement projects because those
projects 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. Figure 4 shows
obligations by the types of road and bridge improvements being made.
Figure 4: National Recovery Act Highway Obligations by Project
Improvement Type as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (71 percent, $12.78 billion):
Pavement
improvement ($8.71 billion), 48%;
Pavement widening ($2.95 billion), 16%;
New road construction ($1.12 billion), 6%.
Bridge projects total (12 percent, $2.19 billion):
Bridge improvement ($977 million), 5%;
Bridge replacement ($821 million), 5%;
New bridge construction ($393 million), 2%.
Other (17 percent, $3 billion):
Other ($3 billion), 17%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. ’Other“ includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
In addition to pavement improvement, other projects that have
significant funds obligated include pavement widening, with $3 billion
obligated, and bridge replacement and improvements, with $1.8 billion
obligated. The total distribution of project funds by improvement type
among the 16 states and the District closely mirrors the distribution
nationally”however, wide differences in how funds were used exist among
states. For example, 40 percent of Florida‘s funds have been obligated
for pavement widening projects (compared with 16 percent nationally)
and 21 percent for construction of new roads and bridges (compared with
8 percent nationally), while 17 percent of funds have been obligated
for pavement improvements (compared with 48 percent nationally). In
Ohio, 37 percent of funds have been obligated for new road and bridge
construction. In contrast, roughly 85 percent of funds in both Iowa and
Massachusetts have been obligated for pavement improvements. While the
states we visited for our July 2009 report had selected pavement
improvement projects because they could be quickly implemented, during
our recent interviews we found states are beginning to select projects
entailing more complexity. For example, Massachusetts has begun
selecting more complicated construction and reconstruction projects,
including a new $36 million pedestrian bridge project.
As of September 1, 2009, $1.4 billion had been reimbursed nationwide by
the Federal Highway Administration (FHWA), including $604 million
reimbursed to the 16 states and the District.[Footnote 12] These
amounts represent 8 percent of the $18 billion obligated nationwide and
6 percent of the $10.6 billion obligated in the 16 states and the
District. DOT officials told us that although funding has been
obligated for almost 7,000 projects, it may be months before states
request reimbursement from FHWA. In particular, 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.
Once the contract is awarded and contractors mobilize and begin work,
states make payments to these contractors for completed work; states
may request reimbursement from FHWA. FHWA, through the U.S. Treasury,
is required to pay the state promptly after the state pays out of its
own funds for project-related purposes. The funds reimbursed to the
states as of September 1, 2009, increased over 500 percent in about 2
months. As we reported in July 2009, FHWA had reimbursed $233 million
nationwide, including $96.4 million to the 16 states and the District
as of June 25, 2009. FHWA officials told us the increased level of
reimbursements was expected as the number of contracts awarded and
projects currently under construction continue to increase. Table 4
shows the level of reimbursements nationwide and in the 16 states and
the District.
Table 4: Recovery Act Highway Reimbursements Nationwide and in Selected
States as of September 1, 2009 (Dollars in millions):
State: District of Columbia;
Reimbursement:
