I-Team: Missouri stimulus report card

2:39 AM, May 10, 2011   |    comments
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  • Missouri stimulus report card
  • Missouri State Capitol building in Jefferson City.

By Leisa Zigman, I-Team Reporter

St. Louis, MO (KSDK) - It has been more than two years since billions of borrowed stimulus dollars entered the economy. Its number one mission was to create or save jobs. So how's that working out in Missouri? Remember, we were all promised accountability and transparency, but an I-Team investigation found, we did not get it.

The government data is inconsistent. The posted numbers don't tell the entire story and according to Missouri's auditor, there hasn't been adequate oversight.

First, NewsChannel 5 looked at the exact amount of American Recovery and Reinvestment Act (ARRA) dollars Washington awarded Missouri since 2009. It seems like a simple question, but in reality it is hard to get one simple answer.

The federal government's own website, Recovery.gov, shows Missouri was awarded $4,813,086,363, resulting in the creation of 13,541 jobs this past quarter. That works out to more than $355,000 per job created.

But if you look at Propublica, an independent nonprofit investigative website, the numbers are much higher. It shows Missouri was awarded $7,812,388,110. Divide that by the 13,541 jobs and it works out to $576,000 per job.

"The federal government and the state do a terrible job telling people where their money is going," said Jack Strauss, director of the Simon Center for Regional economic forecasting at St. Louis University. "And the recovery act gets an even worse grade than that because it's very unclear how this money was spent."

"Missouri and the federal government get a D & F for accountability and transparency regarding who got what and why."

The grades don't get much better when it comes to oversight.

Missouri State Auditor Tom Schweich found certain government agencies did not keep track of hundreds of millions of stimulus dollars.

"Between the Department of Higher Education and the Department of Elementary and Secondary Education there is almost $800 million in stimulus money not being properly monitored," Schweich said.

After the audit, the Missouri Department of Higher Education promised to start monitoring the money. But an official with the Department of Elementary and Secondary Education (DESE) said real time monitoring isn't possible. He defended the Department's end of year audits now in place.

"The state of Missouri has about 900,000 kids, about 70,000 educators, and in this building we have 200 people," said Ron Lankford, deputy commissioner of DESE.

Because of other duties, not one of those 200 employees is assigned full time to track stimulus dollars.

"This would never happen in the private sector. You would never allow your money to be spent without any monitoring or with huge delays in the monitoring," Schweich said

Despite higher unemployment, a lack of oversight in some state departments and poor transparency, most economists NewsChannel 5 consulted for this report say the stimulus did help to create jobs in Missouri. More important, they say, is that the money saved thousands of teacher, police and firefighter jobs, at least temporarily.

"The math says the crisis would have been substantially worse without the stimulus. Because when you spend money, it has to go somewhere. It just doesn't go in a little hole," Strauss said.

But what about figures showing the cost to taxpayers is somewhere between $350,000 and $570,000 per job?

"That is a myth! It is a complete myth! It ignores the fact that a third of the stimulus was in tax cuts," Strauss said.

And he says more went to help fund Missouri's social safety net which includes Medicaid and unemployment benefits. All of the numbers don't add up says Lloyd Smith, the executive director of Missouri's Republican Party.

"There have been 67,000 jobs lost in Missouri in just the past three years," Smith said. "It doesn't matter if you are in Caruthersville, St. Louis, or St. Joe, that is too much money to spend from taxpayers running it through the bureaucracy trying to save or create jobs here in Missouri."

Not true, according to St. Louis Mayor Francis Slay, who boasts that stimulus money is funding 14 infrastructure projects and has created more than 1,200 jobs.

"Improved lighting, traffic signaling, sidewalks, other things to help improve our neighborhoods in terms of aesthetics," Slay said.

Most experts agree the stimulus fix was temporary. The unanswered question is what happens when the funding ends?

"In 2010, Ladue School District, one of the state's richest, started to lay off teachers. Once the stimulus money has ended, states are now cutting back," Strauss said.

In fact, just last week Missouri's Department of Transportation announced it plans to cut more than 11,000 positions.

Below are comments from economists at Webster University, University Missouri St. Louis, and Washington University. NewsChannel 5 asked them to weigh in on whether stimulus dollars have been a success or failure in Missouri when it comes to creating or saving jobs.


Don Phares, Professor of Economics and Public Policy-Emeritus at University of Missouri-St. Louis

On February 13, 2009 Congress passed the American Recovery and Reinvestment Act. It had three broad goals. To provide $288 billion in tax cuts for working families and businesses; $224 billion for education and certain entitlement programs such as unemployment benefits, and health care; and $275 billion for federal grants, contracts, and loans. Federal spending on the stimulus package has brought to the forefront many questions about its impact on the economy. Perhaps the most central one is did it provide benefits to the nation and its constituent states. The following will look into how Missouri was affected, by how much, and what are the outcomes of the stimulus program on the state.

The immediate response to the question "did stimulus spending help Missouri?" is yes. Such an infusion of funding into the state's economy would necessarily provide positive economic impacts. But there remains the question of how much help was provided, what was the nature of the assistance, how was it distributed across the state, and is the impact on-going or simply a short-term "shot in the arm."

Through late 2010 the state of Missouri had received some $7.8 billion in stimulus funds out of a national distribution of $430 billion; this is about 1.8% of the total and almost exactly Missouri's percentage of the total US population. Thus the funding impact was not more or less than its share of the national population. To put the stimulus it in a broader perspective it amounted to about 3.25% of Missouri's gross domestic product. This is a measure of total economic activity in the state. It is equal to about 34% of the state budget that was just approved by the Missouri legislature. At a macro level its impact was far from inconsequential.

The same is true at a micro level within the state. On a per capita basis Missouri received $1,305 or about 93% of the overall national distribution. The per capita distribution within the state, however, varied considerably by county around this statewide average. The amount ranged from $65 per resident in Gasconade County with $976,000 to over $48,000 in Cole County with some $3.6 billion. The reason that Cole County is so high, "off the chart," is because funds for state government were registered in Cole County where state government is located. These funds were used to support state programs such as K-12 education, Medicaid and health related, workforce training and investment, and energy conservation. They were distributed to various state agencies and contained in a myriad of more than 200 separate stimulus projects.

Within the per resident range of $65 to $48,000 most of the counties received less than $1,000 and tended to cluster in the $400-$700 range. Only 21 counties received $1,000 or more in stimulus funds. Not surprisingly the largest recipients were the city of St. Louis with $547 million ($1,534 per capita), St. Louis County with $468 million ($471 per capita), and Jackson County with $612 million ($867 per capita).

In summary the largest allocation of stimulus funds went to support state government projects (Cole County), some $3.6 billion. Another $1.6 billion went to the state's three largest population centers. The remaining amount $2.6 billion went to other counties for use on local projects.

The overall impact on Missouri was considerable. But there are questions to be addressed. What was the spending impact of the funds? What is their long term effect on the state's residents and economy? Was the stimulus just a one time, short term "shot in the arm" or will its benefits carry into the future?

It needs to be noted clearly that the stimulus funds were new to the state and thus had an impact beyond the actual stimulus amount. Each dollar worked through a "multiplier" process which expanded the original infusion of new funds. The total economic impact might have been more than $10 billion depending on the size of the multiplier, which conservatively would be 1.3-1.4. The new spending had an impact on spending, household income, and employment in the state as well as additional revenues generated for governmental jurisdictions in the state.

The final impact of the stimulus is to be determined by how much of the original infusion continues to stimulate new employment, spending, and income in the state. This is an issue for which there is no answer yet since the stimulus is still working through the state economy. It seems highly unlikely that the impact will settle back to zero once the stimulus funds have stopped but by how much more than zero it will be is a very complex question to be answered in the future, if ever.

Did stimulus spending help Missouri? Yes, it did. It provided funds to support existing employment, generated additional income for state residents, and assisted businesses to remain. Also, it provided much needed funding for a myriad of public programs. At the state level this entailed support to school districts for teachers, medical support through Medicaid, unemployment benefits, job retraining and workforce development. For local governments the funding went to public safety, K-12 education, public infrastructure, and a variety of other local programs.

We may never know what the full impact of the stimulus spending was but there definitely were benefits that accrued to the state of Missouri, even if only in the short term.

(NOTE: Information on stimulus spending was derived from Pro Publica at their web site <propublica.org>.)

Patrick Rishe, Associate Professor of Economics at Webster University

The stimulus has had a slight positive effect. What folks don't understand is that there is usually a lag between when a stimulus is approved and when the money from a stimulus actually effects consumer spending and employer hiring.
Be it for political or bureaucratic reasons, when stimuli packages are passed, it takes time for appropriations to actually get finalized and actualized...and that process can be 1 or 2 years removed from the stimulus approval process.

Lastly, even when those monies trickle into people's pockets or a firm's accounts, many folks feel 'burned' by what's happened over the last 3-4 years...and thus, their confidence is shaken. So rather than spend the stimulus money or hire more workers, they tuck the money away because they try to safeguard against future uncertainty.

Michele Boldrin, PhD, the Joseph Gibson Hoyt Distringuished Professor in Arts and Sciences and the chair of the Department of Economics:

I think a bit of recent history on employment trends in Missouri will help to illuminate the issues (Missouri Economic Report: 2010). In Missouri, manufacturing employment was trending downward long before the recession began in 2008 - the loss of jobs in manufacturing can be described as "structural". Other industries were particularly hard hit by the recession - job losses in those industries were "cyclical" in nature: construction and financial activities, transportation and retail trade. Since the recession ended - most would say sometime last year - we saw the largest gains in employment in financial activities, education, health services, and (to a lesser degree) manufacturing.

Now, the question is: "How does this relate to ARRA spending?" According to the data (Recovery.gov), the top funding agencies to Missouri recipients were the Departments of Education, Transportation, Agriculture, Energy, and Health and Human Services (in that order). A total of $4.8billion has been awarded to Missouri recipients in the forms of grants, awards, and loans; $2.7billion has been received to date.

-The money spent for education went for a variety of reasons, among which were the funding of new programs, schooling for those wishing to re-tool, and construction of new educational facilities. Since some of the funding went for new programs and to pay tuition, it is not surprising that gains in employment were seen in education. The permanency of these jobs, however, is doubtful. Please note: some of the positive effects of increased educational spending would also show up in the construction industry (the new educational facilities being built.)

-Transportation dollars were spent for such projects as road and bridge repair and airport modernization: new jobs did not appear to be created but, presumably, the losses were somewhat mitigated by this spending.

-Agricultural dollars were loaned or spent in the form of grants primarily for the construction of rural infrastructure (fire stations, water delivery systems, sewers, etc.) Again, we would expect to see the majority of these effects showing up in construction employment accounts, where losses would be somewhat mitigated by the increased spending.

-Energy spending was mostly for transitions to more environmentally-friendly sources of energy ("fuel-efficient"). We would expect to see firms replacing capital with that which takes advantage of fuel-efficiency, but expect little change in their labor force. Suppliers of the fuel-efficient capital would make engineering changes in their product, but labor force changes would not necessarily be expected. We could see growth in employment in such areas as producers of wind turbines, but that remains to be seen. Much depends on whether these alternative energy sources are, in fact, cost effective in the long run (i.e. when federal subsidies stop).

-Health spending shows up in a variety of forms, including research on diseases and delivery system changes. Since new jobs were created in order to conduct the research and implement the delivery, it is not surprising that we have seen growth in employment in health services. But we also had a significant Health Care Reform Act go through and would expect growth in employment from that program, as well. The level of employment growth attributed to health care reform and that for ARRA funding is in question; my guess is that the first will result in permanent growth and the latter will disappear with federal spending increases.

I would like to point out also that cyclical gains in employment might have been realized without ARRA spending. In fact, if the recession was over early last year, as many claim, then the majority of the ARRA funding was (or is) not necessary to mitigate employment losses. That would have occurred despite the federal government, due to a rebounding economy. Of course, you could always claim that the rebounding economy occurred because of an increase in consumer confidence brought about by ARRA spending, and you may have a point there. I would have difficulty parsing that effect from the data.

In fact, ARRA spending evokes a question of ethics that we tend to ignore in this debate. The government targeted industries they deemed "worthy" of their support: education, transportation, health, etc. Why these over, say, NASA or the National Foundation for Arts and the Humanities? By lending their support to one group and withholding support from another, they make an economic choice that doesn't necessarily reflect that of society (or at least, that of a market-driven society.)


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