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Searching for answers amid federal stimulus dollars, deadlines

Gov. Schwarzenegger has put together a top-level “stimulus team” inside the administration to help track the billions of new federal dollars that will be spent in California.

Schwarzenegger’s deputy chief of staff, Cynthia Bryant, and Ana Matasantos, the governor’s chief deputy finance director, will be among the leaders of the new stimulus team.

The move was described by Schwarzenegger spokesman Aaron McLear as a formalization of a process that has been underway for months inside the administration.

Matasantos and Bryant have both been back to Washington D.C. to receive briefings from the Obama administration on how the stimulus package will work. And they say the Schwarzenegger administration has been actively preparing for stimulus dollars since before Obama took office.

Two elements of the stimulus package have become clear.

First, is the huge amount of money that is coming to the state. Second, is the speed at which the money must be spent. Together, these two elements are creating a frenzy in government and among those hoping for a share of the funds.

The federal government is ordering states to spend their new windfall wisely, but the feds are also imploring locals to spend the money quickly. That leaves the states caught between orders from the Obama administration to get the money out the door and vague demands to proceed with caution.

In all, the Schwarzenegger administration expects about $85 billion worth of stimulus dollars in the state. The majority of that money – about $50 billion – will be new federal funding coming into the state for health care, education and a wide variety of other projects. The remaining $35 billion is expected in the form of tax credits for California taxpayers.

Under the Obama plan, individuals who make $75,000 or less will receive a $400 tax credit over the next year. The credit will begin within weeks, and will appear in qualifying taxpayers’ paychecks in the form of a increase in take-home pay, about $10-$20 per paycheck.

There is also a $7,500 tax credit for first-time homebuyers who make less than $75,000 per year, and buy a new home by July 2009.
But tracking the program dollars coming in to the state, and understanding the rules and guidelines from the federal government for spending that money has been the biggest ongoing challenge for governors across the country.

The Schwarzenegger administration began preparing for the stimulus package late last year. The governor’s cabinet secretary, Victoria Bradshaw, assembled several working groups made up of people from departments, agencies, and officials inside the governor’s office, both in Sacramento and Washington D.C. The groups assembled regularly by phone to talk about what they were hearing, and what might be in the final stimulus bill.

That allowed the administration to hit the ground running in some areas. “For example, we knew the energy commission would be really busy once the bill passed,” Bryant said. “We had a sense of what funds were coming.”

But coordinating a multibillion-dollar stimulus package with different sets of rules and regulations surrounding the money has been difficult at times, aggravated by confusion at the federal level. Governors across the country are wrestling with demands by the federal government to spend the money quickly, even as guidelines about how to spend the money are still being hammered out.

In other cases, states are scrambling to meet various deadlines to apply for money, even though application guidelines are not yet finished. For example, states must submit applications for education money by March 31. But federal guidelines on what projects will be available for that money will not be finished until March 30.

State officials know generally what the guidelines will be, and they have paperwork filled out in advance in anticipation of the quick turn-around.

But there is at least some concern that there may be some last-minute curveballs in the application process.

The decentralized nature of the flow of federal dollars has added to a somewhat frenzied environment around the stimulus money. Another concern cited by state and local officials is that strings are attached to the federal money.

The federal government has promised strict oversight of state and local spending of federal stimulus dollars. But in many cases, guidelines over how to spend that money have not yet been given to the states.

 Legislators are also beginning to look at the stimulus funds, and whether there is a role for legislative oversight of the spending of the federal money. The subject was raised at a joint Utilities and Energy Committee hearing last week. Assemblywoman Alyson Huber, D-El Dorado Hills, said she is looking at whether there is a role for the Joint Legislative Audit Committee to play in supervising the spending of the federal money.

These issues are not unique to California. A recent Associated Press article discussed the problems for states that are promising to spend their stimulus money appropriately, even as the Obama administration “is still figuring out what the rules are.”

States are struggling to track just how much federal money is coming in. In California, the total dollar figure is a moving target, administration officials say. They have posted new estimates of how much the state could receive on the governor’s stimulus Web site, http://recovery.ca.gov.

According to the site, more than $15 billion has already been allocated to California. The vast majority of that money – about $10.6 billion – will come in the form of education funding ($8.6 billion) and health care relief ($2 billion).

The health care money will go to projects normally funded by the state’s general fund. Health care and education are typically the largest general fund expenditures for any state. Bryant says the federal government intentionally focused money in policy areas to provide states with the the greatest possible general fund relief.

“Essentially, these are block grants to states,” she said.

Most of the rest of the money has been allocated to infrastructure projects, including $2 billion for highways, $1 billion for mass transit, and $1.1 billion for housing projects.

According to the latest projections from the governor’s office, California will receive close to $50 billion in federal money overall. About $14.9 billion will be for health care funding, $12.7 billion in education funding, and $7.3 billion for infrastructure projects. Another $8.4 billion will go to worker training and other benefits, including more than $4.5 billion for increased unemployment insurance benefits.

Bryant and Matasantos have been involved in tracking the developments on federal stimulus dollars since late last year. Among the others involved in the effort are Cabinet Secretary Victoria Bradshaw, Deputy Cabinet Secretary Paul Feist, and the governor’s top legislative liaisons, John Moffatt and Michael Prosio.

“Departments and agencies have begun various rule-making processes, they’ve identified areas where we need legislation, and we have the bills that are moving upstairs,” Bryant said.

The Obama administration acknowledges that tracking the money is difficult.

In the FAQ of the Obama Administration’s stimulus Web site, the administration explains, “You aren’t able to track funds yet because we have not yet started receiving information from federal agencies on how they are going to allocate the money. It takes a little bit of time for them to make sure your money is going
to be spent wisely. Right now, the site features an overview of the law and an explanation of what it is intended to accomplish. You will have access to data as soon as we begin receiving it from agencies.”

Tracking the money is also difficult because of the way the stimulus plan is structured. There are dozens of different pots of money that are available to different groups. For the largest portions of the money – health care, education and infrastructure – the money will flow through the states. But in other areas, companies or large cities and counties can apply directly to the federal government for assistance. And the states are not always kept in the loop.

For example, last week, the federal Department of Energy made a $300 million loan guarantee made to one California-based energy company. The Schwarzenegger administration found out about the guarantee only after looking on the DOE’s Web site.


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