Our national recession hasn't been short on precedent-setting. One of the most frustrating trends - and one that threatens to stall out a recovery in mid-step - is the severe budget gaps many U.S. states are facing. State revenues have plummeted amidst high unemployment and low economic activity, and these dire times have shone a light on the fact that many states have been mismanaging their budgets for years, not maintaining "rainy day" savings and often just flat out overspending.
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The federal government has stepped in to try and fill the gap by allocating a big chunk of the $787 billion stimulus bill to the states in the form of loans, grants and monies that can be used to "backfill" specific budget cuts or gaps in funding.
More than a year after the stimulus bill was passed, it remains controversial. Is it creating and/or saving millions of jobs, as proposed by the White House? Is the money being allocated and spent fast enough to really spur economic growth? These are near impossible questions to answer, simply because we only know one reality – the world as it exists with the bill. We'll never know how things would have turned out without it; we can only theorize. (Learn more about government spending and budgeting in The Government And Risk: A Love-Hate Relationship.)
Top 10 States by Money Awarded
- California - $35 billion
- New York - $23 billion
- Texas – $19 billion
- Florida – $14.5 billion
- Illinois – $12 billion
- Pennsylvania – $12 billion
- Michigan – $10.5 billion
- Ohio - $10 billion
- New Jersey – $8.5 billion
- Georgia – $7.5 billion
*Dollar amounts shown includes all monies to states, including grants & loans for specific improvement projects, as well as higher federal reimbursements for medical expenses and unemployment insurance. As such these dollar figures are higher than what you will find on government websites tracking the stimulus bill such as http://recovery.gov
The states receiving the most money per capita (relative to population) are Alaska, Rhode Island, New Jersey, New York, and Vermont. States receiving the least per capita include Texas, Florida, Utah, Colorado, and Virginia.
Is each state getting its fair share? Not likely, considering that some states are hurting more than others. Unemployment is much higher in Michigan than in North Dakota or Indiana. Real estate prices fell much further in California, Florida and Nevada than in Pennsylvania or Georgia. (Learn about the history of government intervention in Top 6 U.S. Government Financial Bailouts.)
Where the Money Is Going
Only about half of the stimulus funds have actually been spent or specifically committed to be spent. The rest sits in limbo, waiting for grants and plans and loans to be approved. It could take years for all the money to be put into play. A large portion of the money that has already been spent has gone out in the form of increased Medicaid reimbursements to states, and higher unemployment insurance payouts.
Another popular destination for money already spent has been the education system. Many states were faced with the prospect of cutting funding for public schools and universities, so a "State Fiscal Stabilization Fund" was created by the federal government, and to date over $19 billion has been distributed to states, which have discretion over which educational needs are the most pressing. (Some think that the U.S. government is too big to fail, but one must only look at historical examples to know that it's not true. For more info, check out Is The U.S. Government Too Big To Fail?)
Because we're in largely uncharted territory, nobody can say for sure exactly what it will take for states – and the country as a whole – to get out of this recession, and what steps should be taken to ensure that something on this scale never happens again. While we should support the states individually, we must never forget how interwoven the states are. The books to improve a school in Tennessee may be bought from a publisher in New York. The cement to build a new road in Nevada may come from Florida. The ripple effects from helping someone far away may wind up very close to home.
Still feeling uninformed? Check out last week's Water Cooler Finance to see what's been happening in financial news.