Just Where Is All That Money Going?
Its been a couple months in the making, but the federal stimulus program is starting to come to fruition. Youve already seen the benefits on your tax return, but as the spring construction season commences, people on the front lines of stimulus funding have high hopes for 2009. While there are different subjects on which to focus from infrastructure to rail lines; from schools to green initiatives the primary concern is job creation.
Historic times call for historic measures.
By all accounts, the current state of the worlds economy has precipitated the largest financial rescue effort in history. Prior to President Obamas federal stimulus program, 2008 saw Washington doling out $700 billion to failing banks, more than $500 billion to collapsing money-market managers, $150 billion to insurance giant AIG, and the list goes on. It has led one economist to wonder if we are using greenbacks or Monopoly money.
The hue and cry across the nation at the use of taxpayer dollars to bail out the villains of the financial collapse is apparently yesterdays news. Looking into 2009, the real story is not a whodunit, but rather, who is going to get it? as in stimulus money. And the good news is that the answer to that question is communities across the nation, via the Obama administrations stimulus package.
Stimulus: by now the term has become woven into the national lexicon, and in 2009 it will continue to be the watchword. The first waves of the $789 billion federal stimulus package have been rolling out since Obamas inauguration, and almost immediately Gov. Deval Patrick and a host of local officials began working hard win slices of that enormous pie.
In addition to money for long-overdue projects in public education, workforce development, and social services, at the beginning of the year, cities and towns across Massachusetts pulled together their shovel-ready infrastructure projects for the first wave of stimulus funds.
Chicopee Mayor Mike Bissonnette filed nearly $200 million in requests, with school renovation, senior centers, and industrial redevelopment the top priorities. Springfield sent off $1 billion dollars in proposals, nearly half of that targeted to the citys schools. With such an invoice to the stimulus pool of funds, Mayor Domenic Sarno told the press in January that we threw everything against the wall to see what sticks.
Almost every community in the Commonwealth has done essentially the same thing.
Massachusetts expects to receive close to $600 million in the first round of funds, for projects that need to be started within 120 days of the January passing of the stimulus plan. And, as might be expected, the administrative facet to the federal stimulus program is enormous. To streamline the process by which funds are disbursed, the state has gone with existing systems: regional planning boards to be the umbrella organizations to serve the towns under their jurisdiction.
In this region, the Pioneer Valley Planning Commission is the designated body to oversee stimulus funds, and PVPC Executive Director Tim Brennan called the project enormous.
But with so much funding for so many different programs, be they focused on energy, transportation, education, or tax relief, the prevailing mindset is that with such an unprecedented need also comes an unprecedented opportunity, and the obligation to take full advantage of that opportunity.
Theres two ways to think about the solutions, said Robert Pollin, a professor of Economics at UMass Amherst who is a more-than-interested observer when it comes to the stimulus process. One is in terms of the short run. If the economy is in a ditch, like we are now, what is the best way to get out of the ditch? And the longer-run question is, if were going to be spending huge amounts of money to help us get out of the ditch, maybe it should also help ward off future ditches.
For this issue, BusinessWest takes an indepth look at all things stimulus, and what the sum of the various parts means for this region.
Looking at the anticipated breakdown of stimulus money for Massachusetts, the total amount in the first round of funds adds up to about $600 million, with the lions share projected for the Boston areas Metropolitan Area Planning Council, with projects totaling $309 million.
However, among the states 12 other regional planning boards, the PVPC is estimated to garner the third-largest appropriation, about 6% of the total, amounting to $35.4 million.
According to the PVPCs status reports, the majority of presently green-lighted projects are roadwork, with Route 9 from Belchertown to Ware designated for $6 million; another $4.5 million for Routes 5 and 10 in the communities of Easthampton, Northampton, Southampton, and West-field; and just over $4.5 million to connect two rail-trail bicycle and pedestrian byways in Northampton and Easthampton.
As the planning body for Hampden and Hampshire counties, the PVPC is not a federal or state organization, but, in its words, a consortium of local governments that have banded together under the provisions of state law to address problems and opportunities that are regional in scope.
Brennan was instrumental in the early days of both Patricks and Lt. Gov. Murrays task forces to speed aid to Mass. communities. He described that process as unprecedented in scope.
Commenting on the first round of submissions from the communities across the state, he said, One thing that I think that has to be underscored here, is that the shovel ready-ness of a project is a much more daunting situation than people might understand.
Elaborating, Brennan said that, given the nature of the bill, to stimulate employment, in order for a stimulus to have an effect it has to come out quickly. The bottom line is that its a jobs bill. So, many projects came in, but realistically speaking were not shovel-ready.
An unprecedented aspect to the 120-day expedited timeline, he mentioned, was the speed from proposal to plan. As the bids are open, contractors are asked to sign the contract for the winning bid on the spot. Thats unheard of, but that gives you an impression of the speed that things are envisioned. No state, including ours, wants to leave any funds on the table. If you dont spend the dollars within the timeline, it goes back into the pool and gets redistributed to other states.
But Brennans job isnt just about getting the checks out on time.
Key areas of interest for the PVPC in 2009 include, among other things, climate change, energy, economic development, infrastructure investment, and transportation. As executive director, Brennan sees these as points of focus when looking at the stimulus funding.
He said that building the areas infrastructure is an excellent opportunity for the overall stimulus plan, both in this first round, with its focus on highway and road work, and in the planning stages for the second round of funds.
Commenting on the big news of the day, that many construction bids were coming in well under estimate, he said, thats because the cost of materials has dropped dramatically. Asphalt is way down from a year ago, and petroleum has come down too, but also contractors are hungry. Overall, this is good. We can get more projects out there. There is a backlog of projects, also, so that if any one falters, there could easily be another to move in its place so that no Commonwealth dollars are left behind.
But for Brennan, the big story isnt whats in the news yet.
On the Right Track
Indeed, commenting on a recent groundbreaking in Greenfield for a multi-modal transportation center, he mentioned that the city had provisioned for that buildings inclusion in a potential rail connection from Springfield due north to Vermont, the Connecticut River Line.
Currently, Amtrak passenger rail enters Springfield, then takes a circuitous route out to Palmer before eventually linking to the Green Mountain State. The existing north-south rail lines are so outdated that only freight trains traveling at a very low speed can use them.
A big hope for stimulus money in the subsequent round of funding is to completely repair the track along the population centers of the Connecticut River Valley, bringing commuter possibilities, expanded tourism options, and ultimately big opportunities for some communities that could use the support. Mayor Mike Sullivan has spoken in the past of his hopes for a rail stop in Holyoke, and Brennan noted that Chicopee, Northampton, Greenfield, and other cities and towns could easily envision themselves as within commuting distance for all points along the rail, even as far south as New York.
This as an excellent example of how you can make a stimulus investment, said Brennan, and get large amounts of economic activity spinning off because of it.
Ultimately, the goal for further stimulus money is to have a brick-and-mortar application, rather than as tax credits, said Brennan. Out of the $789 billion stimulus bill, almost half of it went to tax relief, $800 for a family and $400 for an individual, Brennan said. Thats nice, but that doesnt go far in the way of creating new jobs.
You get more jobs out of infrastructure creation than you do out of tax relief theyve put actual concrete numbers to this, he continued, citing the work of the Political Economy Research Institute (PERI) at UMass Amherst (which Pollin co-directs) as having identified distinct benefits to spending over tax breaks.
A Green Recovery
Some of these benefits are spelled out in Green Recovery: A Program to Create Good Jobs & Start Building a Low-Carbon Economy, a report that Pollin co-authored and released last fall.
As the nation debates its energy future, this report shows that the U.S. can create 2 million jobs by investing in a rapid, green economic-recovery program, states the studys abstract, which will strengthen the economy, increase energy independence, and fight global warming.
Pollin modestly states that he had little to do with the creation and design of the Obama administrations stimulus plan. He does admit, however, Ive heard that Green Recovery was heavily used, and in the final measure which passed, the green component to it, pretty closely reflects what we published.
Talking to BusinessWest recently, Pollin set out the importance of his studys focus, and its application to the stimulus plan. From his perspective, a focus on a green application to any stimulus planning is the right thing to do for the environment, but also for the employment rate.
I think its fair to say that the green-investment agenda, as well as the broadening infrastructure, will be effective on both counts, on the short term and the long term, he said. Heres the reason for it. Over the short term, spending on the green agenda, or public infrastructure, has a bigger short-term positive job impact.
It is about 25% to 30% bigger, he continued. So, if you spend $1 million on a green agenda, or an infrastructure agenda, youre going to get about 17 jobs created. If you do the same thing for tax cuts, at maximum youre going to get about 14 jobs. And I do stress the maximum. Youre probably going to get less, and the reason is, many of us are in bad shape financially.
When we get our stimulus checks, its not necessarily that were going to go out and spend it. Some of us may, but some of us are going to save, or pay off debts. On the other hand, when the government says, were going to start retrofitting a building, or were going to start constructing a bridge, you know the money is going to get spent for that, because thats what the money is meant to do.
Continuing with his thoughts on how the stimulus funding should proceed, Pollin said that over the long term, we need to make this transition to a clean-energy economy even former President Bush paid lip service to that toward the end. Weve got to start, and its got to be some time. If were going to spend $1 trillion in the next couple of years, why not invest in things that are going to help us over the long term?
As to how Western Mass. could benefit from such a program, Pollin merely shrugged and said, most of the job creation from the green agenda comes through construction projects and retrofits. Every community has buildings that could be retrofitted, and we also certainly need to improve our infrastructure grid.
In citing the studys numbers, Pollin mentioned six areas that could both have that green agenda, and also create a maximum of employment. They included the building retrofitting and rail and mass transit, but also work on smart grid technology systems, wind power, solar power, and advanced biofuels.
Within all of these sectors, according to the report, the vast majority of jobs are in the same areas of employment that people already work in today, in every region and state of the country.
Ultimately, time will tell what the stimulus will indeed stimulate, be it tax dollars returning to peoples wallets on up to larger social systems. The ideas are big, but even those framing the complexities are hammering down the edges. Pollin himself is working with the Department of Energy on its own funding programs.
There are the really big issues, he said expansively, but then, there are the regularly big issues, like making what has been funded work properly.
So how do we get the money out the right way, and how would we need to make mid-term corrections if there are things that arent going right with job creation? he asked. Because, above all else, its important to create jobs.