An embarrassment of Recovery Act riches

State and local officials across the country are encountering a once-in-a-lifetime budget dilemma: They can’t spend money quickly enough.

According to ProPublica, a nonprofit investigative journalism group, stimulus spending has dropped off considerably since the first weeks after President Barack Obama signed the American Recovery and Reinvestment Act into law in February, freeing $483 billion for stimulus projects and grants — with the rest of the $792 billion going toward tax cuts.

As of last week, recovery act money was being spent at an average of $570 million a day, compared to $1.3 billion during the first 100 days of the legislation. Using the average of the last four weeks — $614 million — ProPublica calculates that it could take more than two years to exhaust the money.

It’s not that state and local agencies don’t appreciate the fiscal booster shot, nor are they unaware that stimulating the economy and creating jobs will require putting that money into circulation. The problem is that many officials, whose agencies have been cash-strapped for so long, don’t have enough people to process the paperwork and shovel the money out the door.

“For cities and counties wracked by hiring freezes and staff layoffs, it's hard enough to cope with existing workloads, let alone the new demands of securing stimulus grants,” writes Andy Opsah at Government Technology. “Finding stimulus-related grants takes time and effort, and then the eligibility requirements must be studied and the application processes completed.”

In some cases, grants come with stipulations that are so restrictive that agencies are tempted to take a pass, Opsah reports. But that comes with its own risks: “No local official wants to tell citizens that available grant money wasn’t pursued.”

Another problem is that it takes money to spend money. State and local agencies might be flush with stimulus cash, but their administrative budgets haven’t changed. They can tap stimulus dollars to fund a project, but sometimes they must dig into their pockets to pay people to shovel out the paperwork.

Auditors from the Government Accountability Office raised this issue in a recent report on the quality of federal data on stimulus spending, Reuters points out. States “are not being reimbursed by the federal government at a rate that covers the costs of collecting and reporting [spending data],” auditors found.

"These additional costs can exacerbate states' existing fiscal stress,” according to the report.

But help could be on the way. As reported earlier this month by The Hill, a newspaper that covers Congress, Rep. Edolphus Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee, and Sen. Joe Lieberman (I-Conn.), chairman of the Senate Homeland Security and Governmental Affairs Committee, have crafted a bill that would help state and local agencies bear the added cost of stimulus-related planning and oversight.

Some of that help might come in the form of technology, according to The Hill and other sources. And in most cases, agencies won’t need to risk taxpayer dollars on unknown products with dubious claims. Instead, good old-fashioned business intelligence and portfolio management software — possibly already in use elsewhere in a given agency — might fit the bill.

Better yet, in some cases government contractors might take on the work of applying for stimulus funding. Under the recovery act, both agencies and vendors can apply for broadband stimulus money, a source told Government Technology. In theory, a government agency could publish its broadband specifications but leave it to the vendors to submit their own stimulus applications directly to the federal government.

“The vendor chosen by the federal government for stimulus funding would then get to partner with the local government,” Opsah writes.

“Vendors would shoulder the burden of applying for stimulus grants, and governments could retain an element of competition in the process," the source said.