Counting Chickens Before They Hatch: A Quick Lesson on Recovery Act Spending

[1]One of the trickiest aspects of tracking Recovery Act spending is a very basic one: figuring out how much money has been spent so far. Theoretically, it should be pretty easy. Find out how much the federal government has spent because of the Recovery Act, and, well, that's how much has been spent on it. By that estimate, according to Recovery.gov [2], we've already spent almost $53 billion on the recovery, which isn't particularly impressive.

Unfortunately, though, it's not that easy.

The direct spending figure doesn't take into account obligated funds, or the funds the government, through the federal agencies which are theoretically supervising the Recovery Act projects, has promised to pay out. A great deal of the Recovery Act spending is through the use of these promises. Essentially, the states (or other prime recipients) will be the entities directly spending money on projects, with the federal agencies promising to reimburse the states once the work is done.

Deputy Secretary of Transportation John D. Porcari [3] recently had a great post [4] about this issue on the White House blog, which should be mandatory reading for anyone interested in Recovery Act spending.

"We fund highway projects through a reimbursement process, meaning states send us bills for highway work as it's getting done. For example let's say Virginia obligated or dedicated $200,000 of its Recovery dollars to resurface several miles of a road. Once Virginia awards a bid and the work gets underway the contractor will send the state a bill periodically for the work as it progresses. The state pays the bill then turns to us for reimbursement (which in government speak is referred to as an outlay) - in many cases they get the funds the same day.

 

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Whenever a state obligates or dedicates their Recovery dollars to a project that means it is green-lighted. States can start advertising the project and soliciting bids and once a bid is awarded contractors can buy supplies, bring workers on board and start breaking ground. It could be weeks before the reimbursement process starts so those outlays are in no way an indicator of how much money is getting to states, how much work is being done or how many people are working."

Granted, not all of the spending in the Recovery Act is governed in this way. Porcari was speaking about highway projects specifically, and a lot of the first round of spending is through direct grants to the states, such as Education's State Fiscal Stabilization Fund [5] or Health and Human Services' Medicaid grants [6]. But enough of the Recovery Act funding is spent through such obligations that it's important to remember obligation spending whenever reading articles about the pace of Recovery Act spending. Indeed, including obligations, the amount of money available so far under the Recovery Act is closer to $153 billion, a far cry from the $53 billion that has actually been spent up until now.

Image by Flickr user zolierdos [7]. Used under a Creative Commons license.