Nixon promises aggressive use of federal stimulus money
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Nixon promises aggressive use of federal stimulus money

Date: February 18, 2009
By: Chris Dunn
State Capitol Bureau

JEFFERSON CITY - Despite the qualms of Republican state legislators, Gov. Jay Nixon said he will promote using all the money appropriated to Missouri by the federal economic stimulus package.

But Nixon had no detailed budget proposal and could not provide estimates of the federal stimulus funds' specific impact on Missouri. Also, hours before Nixon's announcement to the press, a bill that would require the monitoring of federal stimulus funds received vocal approval in the Senate chamber.

Missouri can expect an estimated $4.4 billion out of the $787 billion package signed by President Barack Obama on Tuesday. In a press conference on Wednesday, Nixon stated his intent to accept all money readily available from the federal government and to compete aggressively for more funds.

"I am committed to accessing and using all these funds as urgently and strategically as possible to create jobs and get our economy moving," Nixon said. "With these critical federal resources, we have the unprecedented opportunity to create jobs in these difficult economic times and position our economy, not only for recovery but for a complete economic transformation."

The federal government is granting funds to states through three different pots of money. First, funds calculated by determined formulas will channel directly into certain sectors, such as infrastructure improvements, without much interference from state government. Competitive grants characterize the second pot, wherein states compete for billions of dollars to fund rural broadband infrastructure and green technology. The third pot, which is the smallest and is known as the state stabilization fund portion, focuses on helping states restore revenue losses and stabilize budgets specifically in public education and health care.

Nixon emphasized how aggressively Missouri will compete for the funds in the second pot of money. He cited the promptness with which the state responded to the stimulus -- within minutes of Obama's signing the bill into law on Tuesday, construction on a bridge in Tuscumbia, Mo., began. According to officials, it was the first construction project begun under the stimulus plan.

"We are now in the future," Nixon said. "Just like yesterday when we were the first to compete, I'm committed to competing for all these competitive dollars to maximize and move the economy forward. I do not think that we should walk away from this once-in-a-generation opportunity."

But when asked to define "economic transformation" and if he could name any stimulus-induced changes to the state budget, Nixon gave no specific answers or numbers.

And when asked how he can reconcile a statement he made during his campaign that "here in Missouri, we don't print money" with using "freshly minted coin from D.C.," Nixon hesitated before saying, "They did it, not us."

After briefly struggling for words, Nixon said, "Congress has passed a measure, and the president has signed it into law. An economic recovery plan. For me, as the chief executive of this state, to do anything other than to maximize our efforts to get this economy moving forward again so that when we're talking about the future -- you bet the problems will be a challenge."

Republican budget leaders agree that outright rejecting all federal stimulus funds is not in the state's best interests. House Budget Committee Chairman Allen Icet, R-Wildwood, said the Senate, House and governor all agree that receiving more money to fund the state Department of Transportation and other infrastructure projects is helpful and necessary. But because of the stipulations placed on the state stabilization funds for health care and education, some Republicans are leery of using that third pot of money.

According to the National Conference of State Legislators, matched funds allocated for Medicaid will be dropped if eligibility standards are altered to include more health care recipients in the receipt of stimulus funds. This means that any adults newly added to the state health care system would not receive the Medicaid match rate enhanced by federal stimulus dollars, which adds up to a boost of about 6 percent.

Also, 81 percent of the money allocated for education must be used to restore funding losses and meet No Child Left Behind provisions, which several Republican legislators have interpreted as requiring the state to hire more teachers, among other such expansions. The remaining 19 percent of the money can fund capital improvement projects.

Unless general revenue and tax revenue pick up to restore the economy and can continue to fund the expansions, projects and developments before the federal stimulus money dries up, those new programs could face termination in two years, when the federal dollars are no longer available.

What may further frustrate state lawmakers is Missouri's constitutional requirement to pass a balanced budget. But because the stimulus package stipulates that one-time funds for education and health care be used in certain ways and amounts, Republican legislators fear that using one-time funds to finance long-term projects will result in a significant deficit in the state budget and revenue in two years.

"I don't think it's a legitimate answer to just say the economy will recover and we'll grow our way out of this," said Sen. Jason Crowell, R-Cape Girardeau. "Many individuals are saying that this bailout is going to necessitate a bailout in two years."

Icet said he has not completely finished wading through the federal stimulus package language, which is more than 1,000 pages. But the stipulations attached to the state stabilization funds have him concerned as well, he said.

"That's the real concern that we in the House have, and I'm sure the Senate has as well -- to get us locked in on one-time money for ongoing operations is just bad budgeting technique," Icet said.

Sen. Gary Nodler, R-Joplin, called the stimulus package a "mixed blessing." Nodler, who chairs the Senate Appropriations Committee, has not read the federal stimulus package language in detail. But he said that while responsibly using the funds is "not a bad thing," he is wary of the large amount of money appropriated to the state.

"In the sense that there is a bridge through a revenue shortfall that comes from this federal package, obviously that part is helpful," Nodler said in reference to this year's $261 million state revenue shortfall. "What's challenging is that in one sense, the size of the package is almost too large. It dumps really almost too much money into the state's treasury in a short enough period of time with significant enough restrictions on its use that it appears to me likely to cause downstream difficulties with unsustainable commitments to state programs that are encouraged by this federal bailout package."

But Nixon said the stipulations should not discourage the state from using these one-time funds to finance education and health care.

"The real magic here is the one-time expenditures that give us a true opportunity to make an economic pivot to the future, which we're preparing just to do," Nixon told reporters. "I just went to law school the one time, but I've been able to use that law degree for the rest of my life. When you're talking about worker training and education and you increase the value of workers in getting them trained -- I don't see that as scary, the fact that we would have a whole bunch of trained, high-tech workers and a whole bunch of trained medical professionals. I don't see that as a problem in the future; I see that as an opportunity for us."

In the press conference, Nixon also outlined his Transform Missouri Initiative, which would promote education and worker training, infrastructure improvements and technological development. He said that with the collaboration of state legislators, his office will work to maximize the benefits that Missourians can reap from the federal stimulus package.

"I think the fact that they've given us this opportunity gives me the responsibility to lead here, gives me the responsibility to collaborate with other elected officials and industry leaders and, more specifically, to collaborate on behalf of the 219,000 Missourians who got up this morning, looked in the mirror and didn't see somebody that was going to work," Nixon said. "We've got to get people going back to work."

Also on Wednesday, a Senate bill that would require that all incoming federal stimulus money be monitored received vocal approval in the Senate chamber today. Sponsored by Nodler, the bill would create a stabilization fund and a stimulus fund within the state treasury. These two funds would segment the incoming money to identify, manage and segregate the money in separate channels, Nodler said.