House committee passes bill to use federal stimulus money for fiscal year 2009

JEFFERSON CITY - With about a month before the state's final budget is due to the governor, Missouri is one step closer to using more of its federal stimulus funds.

The House Budget Committee passed Gov. Jay Nixon's supplemental bill on Wednesday. The bill, which was approved without opposition or amendments, calls for the appropriation of $155 million to several state departments for the remainder of this fiscal year.

Of that, $93.3 million would come from the state's $4 billion federal stimulus money. With $323 million in federal funds used in the House's version of the state budget for fiscal year 2010, the bill would mean the appropriation of more than 9 percent of the federal stimulus money offered to Missouri by Congress via the American Recovery and Reinvestment Act of 2009.

The ARRA, signed by President Barack Obama in mid-February, allocates each state federal stimulus money via several funds, which come with different stipulations. Two general but distinctly different funds make up Missouri's $4 billion portion of the ARRA: the stimulus fund and the stabilization fund. As designated by Nixon's bill, the $93.3 million would come from the $1.829 billion stimulus fund that uses pre-existing formulas to determine how much money goes to certain federal programs. These programs include worker training, food stamps and renewable energy promotion.

"This is the money that is being provided to states through the federal stimulus bill," state Budget Director Linda Luebbering said. "The federal government targeted federal money for specific programs. It is not a state option. If you want to spend the money, you must spend this money in the way that the federal government has mandated."

The bill will next face the state House and Senate before it can be signed into law by Nixon.

Nixon's bill earmarks federal funding to supplement existing programs in 10 state departments, as well as new programs in five of those departments. The state Department of Economic Development would receive the most money from the federal stimulus package, with $36.3 million appropriated to extend worker retraining, unemployment insurance programs and employment service activities. Another large sum of money would go to the state Department of Natural Resources, which would receive $27.8 million to promote renewable energy, energy efficiency and pollution control.

The $93.3 million in federal money is the amount that Nixon's office says can be spent before the fiscal year ends on June 30. What remains of the $1.829 billion in Missouri's overall stimulus fund would be allocated for fiscal years 2010 and 2011.

But federal stimulus supplemental bills are separate from the state budget. Only Nixon's office can recommend supplemental appropriations, and the only amendments legislators can make to those bills are reductions, Luebbering said.

The bill passed on Wednesday is designated for the remainder of fiscal year 2009. Mark Schwartz, the budget and policy analyst for House Budget Committee chairman Allen Icet, said the bill for fiscal year 2010 is expected to come from Nixon's office next week.

Icet, a Republican from Wildwood, said that despite the numerous questions unanswered by the federal government, state lawmakers must do their best to appropriate the federal stimulus money via the supplemental bills.

"As we sit here now, I don't think anyone has a perfect idea of exactly when the money is going to arrive," Icet said. "So we're really dealing with a lot of unknowns because that's still in a state of flux, depending on how the feds write the rules and what the final formula will be. So we're doing the best we can with what little information we have out of Washington, D.C. Because if we the state do not appropriate the money, they will say we can't spend it."

The pressure is on: Five weeks remain in the legislative calendar before the state constitution requires that all appropriations bills be ready for Nixon to sign into law by May 8. Icet said he is not ruling out the possibility of a special session that would extend the legislative calendar and give the two chambers and Nixon's office more time to review and approve the state budget and stimulus appropriations.

"I think every year that is possible just because of differences in what priorities are for spending," Icet said. "And this year, with all the economic stimulus, it's such a wild card as for what it can do to the dynamic of the appropriations process."

But the supplemental bills deal primarily with the $1.829 billion stimulus fund in Missouri's overall $4 billion appropriation from the federal government. That still leaves about $2 billion left for state lawmakers to work with.

Luebbering said Icet is working on a bill that would appropriate money from the stabilization fund, which makes up $2.171 billion of Missouri's $4 billion package. Three other funds in the $787 billion federal stimulus package exist, and legislators have not yet taken formal action to allocate money from them. Several more millions, if not billions, of dollars can be acquired through those funds.

All five categories of funds designated by the ARRA are outlined below.

CATEGORY 1: Budget stabilization funds

Made up of less than 10 percent of the entire federal stimulus package, this fund initially stirred controversy in the state Senate Select Committee on Oversight of Federal Stimulus because of the stipulations placed on the use of the money within. This fund is designed to help state governments avoid cutting from their education and Medicaid budgets.

A total of $2.171 billion has been allocated to Missouri for state stabilization. Of that, $921 million is designated for education funding, with 81.1 percent specifically for direct education support and 18.2 percent for expenditures such as renovations and public safety.

An additional $1.25 billion has been designated for Medicaid because of an increase in the reimbursement rate, wherein the federal government will pay the state $70 for every $100 spent on Medicaid services. But Missouri cannot use any of that money if Medicaid eligibility rules are altered. No funds appropriated for Federal Medicaid Assistance Percentage can be put into a reserve or rainy day fund.

CATEGORY 2: Existing federal program stimulus funds

Using pre-existing formulas and rules, the money in this fund will go almost directly from the federal government to existing federal programs. Examples include the money Nixon's office would appropriate to the Natural Resources Department and the Economic Development Department under the bill passed Wednesday. Other examples include transportation handled by local and municipal authorities, law enforcement funding and food stamps.

Federally, this fund draws about 25 percent of the overall $787 billion federal stimulus package. For Missouri specifically, $1.829 billion is allocated to this fund.

CATEGORY 3: Competitive grants

Categories 1 and 2 make up the $4 billion package that Missouri is eligible to receive. The competitive grants category, which makes up about one-third of the federal stimulus package, allows states to compete for additional grants to boost their economies.

These hundreds of billions of dollars, available for whichever states are most competitive, are the basis of Nixon's Transform Missouri Initiative. Icet said that though state departments and agencies are responsible for competing to receive the money, legislators would be responsible for appropriations.

CATEGORY 4: Tax relief

Much of the remaining money in the overall $787 billion federal stimulus package is "committed to individual and business tax breaks," according to a document released by Nixon's office in late February. This fund provides money for tax credits for which families and businesses can apply if they meet certain qualifications.

CATEGORY 5: Enhanced economic recovery financing tools

This fund addresses larger businesses by enhancing financial tools such as bonds and tax exemptions.

Missouri and other states have two fiscal years to use the money made available to them by the ARRA. But Icet said Missouri still needs more information about stipulations from the federal government before the final appropriations bills can be signed in five weeks.

"Part of the challenge is because of all these unknowns at the federal level, it just doesn't lend itself to making a very smooth process at our level," Icet said. "But this is the hand we've been dealt, so we'll do the best we can with what information we have to raise some appropriations bills and move them forward and hope for the best at the end of the day."