Implementing the Stimulus Bill Turns Out to be Difficult

(MoneyWatch)  Arizona, like many other states, is struggling on how they will implement parts of the "Stimulus Bill" passed by Congress this year. The bill has requirements on the states to track how the money is being spent, job creation and so on. The Arizona Capital Times has an article discussing the result of a Federal audit of that state's implementation so far.

None of the issues discovered are unique to Arizona as all of the other states are facing the same issues. In fact the more money a state gets the bigger these kind of problems will be. Arizona faces two big problems. First a lack of personnel available to actually implement the tracking requirements. This is due to the fact that state workforces are under pressure due to the downturn in the economy lower tax receipts. In Arizona this had led to layoffs of the kind of people who would be best for this role. The problem is exacerbated by the fact that stimulus funds cannot be used for this kind of work -- although you could joke that that would be a direct way to increase jobs.

The other big issue relates to that as Arizona believes it will have a hard time keeping track of the jobs created. Depending on how the money is being spent this is an easier task then others. For direct projects funded by Stimulus dollars it should be fairly straightforward, but where the dollars are mingled with local and state general funds like education or medical then it is more difficult. How do you assign which teacher or policeman is hired by Federal funds and not local? Would there actually have been the number of layoffs of staff as at first predicted? Do the Federal monies have some sort of multiplier effect?

Of course the issue is what if the states are not able to do this? Will the Obama Administration punish them for not meeting the stated job creation numbers? I doubt it. Will there be less stimulus funds in the future or will a state lose their funds to another? The construction of the bill makes this very difficult. So really there seems to be no enforcement mechanism for some of the requirements related to the funding except bad publicity.

As with all government funding it should be tracked carefully as there are plenty of opportunities for fraud, waste and abuse. It only will take a few cases of money being sent to political cronies or pay-to-play to make the Stimulus program look bad. We have three or four years of activity to look at coming up.