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How States are spending their Stimulus

A month after President Obama signed the $787 billion economic stimulus law, governors and state lawmakers have already begun fighting with Washington and each other about putting the money to use.

After the bill first passed, we reviewed the economic stimulus package to access how much was allocated to higher education.  Now that most of the funds have been dispersed or promised, individual states are making determinations as to how the stimulus money will be spent, or accepted.  Responses are mixed across the country – and across party lines. 
Republican Governor Tim Pawlenty, of Minnesota, says federal economic stimulus money has allowed him to propose more state spending for public schools over the next two years. The Republican governor recently released a revised budget proposal which reflects that federal money, as well as the state’s latest economic forecast.

The requirements of the federal stimulus money also forced Pawlenty to restore some of the spending cuts he had earlier proposed to higher education. Overall, Pawlenty has restored over $300 million of previous announced cuts to higher education.  Previously proposed reductions in funding for the University of Minnesota and the Minnesota State Colleges and University system would be restored. Pawlenty also renewed his recommendation that both systems freeze or cap tuition increases.

In a similar response, Democrat Gov. Martin O’Malley, of Maryland, has said he would use some of the more than $1 billion in federal stimulus money earmarked for Maryland education to increase funding for community colleges and maintain the freeze on undergraduate tuition at state universities.

“When the economy goes down, more and more families turn to community colleges,” O’Malley said during the appearance. Indeed, the colleges are reporting major enrollment increases”.

The governor’s initial budget for next year did not include an increase for community colleges, which are seeing thousands more students enroll to gain new skills to help them find jobs in the recession. But with the stimulus money, O’Malley is increasing state aid by 5 percent over the next two years.  The funds are also helping Maryland finance construction projects at universities.

O’Malley said the fourth year of a freeze on in-state tuition at the university level had been in jeopardy as the state budget outlook worsened. The federal stimulus money has also allowed him to continue the freeze.

One of the more prominent battles over the stimulus money is being waged by South Carolina Gov. Mark Sanford, who is hoping to use his state’s share of stabilization funds to pay down state debt. The law gives governors some latitude on how to use the money. But, it was intended in its design to prevent deep state budget cuts, particularly in education.

After the Obama administration denied his initial request for a waiver to pay down debt, Sanford submitted a new proposal asking for federal blessing to use $577 million to pay off education bonds and the remaining $125 million to pay down a range of state debt.

Sanford’s proposal has also put him at odds with his own Republican-controlled state legislature, which is depending on $350 million of federal stimulus money to balance its 2009-2010 budget.

SC state’s education department alone is relying on receiving $283 million from the stimulus funds. If it doesn’t receive them, it might have to cut 4,000 teachers, said Dan Cooper, chair of the state’s House Ways and Means Committee.

Alaska Gov. Sarah Palin Thursday announced she would only take 55% of the federal stimulus money offered her state. Palin is rejecting money for education, unemployment benefits and other programs that she says the state won’t be able to fund after the federal money runs out.
“I don’t want to automatically increase federal funding for education program growth, at a time when Alaska can’t afford to sustain that increase,” said Palin. The Republican governor, however, has said she would not stand in the way of state lawmakers or local officials if they want to request additional funds.

“I trust the legislature will do the right thing and take Alaska’s share of the money for education in the economic recovery package,” said Democrat Mark Begich, US Senator. “We owe it to our children to give them the most opportunities possible, and this is money fairly allocated to Alaska in this stimulus package.”

In Nevada, the state’s fiscal problems are so severe that it can’t meet the stimulus law’s requirement that it fund its higher education system at 2006 levels. Therefore, they’ve asked for a waiver. The state is set to receive nearly $324 million in stabilization funds for education of all levels.

“Our state is in such a dire financial crisis that we believe it would be very difficult or impossible to fund education — especially higher education — at 2006 levels,” said Daniel Burns, spokesman for Republican Gov. Jim Gibbons.

Regardless of the decisions of individual states, the stimulus package does include several provisions that are available to most, if not all students.  For example, qualified students are to receive increases in student grant funding due to an increase in the Pell grant program under the federal stimulus package. The maximum Pell Grant, which goes to low-income students, was increased about $500, to $5,350.

The college tuition tax credit was increased to $2,500 per student from $1,800, and the income cutoff was increased to $180,000 for families. Federal work-study funding is also increasing. And the federal government will award $6 billion a year in Perkins loans, up from the current $1 billion.


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