Evaluating the American Recovery and Reinvestment Act

Three years after the federal stimulus act became law, CIOs assess its impact on state IT.

by / January 31, 2012

It’s been three years since the American Recovery and Reinvestment Act (ARRA) was signed into law. Even before it received the president’s signature, ARRA ignited controversy. Some said it was an overwrought federal invasion of the private sector, while others argued that the act wouldn’t do nearly enough. To find out what impact ARRA had on state IT, Government Technology asked Maryland CIO Elliot Schlanger, Illinois CIO Sean Vinck, Massachusetts CIO John Letchford and Massachusetts Recovery and Reinvestment Office Director Jeffrey Simon to talk about what they thought ARRA did — or didn’t do.

What’s your assessment of ARRA? Did it achieve what it was intended to?

Vinck: ARRA provided much-needed fiscal stimulus to the American economy at a time of great instability. Without the investments in infrastructure, education, economic development and health care that ARRA provided, the economic crisis of the last several years would have been worse. Like all ambitious projects, we will no doubt find ways that we could have done some things better. On the other hand, the government adopted new standards of transparency and accountability that were historically unprecedented. That is a great step.

Schlanger: No doubt ARRA was an urgent and expedient bipartisan response to an economic crisis that a new president was challenged with upon entering office. In simple terms, the act was designed to achieve three rather simple goals: create and/or retain jobs; spur economic activity and invest in long-term growth; and demonstrate the highest levels of accountability and transparency while executing the act. Are we achieving the goals? While not perfect, every state can show much progress against each goal. Another question that could be asked is: If ARRA was not enacted, what might be our economic condition today?

Simon: In Massachusetts, just over 91,000 people have received an ARRA-funded paycheck since the program began. The state’s unemployment rate tracked the national rate from about 2003 to its dramatic climb in 2008-2009. While the national rate continued to climb sharply throughout 2009, Massachusetts’ rate peaked in October 2009 at 8.8 percent. The rate then began to steadily decline and is now at 7.3 percent. ARRA has been an important part of this decline and of Gov. [Deval] Patrick’s recovery plan. The program had two main goals: first, to stabilize the economy and help the people who were struggling to cope with the most serious downturn since the Great Depression, and second, to stimulate economic activity that would employ people on worthwhile programs and projects. In Massachusetts, both of these objectives had very positive effects.

Has your agency seen any direct benefits? If so, what were they?

Letchford: While the commonwealth’s Information Technology Division did not directly benefit from ARRA funding, I can highlight two positive outcomes for our agency, thanks to ARRA. One is that this program required an evolutionary increase in transparency for residents, which enabled us to implement appropriate technologies to meet that and similar needs. The second is that ARRA’s focus on health IT has increased the level of support for something that is very high up on our agency’s — and the governor’s — list of priorities, which is great.

Schlanger: Specifically concerning the Maryland Department of Information Technology, under the leadership of Gov. [Martin] O’Malley, a team of federal, state and local elected officials, and voluminous support from a plethora of vested parties, the state secured a major grant under the ARRA Broadband Technology Opportunities Program. The $115-million grant, supplemented by a $43 million match from the state and local jurisdictions, is allowing the construction of approximately 1,300 miles of fiber-optic cabling that will span all of Maryland’s 23 counties and Baltimore City, covering 9,800 square miles inclusive of urban, suburban and rural communities. More than 1,000 community anchors will be directly connected, including schools, police and emergency centers, government and community support centers, libraries, community colleges and universities. The ARRA-supported project fosters economic development, improves public safety interoperability, and interconnects local and state government networks. Also, to support commercial provider “last mile” build-out to homes and businesses, the network passes near approximately 2.2 million households, 5.6 million residents and 96,000 businesses. Finally, the project itself will create more than 800 jobs.

Vinck: Illinois benefited enormously in transportation, economic development, health care and education. Implementing ARRA required many agencies to upgrade their reporting and accountability systems. One benefit was some improvement to technology in some agencies.

What do you think ARRA’s shortcomings are?

Schlanger: ARRA was like a shot of adrenaline intended to stimulate a rapidly weakening economy at the time. ARRA was never envisioned to be a long-term cure. Therefore, much of the funding was disbursed into defined projects, with a specific scope to be executed within a specific time period. That said, the act does not provide for the wherewithal to sustain our creations over the long haul. I suppose the bet was that the economic recovery would have been further along at this time. The reality is that we might have created fiscal obligations resulting from our ARRA projects that will be a challenge to maintain.

Vinck: ARRA could have done more to encourage and empower state governments to improve their operational infrastructure, including technology. ARRA funds were distributed through existing structures without a real analysis of how efficient those mechanisms were. The federal and state governments should invest in creating structures for program management that are more uniform, technologically advanced and more reflective of best practices to ensure that future stimulus dollars are spent in the most economically efficacious manner.

Simon: There is not enough vertical construction. Vertical construction employs many different trades and involves everyone from architects and engineers to steelworkers and laborers. I would have liked to see more investment in areas like infrastructure and municipal facilities.

What were its strengths?

Simon: Every agency in Massachusetts knows that stimulus is a top priority for Gov. Patrick. They also know that the money has time limits. This forced our departments and agencies to be very creative and efficient in the execution of ARRA programs and projects. If we continued to do business the way it has always been done, we never would have met the time constraints. Many important lessons were learned in this process — lessons we are in the process of applying to all of state government even as the ARRA program winds down. In the areas of transparency, civic engagement and efficiency, tremendous gains in particular have been made in the ARRA program. The experience of designing metrics that are used to compare dissimilar government programs and of designing the technology to allow the collection and analysis of that information to be done with literally millions of bits of information will have long-lasting positive effects.

What would you have done differently if you were disbursing stimulus funds?

Vinck: I would have required all governments and entities receiving or distributing ARRA funds to be able to account for those funds in accordance with generally accepted accounting practices through an enterprise resource planning system or the equivalent thereof. Further, I would have tried to get consensus judgment from top economists on how to evaluate the stimulative effect of different investments. There should have been an estimate of the multiplier of effect of given investments, and subsequent accountability measures to determine whether the projected economic activity occurred.

Simon: I would have given governors much more discretion to direct funds in the areas that were priorities of each state. The expenditure of funds was fairly narrowly proscribed by Congress with only a portion of the State Fiscal Stabilization fund able to be applied to any legitimate government function. What is a priority for Nebraska may not be a priority for Massachusetts, which would be different again from New York and Nevada. I’d put more faith in our governors.

In your state, do you think ARRA funds were spent correctly or do you think they could have been better used elsewhere?

Schlanger: In the state of Maryland, ARRA opportunities were distributed between numerous agencies, programs and disciplines including education, public safety, health and human services, transportation, environment, housing, technology and others. Tens of thousands of Maryland jobs will be created or have been saved, while millions of citizens have or will have received some direct or indirect benefit from programs or projects spawned by ARRA. Was the act the only and most perfect tool in the shed for fixing the most severe economic crisis experienced in decades? Obviously it was not perfect and not the only, but definitely necessary and darn good.
Vinck: We are comfortable that our state did a good job of managing our ARRA funds in the best achievable way, in accordance with the law.

Some ARRA opponents contend that the funds should have been given to individuals and families rather than agencies and companies. What do you think?  

Vinck: I think that this criticism is nonsensical. ARRA funds did go to families and individuals, directly and indirectly. For example, ARRA enhanced energy assistance funds, the beneficiaries of which are homeowners, individuals and families. ARRA provided for tax incentives, many beneficiaries of which were individuals and families. The fact that agencies in the public and private sphere were employed as the means to distribute the funds does not mean that the benefit didn’t flow directly to individuals and families.

Schlanger: I would point out that ARRA funds were distributed under the general categories of tax benefits; entitlements; and contracts, grants and loans. So in essence, a considerable portion of the funding directly benefited individuals and families. As for the funds that were disbursed to agencies and companies, I believe the resulting economic development, or sustainment in many cases, together with the associated job creation and retention, brought corresponding benefits to many individuals and families.

Simon: If you divided ARRA funds that went through state agencies by the number of Massachusetts residents, the result is about $600 per person per year for two years. If you include the funds that went directly to recipients with the funds that went through the state, the number becomes about $850. It is difficult to speculate what would have happened had we distributed those funds to the people. However, it is not hard to imagine that those funds would’ve either been spent on consumables or put in the bank. The funds would not have been spent on teachers, police officers, roads, sewage treatment plants, medical research, advanced battery technology or the many other projects and programs that ARRA funded. The choice is to spend the money immediately on consumables and saving, or to prime the economic pump through investment in longer-term, worthwhile projects combined with shorter-term economic stabilization. I come down on the side of the more future-oriented approach that not only puts people to work today, but also leaves us with a legacy of good works.


Chad Vander Veen

Chad Vander Veen is the former editor of FutureStructure.


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