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Report: States Aren't Using Stimulus Funds as Intended

Matt Kelley

Sen. Sheldon Whitehouse, D-R.I., left, and Rep. Darrell Issa, R-Calif., have different opinions on the stimulus package. (Left to right: file photo by Louai Beshara, AFP/Getty Images; By Susan Walsh, AP)

WASHINGTON - Under pressure to spend stimulus money quickly, many states are using the federal funds for short-term projects and to fill budget gaps rather than spending on long-term improvements, according to a report by congressional investigators.

The report, scheduled to be released Tuesday by the Government Accountability Office (GAO) at a House oversight hearing, also says many states aren't meeting some goals and requirements of the economic recovery program. Some states, for example, are not sending transportation funding to the most economically distressed areas, and they are using education funds to prevent layoffs rather than fund innovative new programs, the report says.

As required by the $787 billion stimulus law, the GAO is monitoring stimulus spending in 16 states and the District of Columbia that will receive two-thirds of the federal funds. It reports to Congress every two months.

The report says that as of mid-June, states had received about $29 billion of the estimated $49 billion in stimulus funding they are scheduled to get before the federal budget year ends Sept. 30. More than 90% of the money given to the states so far is for Medicaid and a fund meant to prop up states' budgets for schools and other basic services such as public safety.

Republicans such as Rep. Darrell Issa of California, the ranking GOP member of the oversight committee, have said the nation's rising unemployment rate means the stimulus package isn't working. "By any standards, the expectations that accompanied the stimulus have fallen far short," Issa spokesman Kurt Bardella said in an e-mail Tuesday.

Some Democrats, such as Sen. Sheldon Whitehouse of Rhode Island, have raised the prospect of a second stimulus package. In an interview with ABC News on Tuesday, President Obama said improving the economy is "something we wrestle with constantly" but did not say whether he would support a second spending package.

The stimulus law requires states to give priority to transportation projects in economically distressed areas. But because states needed to choose projects quickly, many either didn't consider distressed areas until late in the planning process or used their own criteria rather than the federal requirements, the GAO found.

For example, 21 Illinois counties identified as economically distressed "would not have been so classified following the act's criteria," the report says.

Nearly half of the $15.9 billion worth of transportation projects underway nationwide are for resurfacing or other pavement improvements, and an additional 17% are for widening existing roads, the report says. That's because paving projects can start quickly and don't usually require time-consuming environmental studies, the report says.

The report says local school officials told the GAO they did not plan to use stimulus funding for educational reform because they have to spend the money quickly and have more pressing needs. Stimulus money has saved teachers' jobs, including nearly 2,000 in the Miami-Dade school system in Florida, the report says. Education officials in Flint, Mich., said they were using stimulus money to preserve current programs although no new school buildings have been built there in more than 30 years.

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