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Cascade: No. 72, Fall 2009

Stimulus Bill Opportunities and Challenges for Delaware

Delaware, like all other states, will reap significant benefits from the American Recovery and Reinvestment Act (ARRA), but the state faces significant challenges in implementing the law as well.

By our current estimate, over the next three years $902 million in both operating and capital funds will flow to Delaware state government through formula and discretionary grants, another $245 million will come to federal agencies for projects in our state such as the Amtrak train station in Wilmington and Dover Air Force Base, and $31 million more will be given to counties, municipalities, and private nonprofits. (To put this in perspective, Delaware's annual operating budget, including state and federal funds, is approximately $4 billion.) These numbers will almost certainly increase as Delaware is successful in obtaining competitive grants. The high ratio of funding received by the state compared to that received by local governments reflects the fact that, in Delaware, the vast majority of government services are delivered at the state level.

Matthew P. Denn, Lt. Governor of DelawareMatthew P. Denn, Lt. Governor of Delaware

Although there are no precise state-by-state projections, hundreds of millions more will go to individual Delawareans in the form of federal tax benefits and incentives and direct grants and loans. Tax provisions in the ARRA include an extension of alternative minimum tax relief, an expansion of the earned income tax credit, and new or expanded credits and deductions for purchasing new vehicles, especially alternative-fuel vehicles; for first-time homebuyers; for energy efficiency; and for college education.

Roughly speaking, a third of the money coming to our state will go toward filling Delaware's budget gaps for fiscal year 2009, which ended on June 30, and the next two fiscal years. The next third will go directly to construction — the aforementioned federal agency projects, highways and transit, housing, and environmental projects. The final third will primarily be divided among more than 50 different state-run programs already funded in whole or in part by the federal government. To stimulate the economy as quickly as possible, Congress generally chose to increase funding to existing programs rather than create new ones, which would require a lengthy ramp-up.

About $63 million of the stimulus package formula funding for Delaware will go to housing and community development programs on both the operating and the capital sides. Most of the funding is split between the Delaware State Housing Authority and the other four county and municipal housing authorities. Two-thirds of the federal monies will increase the spending levels of four ongoing programs: the Community Development Block Grant (CDBG), the HOME Investment Partnership, the Homelessness Prevention program, and the Public Housing Capital Fund.

The CDBG is a flexible funding stream intended to provide communities with resources to address a wide variety of unique community needs, including but not limited to rehabilitating affordable housing and improving public facilities. The HOME Investment Partnership provides low income housing tax credits to be distributed competitively to developers of such housing. The Homelessness Prevention program provides financial assistance and services to prevent individuals and families from becoming homeless and to help those who are experiencing homelessness to be quickly re-housed and stabilized.

The types of housing assistance available include emergency shelter, short-term or medium-term rental assistance, housing relocation and stabilization services, mediation of landlord-tenant disputes, credit counseling, security or utility deposits, utility payments, moving cost assistance, and case management. The Public Housing Capital Fund pays for modernizing existing low-income housing stock.

In addition, for the first time, the ARRA is also making nearly $23 million worth of grants in lieu of tax credits available to developers of low-income housing. The Delaware State Housing Authority will make awards to finance the construction or acquisition and rehabilitation of qualified buildings for these grants. Delaware is also seeking additional millions in competitive grants for housing capital, neighborhood stabilization, community development, and economic development.

Some private nonprofits in Delaware, primarily Head Start agencies and our federally qualified health centers, have already been the recipients of direct stimulus grants. Delaware's other nonprofits benefit from the formula funding of the stimulus package primarily through the Community Services Block Grant (CSBG). The CSBG is an ongoing program, but the ARRA provides a bonus payment of $5 million, about 1.5 times the recent annual appropriation level. CSBG funds are distributed to nonprofits not by a state agency but by an umbrella organization, First State Community Action, on a statewide competitive basis.

The ARRA's most direct beneficiaries in the business community are the construction contracting companies. All of the more than $400 million for construction will be allotted to the private sector through competitive bids — for roads, bridges, new and expanded wastewater treatment facilities, public drinking water supplies, and energy efficiency retrofitting. The broader business community can also benefit from the ARRA's direct competitive grant opportunities, especially in alternative energy, considerably expanded SBA loan programs, and tax relief.

Delaware continues to face a number of challenges in receiving its stimulus funds. The first and most pressing is simply to understand the contents of the thousand-page bill and what it means for the state; we must also ensure that we meet all of the deadlines and requirements of the law. Meeting all of the deadlines and complying with every requirement are ongoing tasks, tasks made somewhat more difficult given that we do not have one employee whose only job is to handle the stimulus package.

A second challenge is making Delaware's citizens aware of their stimulus opportunities. We have made full use of Delaware's Clearinghouse Committee, a joint committee of the executive and legislative branches charged with reviewing all federal grant applications, including those related to the ARRA. The committee graciously doubled its meeting schedule to accommodate the long list of stimulus-related grants. Its meetings are open to the public. In addition to establishing an extensive stimulus-related website, we held a series of six "stimulus suggestion box" public meetings throughout the state, as well as four business opportunity meetings. In addition, we did targeted outreach to the Delaware nonprofit, disabilities, and faith-based communities.

A third challenge relates to the use of what is, by definition, a temporary funding stream. Many ARRAfunded programs contain standard federal grant language requiring that the funding supplement rather than replace state funding. This requirement needs careful thinking, since any new spending must not create an obligation down the line, when federal funding ends, that the state may be unable to afford.

We continue to be challenged to meet the law's dual goals of tight controls to avoid waste, fraud, and mismanagement and rapid expenditure of the funds to promote the quickest possible economic recovery. While these goals are not mutually exclusive, there is nonetheless a dynamic tension between the two. Tighter controls slow down spending, and rapid spending requires more strict controls. Finally, we all need to manage expectations about the stimulus package. Undoubtedly, it has created and will create and preserve jobs and stimulate the economy; it is also of considerable help in balancing our state's budget this year and next. But the stimulus money is not a panacea; there is not a federal stimulus dollar for every possible expenditure, nor will it fill Delaware's budget gap all by itself.

More information is available at http://www.recovery.delaware.gov. External Link

Stimulus Bill Websites and Reports

Federal grant opportunities related to the American Recovery and Reinvestment Act (ARRA) are identified at www.recovery.gov. External Link A useful source for finding and applying for federal grants is www.grants.gov. External Link

Information on ARRA-related spending in Pennsylvania, New Jersey, and Delaware may be found at www.recovery.pa.gov, External Link http://www.state.nj.us/recovery/, External Link and http://www.recovery.delaware.gov. External Link

The U.S. Small Business Administration has information on ARRA-funded small business programs at http://sba.gov/recovery/information/index.html. External Link

A Local Initiatives Support Corporation summary of ARRA-funded programs may be found at www.lisc.org/; External Link select policy and "Sustainable Communities and the American Recovery and Reinvestment Act: Items of Interest and Details."

An Enterprise Community Partners summary of ARRA programs may be found at http://www.enterprisecommunity.org/public_policy/. External Link

A Brookings Institution report "Implementing ARRA: Innovations in Design in Metro America" may be found at http://www.brookings.edu/. External Link

HUD tracks ARRA funding for HUD programs at www.hud.gov/recovery. External Link

The IRS describes ARRA tax incentives for businesses at http://www.irs.gov; External Link select newsroom and 2009 fact sheets. For ARRA tax benefits available to taxpayers, select newsroom and news releases.

The Center on Budget and Policy Priorities provides state-by-state estimates of ARRA spending affecting low- and moderate-income individuals at http://www.cbpp.org/files/
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