Reviewing the Recovery Act

Infrastructure Watch has been following the American Reinvestment and Recovery Act (ARRA) since it was enacted. While infrastructure accounted for a relatively small amount of the total supplementary appropriations provided by ARRA, tens of billions of dollars is noteworthy in any industry. Much of the money that went to infrastructure has been spent and ARRA will begin a slow wind-down from the perspective of infrastructure. It seems like a good time for a review of the program and it effects so far.

INFASTRUCTURE INVESTMENT

ARRA committed only a fraction of its supplementary appropriations to infrastructure. Even so, the $62 billion appropriated to transportation and water infrastructure was significant considering that federal spending in this area had been declining. In 2009, this resulted in a $6 billion increase in federal infrastructure spending, of which $4 billion was directly from ARRA.

The Congressional Budget Office (CBO) estimates that 90 percent of these funds will be spent by 2013. The Government Accountability Office (GAO) had reported that 90 percent of the highway funds had been obligated by February 2010 and about a quarter of that had been paid out to state transportation programs. The clean water and drinking water state revolving fund (SRF) programs had drawn almost 80 percent of the funds by June 2011.

The author and others working in these industries are already looking for what projects or business lines might have the potential to bring in revenues as the ARRA well runs dry in a few years. The prospects aren’t entirely gloomy. Generally, the federal government accounts for only 25 percent of the spending on transportation and water infrastructure. The rest comes almost entirely from state and local governments.

Though federal funding is a minority of the investment in infrastructure, it is a significant portion of the capital investment, with relatively little going to operations and maintenance. This trend continued with ARRA. Smart Growth America criticized ARRA because to much went the construction of new transportation assets and too little to repairing existing infrastructure. They thought the extra appropriation would have been better spent and had a greater economic stimulus if more of it had been spent on the repair of existing infrastructure.

Maintenance of Effort
Though states are already a significant contributor to spending on transportation efforts, ARRA required states to continue funding transportation at the level they would have without the extra funding. Congress wanted to increase spending on transportation infrastructure, not give states a way to shift money to other areas.

The requirement has proven problematic. States are facing losses of revenue that may have forced them to cut transportation spending anyway. In addition, ARRA didn’t require to report what there level of effort would be until several months after they began to use the funds. States may not have, strictly speaking, circumvented the maintenance of effort requirement, but it has become difficult to say they have continued funding as they would have anyway.

JOBS CREATION
ARRA recipients reported more than 580,000 full time equivalent (FTE) jobs in he last quarter of 2010. The way jobs are reported by recipients makes it difficult to determine the exact impact of ARRA on jobs.

ARRA recipients report work-hours that were paid for out of the ARRA funding. In the case of an infrastructure project, these work hours might involve construction trades, construction management, engineering design and oversight, and other services (legal, environmental, and more). The nature of these jobs means that the people may be working part-time on ARRA projects while working part-time on other projects, or temporarily work full time on an ARRA project. It is easy to add up the hours and calculate an FTE. It is difficult to know if any of these jobs were created ARRA, or if they might have ended except of ARRA, or might not have been affected.

This type of reporting has a built-in decline as ARRA money is spent down and projects end. Reported ARRA-related jobs is already declining in the SRF programs. ARRA-related jobs reported from SRF programs peaked in the Spring of 2010 and have declined since. Some foresaw a post-stimulus jobs drop even as it was just getting off the ground.

The author is an example these features of jobs reporting, ARRA work having accounted of about a quarter of an FTE in relation to him over the last 19 months. It’s impossible to say what, if any, other work the author may have done if not involved in ARRA projects; he’s glad to have good projects from wherever they come. When he transfers his effort to other work, hopefully, over the next year or so, his hours reported for ARRA will decline and end.

In addition, only some of the ARRA-funded programs are required to report jobs. Those that report jobs only have to trace them so far, to primary contractors and their subcontracts. It is a practical impossibility to count the jobs created or retained by such a program.

Even so, CBO made a go at estimating it. They estimate that ARRA increased the number of people employed by between 1.3 million and 3.5 million in the last quarter of 2010.

CONSTRUCTION COSTS
In the years before ARRA, construction costs had been rising more rapidly that prices the rest of the economy. Bucking that trend, GAO reported that many ARRA-funded projects were receiving bids that were lower than expected. The author has heard from water utilities and state revolving fund programs that a similar trend is occurring in drinking water and wastewater projects.

The thought is that the recession has made the environment very competitive and more bidders are going after each job. In response, contractors are taking minimal profits in order to get projects and stay afloat until the economy recovers. The Associate General Contractors of America has even suggested that contractors have bid projects at less than cost for that purpose.

This drop in bid prices is a reflection of the economic environment, not a response to ARRA. The touted “bid savings” that have ostensibly allowed the ARRA dollars to stretch farther have provide the same benefit to all the other money spent on construction.

MACROECONOMICS
CBO estimates that ARRA increased the gross domestic products (GDP) by between 1.1 percent and 3.5 percent in the last quarter of 2010.

FEDERAL DEFICIT
CBO estimates that the ARRA will increase budget deficits by $821 billion between 2009 and 2019. They estimated 70 percent of that, approximately $575 billion, was realized by the end of September 2010.

REFERENCES
The following references were used in the preparation of this review of ARRA.

Congressional Budget Office (CBO). Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from October 2010 Through December 2010. Washington, DC: CBO, 2011.

-----. Public Spending on Transportation and Water Infrastructure. Washington, DC: CBO, 2011.

Cooper, M. Companies pretty up prices to win stimulus projects. New York Times. March 28, 2009.

Farley, R., & Grabell, M. ProPublica and PolitiFact test Obama claims on stimulus. ProPublica. Nov. 10, 2010.

Fields, G. Job cuts loom as stimulus fades. Wall Street Journal. Dec. 1, 2009.

Government Accountability Office (GAO). Recovery Act: Funding Uses for Transportation Infrastructure Projects, but Some Requirements Proved Challenging. Washington, DC: GAO, 2011.

-----. Recovery Act: Funds Supported Many Water Projects, and Federal and State Monitoring Shows Few Compliance Problems. Washington, DC: GAO, 2011.

-----. Recovery Act: One Year Later, States’ and Localities’ Uses of Funds and Opportunities to Strengthen Accountability. Washington, DC: GAO, 2010.

Smart Growth America. Recent Lessons from the Stimulus: Transportation Funding and Jobs Creation. Washington, DC: Smart Growth America, 2011.

The following references are offered for those interested in additional information on ARRA.

Infrastructure Watch (blog). Coverage of infrastructure economic stimulus. May 14, 2009.

-----. Coverage of infrastructure in economic stimulus. Apr. 14, 2009.

-----. Government Accountability Office watches Recovery Act implementation. August 23, 2010.

-----. Infrastructure & recovery news. Oct. 8, 2010.

-----. Infrastructure & stimulus news. June 17, 2010.

-----. Infrastructure economic stimulus in the news. July 1, 2009.

-----. Infrastructure stimulus. Jan. 27, 2011.

-----. Recovery Act and infrastructure in the news. Jan. 26, 2010.

-----. Recovery Act and infrastructure in the news & elsewhere. Aug. 1, 2009.

-----. Recovery Act and infrastructure news. May, 11, 2010.

-----. Recovery & stimulus news. Mar. 25, 2011.

-----. Show me the money: Stimulus & infrastructure news. July 7, 2010.

-----. Summary of transportation stimulus oversight findings. Sept. 27, 2009.

-----. USDOT redirects high-speed rail stimulus away from slow states. Dec. 21, 2010.

McNamar, T. Profiles from the recession. Blueprint America (blog). Sept. 15, 2010.

Congressional Budget Office Presents Testimony on Transportation Spending

Earlier this month, Mr. Robert A. Sunshine, Deputy Director of the Congressional Budget Office (CBO) presented testimony on federal spending on surface transportation infrastructure. This report was prompted by events anticipate for 2007: the expiration of SAFETEA-LU and spending form the Highway Trust Fund outpacing revenues.

Most government spending on surface transportation infrastructure is by state and local governments (about three-fourths). The great majority of federal spending is on capital (92 percent). The majority of state and local spending is on operations and maintenance (64 percent).

The CBO points out that Congress will need to find ways to decrease spending (or at least the growth in spending), increase revenues, or some combination of these. Fully funding the projected spending by raising fuel taxes could result in an increase of 5 cents per gallon.

The CBO suggested alternatives to fuel taxes.
-Mileage fees. Fees based on the number of miles traveled by a vehicle. This would include tolls.
-Weight-distance fees. Annual fees based on the mileage and type of vehicle.
-Congestion fees. Fees based on road choice and travel timing.
State and local governments are using or have experimented with these alternatives. They are advantageous and more economically efficient in that they link particular infrastructure resources to their users and type of use. The present fuel tax system is advantageous in that it is relatively inexpensive to administer and hard to evade.

Highway Trust Fund Running Out of Money

The Congressional Budget Office (CBO) predicts that the Highway Trust Fund will be empty by 2014. Federal gas taxes support the fund and are greatly outpaced by spending. These predictions of the trust fund demise are getting to be a regular thing.

Link to the CBO report

Additional posts and articles
Boxer Files Highway Trust Fund Extension
CBO reports highway trust fund headed for bankruptcy in 2014
Highway Fund in Continued Trouble; Empty by August
Returning to Dust: Our Aging Infrastructure

Infrastructure & Environment Roudup

Drinking Water Supplies Threatened by Dry Weather

The Associated Press put together a nice, short summary the problem of shrinking water supplies.  You can read it at the NBC News site and see video of a related story.

Earthquake Preparedness: The Great Shakeout

February 7 will be the Great Central U.S. Shakeout.  If you’re a fellow Missourian, find more information at the Missouri Division of Geology.  If you live elsewhere in the central United States, check out the Shakeout Web site (participating states are Alabama, Arkansas, Illinois, Indiana, Kentucky, Oklahoma, Mississippi, and Tennessee).

Highway Trust Fund Out of Money by 2015

The Congressional Budget Office (CBO) has released projections of funds available in the Highway Trust Fund.  They expect it to have insufficient funds to meet obligations by fiscal year 2015.

The Highway Trust Fund is the primary source of money for the federal-aid highway system.  Revenues to the fund come primarily from the federal gas tax.

You can see the CBO projections here→.

Related posts and articles

Highway Trust Fund Running Out of Money (Infrastructure Watch, Feb. 9, 2012)

Hydropower Bill Reported Out of Committee

The Hydropower Regulatory Efficiency Act of 2013 (H.R. 267) was reported out of the House Committee on Energy and Commerce.  The bill would expand hydropower development.

Mississippi River Affected by Drought

We’ve been following stories about the effects of the prolonged drought on the Mississippi River.  Our posts have mostly related to barge traffic and the effort to keep the river open downstream of St. Louis.

NPR has posted an article about the effects at the mouth of the river.  One of the issues is salt water intrusion, which as the potential to change the water quality in that part of the river and has already reached the intake of one drinking water system in Louisiana.  Of course, barge traffic is an issue for New Orleans, too, because the port there is where goods move from river barges to ocean-going vessels.

Recently, barge traffic has been back up by an oil spill on the river, too.  Cleanup of the spill near Vicksburg, Mississippi, continues.

Related posts and articles

Mississippi River barge backup shrinks, oil cleanup continues (Plume, K., Reuters, Feb. 1, 2013)

Rock clearing on drought-hit Mississippi River nears completion (Plume, K., Reuters, Jan. 29, 2013)

Work to Keep Mississippi River Open Continues (Infrastructure Watch, Jan. 29, 2013)

New Staff Leader Announced for Senate Environment & Public Works Committee

Sen. Barbara Boxer (CA), chair of the Senate Committee on Environment and Public Works, announced that Jeremy Symons will join the committee staff as Deputy Staff Director. He will focus on environmental issues, including clean water, air quality, wildlife, and climate change.  Symons currently serves as the Senior Vice President for Conservation and Education at the National Wildlife Federation (NWF). Previously, he was Executive Director of NWF's Climate Change Campaign, held positions in the Environmental Protection Agency's Office of Air and Radiation, and served in Sen. Ron Wyden's (OR) office.

You can read the original news release here→.

Secretary Chu Leaving Energy

Energy Secretary Steven Chu announced he will be resigning his post.  Other officials who announced their resignation include Transportation Secretary Ray LaHood and EPA Administrator Lisa P. Jackson.

Related posts and articles

Outgoing Energy Secretary Warns Of Dangers Of Climate Change (Shogren, E., NPR, Feb. 1, 2013)

In Congress

Balancing Act

The Balancing Act (H.R. 505) has been referred to several committees of the House of Representatives. The bill is intended to delay sequestrations, improve efficiency, reduce tax loopholes, and extend some programs. Some of the infrastructure related highlights of the bill include

-elimination of several tax breaks related to fossil fuels,

-immediate appropriations for air and surface transportation,

-create an infrastructure bank called the American Infrastructure Financing Authority,

-extending certain tax exemptions on bonds.

If Congress would like to put this blogger to work, it should end this ongoing threat of sequestration and agree on a budget.

Congressional Budget Office Releases 4Q2012 Recover Act Report

The Congressional Budget Office (CBO) released a report on the economic impact of the American Reinvestment and Recovery Act (ARRA) for the last quarter of 2012. During that period, ARRA funded 113,000 full-time-equivalent jobs (FTEs), though this figure does not necessarily correlate to increased jobs in the economy. CBO estimates the economic impacts for the reporting quarter to be

-0.1 to 0.6 percent increase in gross domestic product (GDP),

-0.1 to 0.4 percentage point decrease in unemployment, and

-increased the number of people employed by between 0.1 million and 0.8 million.

Fix It First

President Barack Obama’s Fix-It-First proposal has received some fairly gentile criticism from House Transportation and Infrastructure Chairman Bill Shuster (PA). The plan would provide an additional appropriation of $50 million to transportation projects ($40 million to transportation programs and $10 million to capitalize an infrastructure bank). Rep. Shuster says the proposal fails to address the long-term issue of transportation funding. Current transportation funding sources bring in $35 billion annually, but Congress has approved spending of more than $50 billion annually. You can read more about this issue at The Hill.

Water Resources News

Aging Water Infrastructure and Maintenance Act Reported Out of Committee

The Aging Water Infrastructure and Maintenance Act (S. 2842), sponsored by Sen. Harry Reid (Nevada), has been reported out of committed and placed on the Senate calendar. The act would require the Department of Interior to inspect reclamation projects that could threaten public safety if they failed. In some cases it would provide for financing of improvements needed to insure a facility is safe. The Congressional Budget Office (CBO) estimates the program would cost $189 million over the period of 2009 through 2013.

Cooperative Watershed Management Act of 2008 Reported Out of Committee

The Cooperative Watershed Management Act of 2008 (S. 3085), sponsored by Sen. Jon Tester (Montana), has been reported out of committee and placed on the Senate calendar. The bill would create a grant program, operated through the Department of Interior, to form and expand watershed groups and fund watershed restoration projects by those groups. The bill authorizes appropriations beginning at $2 million annually and rising to $20 million annually in 2012 through 2020. The CBO estimates the program will cost $43 million over the period of 2009-2013.

Here are some other bills we’ve been watching:
Clean Water Affordability Act (S. 3443)
Climate Change Drinking Water Adaptation Research Act (S. 2970)
Drug Free Water Act of 2008(H.R. 6451)
Perchlorate Monitoring and Right-to-Know Act of 2007 (S. 24)
Protecting Pregnant Women and Children from Perchlorate Act of 2007 (S. 150)
Sewage Overflow Right-to-Know Act (S. 2080)—House version passed
Small Community Drinking Water Funding Act (S. 1933) (additional post)
Twenty-First Century Water Commission Act of 2008 (S. 2728) (additional post)
Water Essential Storage To Enhance Regions in Need Act (S. 2873)
Water Security Act of 2007 (S.1968)

Recent water resources posts and articles:
More Attention for 21st Century Water Act

Previous water resources news:
Links to Infrastructure-Related Organizations
McCain’s Comments on Water Policy: Additional Resources
Water Resources News (Aug. 19, 2008)
Water Resources News (Aug. 27, 2008)

Recovery Act Review

Economic Impacts of ARRA 

The Congressional Budget Office (CBO) reports quarterly on the estimated economic impact of the American Reinvestment and Recovery Act of 2009 (ARRA).  In its report for the third quarter of 2012, it estimated that ARRA funded more than 135, 000 jobs (full-time equivalents, or FTEs).  It expects 90 percent of ARRA’s budget impacts will be realized by the end of the year.  It projects that ARRA will increase they budget deficit by $833 billion by 2019, up from its original estimate of $787 billion.

Cleanup Projects

 The Department of Energy (DOE) received $6 billion from ARRA for the cleanup of DOE-managed sites that produced nuclear material.  According to a Government Accountability Office (GAO) report, ARRA-funded jobs peaked in the fourth quarter of 2010 at about 11,000 FTEs.  They reduced the footprint of managed sites by 70 percent; that is they cleaned up more than 650 square miles.

Beginning with ARRA, DOE implemented a project management approach that broke down projects into more manageable pieces.  GAO found that this practice may have allowed the agency to classify projects in a way that may have allowed them to avoid certain review processes.  In addition, inconsistencies in developing project scope, schedules and targets, along with variability in documentation, makes it difficult to accurately assess and compare project and program performance.

State and Local Management of ARRA

State and local governments had significant responsibilities in managing ARRA funds as recipients.  GAO reported findings related to their review of state and local management.  Some of those findings include:

-The emphasis on obligating ARRA funds resulted in delayed obligation of other funds.

-Recipient expertise effected the management of ARRA funds.  Particularly, state agencies tended to have more success in managing their ARRA projects that local agencies because of greater familiarity with federal requirements.

-Unclear guidance caused problems for various projects.

-Internal controls of some recipients were not adequate, at least at the start, for monitoring compliance with ARRA requirements.

Related posts and articles

American Reinvestment and Recovery Act New (Infrastructure Watch, Dec. 4, 2012)

Coverage of Infrastructure Economic Stimulus (Infrastructure Watch, May 14, 2009)

Economic Stimulus Funds 2000 Transportation Projects (Infrastructure Watch, Apr. 14, 2009)

Government Accountability Office Watches Recovery Act Implementation (Infrastructure Watch, Aug. 23, 2010)

Infrastructure & Stimulus News (Infrastructure Watch, June 17, 2010)

Missouri Top State in Wastewater Stimulus Funding Use (Infrastructure Watch, Mar. 28, 2010)

News about the American Reinvestment and Recovery Act (Infrastructure Watch, Sept. 14, 2011)

Recovery Act Infrastructure Criticism (Infrastructure Watch, Sept. 18, 2012)

Recovery and Stimulus News (Infrastructure Watch, Mar. 25, 2011)

Reviewing the Recovery Act (Infrastructure Watch, Aug. 2, 2011)

States Obligate All Highway Stimulus Funds (Infrastructure Watch, Mar. 10, 2010)

Summary of Transportation Stimulus Oversight Findings (Infrastructure Watch, Sept. 27, 2009)

Transportation News

Bridges in Trouble

Many bridges in the Unites States are reaching the end of their design life. Nationally, 12 percent of bridges are functionally obsolete, meaning they were built to a standard no longer used today, and 13 percent are structurally deficient, meaning they have deteriorated load bearing members or narrow waterway openings that cause intolerable congestion. The number of bridges, their age, and the increasing cost of construction and maintenance is putting a strain on state and municipalities responsible for maintaining the transportation system, which pay for about 37 percent of the cost of bridge rehabilitation and repair (AASHTO).

As states are inspecting their bridges, the federal government is scrutinizing its bridge programs. There is a growing expectation of linking federal expenditures to performance (GAO-08-1043, 08-1127T).

Passenger Vehicles and Climate Change

A cost placed on carbon dioxide emissions is expected to have little impact on the behaviors of individual drivers. Driver adaptions to recent increases in gasoline prices have been small. In addition, new fuel economy standards are expected to have a greater impact on emissions from passenger vehicles than a small price increase from a carbon dioxide charge (CBO 2008).