State Fiscal Relief

ARRA contains a number of provisions to provide fiscal relief to the states at a time of record deficits. Most attention has focused on the $53.6 billion provided through the State Fiscal Stabilization Fund, but the act also contains other provisions to assist the states.

The State Fiscal Stabilization Fund directs $53.6 billion to the states through the U.S. Department of Education. The Fund holds back $5 billion for the secretary of Education for State Incentive Grants and an Innovation Fund. The Incentive Grants are to states that have met certain education provisions (e.g., achieving equity in teacher distribution). The $650 million Innovation Fund will be used for awards to recognize school districts or partnerships between nonprofit organizations and state education agencies, school districts or one or more schools that have made achievement gains.

The remaining $48.6 billion is allocated to the states with 61 percent based on the size of the population ages 5 through 24 and 39 percent based on total population. For the amount that each state receives, 81.8 percent is directed to support elementary, secondary and higher education. The remaining 18.2 percent can be used for public safety and other government services.

The Center on Budget and Policy Priorities has prepared a projection of the state-by-state allocation from the State Fiscal Stabilization Fund, which is available at: http://www.cbpp.org/1-22-09bud-sfsf.pdf

In addition to the State Fiscal Stabilization Fund, significant dollars will flow to the states to take some of the pressure off the burgeoning state deficits. Several provisions in the stimulus bill focus explicitly on reducing the burden of states' Medicare and Medicaid obligations. These include increasing the rate of direct federal assistance (tied to changes in state unemployment rates) for Medicaid, additional funds to supplement hospitals treating low-income patients, a moratorium on a collection of Medicaid regulations enacted during the previous session of Congress, and extending the time period of transitional medical coverage for those with reduced Medicaid eligibility, among others.

The Department of Transportation will distribute a large amount of funds throughout the country, with $1.1 billion for improving airport safety and capacity with an additional $200 million for airport facilities and equipment, $27.5 billion for highway infrastructure, $8 billion for high-speed rail, $6.9 billion for public transit, $1.3 billion for Amtrak, $100 million for shipyards and another $1.5 billion in grants across all modes of surface transportation.

Under the Department of Housing and Urban Development, communities will see $2 billion in neighborhood stabilization funds to deal with foreclosed and vacant properties and $1 billion in Community Development Block Grants. To improve housing, $4 billion will go towards rehabilitating and retrofitting public housing, $2.25 billion for section 8 homes, $510 million for improving the energy efficiency of structures maintained by Native American housing programs, and $100 million will be steered to local governments to remove lead-based hazards. Finally, $1.5 billion will be distributed to assist homeless families and $2.25 billion will be dedicated for low-income housing tax credits.