081212 States Would Get Free Hand in Stimulus Plan to Speed Spending

(Bloomberg) -- The economic stimulus package headed to Congress in January would let states and localities, rather than the federal government, decide how to spend the bulk of the money, lawmakers and lobbyists say.

The stimulus measure being worked out by aides to President- elect Barack Obama and congressional staff members calls for much of the cash to be pumped into existing transportation and energy programs without federal directives on how to spend the money.

Advocates of the approach say it would speed congressional approval of Obama's push to inject into the economy what some senators say may surpass $700 billion over the next two years. Lawmakers in Congress would forgo their more time-consuming practice of loading the measure with thousands of pork-barrel projects known as earmarks.

The strategy also raises the possibility that state and local officials would use the money to finance their own wish lists of projects that wouldn't necessarily create the most jobs or serve all of Obama's goals.

"It's in essence a blank check," said Mariia Zimmerman, policy director for Transportation for America, a Washington coalition of transit, environmental and public health advocates. "It's 'Here's the money,' and there's no accountability."

The approach, part of an effort to get the bill to Obama by the time he takes office Jan. 20, sidesteps what could be a protracted negotiation over potentially thousands of specific projects.

Block Grants

"Instead of Congress earmarking funding, I am expecting that we will give block grants to states, giving them discretion over which projects to prioritize," said Senator Jeff Bingaman, a New Mexico Democrat and chairman of the Energy and Natural Resources Committee.

Groups representing state highway officials, transit systems and energy agencies say the approach would allow them to break ground on billions of dollars' worth of projects as soon as the legislation passes.

The approach is a departure from Obama's campaign promise to rebuild America by creating an "infrastructure bank" to fund projects. As the economy has worsened, Democratic lawmakers and Obama aides have postponed that concept and instead are looking for the speediest way to inject money into the economy.

Among critics, the concern is that writing checks to states and localities could shortchange Obama's public transit and clean-energy programs in favor of spending on roads, which get the bulk of transportation spending under current formulas.

'Clumsy' System

Colin Peppard, transportation policy coordinator for the environmental group Friends of the Earth, called states a "clumsy" distribution system and a group that tends to favor big road projects over public transit and other, more- environmentally friendly programs.

"Is it better than Congress deciding? I don't know that it's much different," Peppard said. "It's just earmarking in a different way. The project lists are generally the same."

He called on the incoming Obama administration to apply more pressure to lawmakers drafting the legislation to ensure that spending on transportation projects is “green.â€

John Horsley, executive director of the Washington-based American Association of State Highway and Transportation Officials, said that in his view, "green" projects "to a degree can be accommodated" by the stimulus package.

The prime goal, though, must be job creation, he said. “The green that most workers want to see is the green of a paycheck.â€

Wish List

An inventory of 11,391 ready-to-go projects that the U.S. Conference of Mayors has prepared as Congress readies for debate on the stimulus package has sparked some of the concerns about leaving the spending decisions to state and local officials.

The list includes repaving tennis courts in Rocky Mount, North Carolina, buying park benches in Birmingham, Alabama and renovating a golf course in Austin, Texas.

"There are an awful lot of tennis courts-to-nowhere-type projects in there," said Tim Lynch, senior vice president of the American Trucking Associations in Alexandria, Virginia. "While I'm sure that will stimulate something, that's not quite what we think is necessarily an appropriate federal role."

Shortly after Obama's election last month, he pledged to create 2.5 million jobs with the stimulus plan to build roads, bridges, public buildings and other infrastructure projects. Democratic leaders want to have the bill ready for a vote when Congress convenes on Jan. 6, with the goal of sending legislation to Obama's desk by the time of his inauguration two weeks later.

Closed-Door Talks

To meet those deadlines, a flurry of closed-door meetings has occurred on Capitol Hill as congressional aides, Obama staffers, lobbyists and interest groups work to craft the biggest public works program since the Dwight Eisenhower administration.

Funneling the money into existing programs would keep lawmakers from haggling over the merit of thousands of individual projects.

Energy-saving projects, for example, would be financed through programs at the federal Energy and Interior departments, which would then send the money to states and localities.

"There are a number of state funds and programs that do renewable energy deployment and energy infrastructure retrofits," said Bracken Hendricks, an Obama campaign adviser and analyst at the Center for American Progress, a policy group in Washington helping with the transition. "It's an existing spending infrastructure and it's been very, very effective."

Billions for Roads

House Transportation and Infrastructure Committee Chairman James Oberstar, a Democrat from Minnesota, wants to allocate at least $45 billion in infrastructure improvements to states based on current highway spending formulas.

Horsley of the state highway and transportation group said state officials would know how best to spend any stimulus funds.

"Congress isn't going to attempt to earmark these projects," Horsley said. "If speed is of the essence, the states have documented, ready-to-go projects."

Mayors met last week with Oberstar and House Ways and Means Committee Chairman Charles Rangel, a Democrat from New York, to make the case for their $73.2 billion list of projects. The group says these projects could create as many as 848,000 jobs over the next two years in 427 cities.

The projects "will immediately employ people, support small businesses, and stimulate Main Street economies," said Miami Mayor Manny Diaz, president of the mayors' conference.

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