The point man for federal stimulus spending in Hawaii sees the benefits -- and limitations -- of the ARRA program
POSTED: 1:30 a.m. HST, Nov 12, 2010
Mark Anderson needs a sign on his desk that says, "The buck stops here -- but only briefly." Anderson's business card lists his title as "State Lead ARRA Coordinator," which means he keeps strict records of spending under the American Recovery and Reinvestment Act, better known by its supporters and detractors as the stimulus package. Hawaii has been allotted most of what it's going to get, a total of more than $1.6 billion. Of that total, a little more than half -- $849 million -- has been spent.
But Anderson is dubious about calls for the unspent money to go back to pay down the national deficit. He pointed to tallies showing $153 million legally "encumbered" by approved contracts, and he said much of the rest of it is so far along in the planning process that calling it back would be extremely complicated.
On balance, he said, the spending has stabilized state government and produced thousands of jobs, some of them through direct hiring to complete specific projects (see chart). Roughly a third of the jobs, 5,147, were for projects in which careful job reporting was required. Most of the remaining jobs were a result of extra spending in the community allowed by expansion of benefit payments and other federal funding streams.
The Hawaii-born Anderson, 40, said he owes his wife a debt of thanks for dealing with his long hours on the job. They are parents to sons Ethan, 4, and Tate, 1 ("We almost named him ARRA," he said with a laugh).
Anderson graduated from Punahou School, earned an economics degree at the University of Washington but then decided he owed something to his home state.
"It's been very satisfying," he said. "I think one thing Hawaii has going for it is that people care about Hawaii. People really care about it, and I think that's our greatest strength."
QUESTION: What do you think is the biggest misunderstanding about the stimulus program? Do you think it's gotten a bum rap in some way?
ANSWER: My sense is that the public expected the stimulus to restore our level of prosperity to what it was before the financial meltdown. And I think the stimulus package was very helpful for Hawaii and helped to stabilize our economic situation. But it hasn't restored us to how things were, and I think there was an expectation that things were going to go back to how they were.
Q: The Obama administration estimated it would keep unemployment lower than it is. Do you think that was the error, in overselling the stimulus on what it could do?
A: The expectations were very high, and I think the financial crisis and the economic downturn was probably the most severe, they say, since the Great Depression. Just the general concern about where our country's headed, the uneasiness, the public has rightfully questioned: Is the stimulus effective or not? ... Besides the expectations, I think the other thing has been it's come with a lot of transparency that wasn't there before. ... So people are becoming aware: "The federal government spends money on this type of research or that type of research, or is involved in this or is involved in that?" I think that transparency has raised that awareness. So I think a lot of the questions are just on being able to notice things that went invisible before ... I think that eventually all public spending will head in this direction. It will be a Web-based way of the public checking on how their tax dollars are being used. I think it's a positive trend, but it's going to take a few years to get to where it needs to be.
Q: And why is that? Is it just the limitations of our own information technology network?
A: That's a lot of it. Just on the state side, I think we'd have to invest in the upgrade of the financial accounting system. Our financial accounting system is dated, and it's a real time and effort and cost to get this information out. And I think if we go to a higher level of accountability and transparency, we're going to have to upgrade our financial accounting system.
Q: Some congressional candidates said during the campaign season that one way to reduce the deficit is to cut stimulus funds. Is that possible?
A: I think that would be very difficult to do.
Q: You think so? Even if the funds are not encumbered?
A: Some funds might be able to be recovered but I would doubt very much. A lot of the funds have been encumbered. We're pretty down the process now; I mean, half the money's spent. I would say a quarter is encumbered ... and then some of the big pots of money remaining are for things like our education system. So the DOE (Department of Education) has some pockets of money -- so you're going to take that money back from the school system? Is that something that's going to work? I don't know ... we're past that Sept. 30 award date, so now the federal government's awarded stuff to state government and other entities, and those folks are generating plans and doing things that then turn into contracts, conducting activities and hiring people. And to be able to stop that and then issue guidance on how to close things out and pull it all back, I think it would be very difficult.
Q: How do you answer the critique that Hawaii's spending rate was too slow?
A: Unlike Hawaii, a lot of other states front-spent all their money. So we went through all these very painful and divisive budget cuts. Other states said, "OK, we're going to spend all our stimulus money now, and postpone that reckoning for later ... But Hawaii took a different approach with trying to use these stimulus funds to produce a reform plan and actually work together on some core principles of improving our education system and spread that money out so there's not so much of a cliff effect, hoping that when the money's spent, the economy will have recovered. So, two different strategies, right? So we might receive criticism that, "Your spending rate is not as quick as this other state," but we had a very different strategy. Another example: Department of Transportation, they decided to undertake more complex projects. So a lot of states use their transportation money just for repaving. The Department of Transportation said, "No, we want to do bridges and these other things." It takes a little bit longer to get those done, but longer-lasting, too, though. See what I mean? So we made some decisions, we're going to get criticized for it, but it's just the route we decided to go. And we'll see who gets the gold star at the very end (laughs).
Q: Given that our state's approach has been more investment-oriented and longer term, are we going to feel the effects further out?
A: Yeah, I think, for one, we've gotten some pretty nice competitive ARRA awards that are going to help improve our economy. We got the ARRA award in broadband -- all the schools are going to become wireless. Total CIP (capital improvement project funds) for all state agencies is $261 million in ARRA projects; we've gotten some nice awards in the energy area which I think will help us in our future. Of course, to me the greatest award is that Race to the Top award. If that can have a positive influence on the direction of education reform, I think that's going to have a significant impact. I think some of those competitive grants are laying the foundation for future growth for our economy, and I think that was the intention of those grants. And I think the spending, a lot of the spending will go out this year and next year and then will trail off from there.
Q: Would you say ARRA funds stabilized things, but there is more work to do?
A: Yeah. There are two pieces of ARRA that stabilized state government, basically aid from the federal government, the FMAP (Federal Medical Assistance Percentages) money. We would have faced additional budget cuts in that amount without that. And then all the money that's gone to education, if we didn't get that in federal aid, we would have been facing that much more. So we're talking hundreds of millions of dollars more in budget cuts we would have had to go through without the stimulus package.
Q: You've said that your job was harder at the beginning. How so?
A: The package passed quite suddenly, and then it's trying to understand what the package entailed, all the different programs in it, trying to understand the time frame in which those programs were going to become available, trying to understand the reporting requirements and what the federal government expected of us. All brand new things. So that's our side; the federal government side, they're working together to figure out how it's going to work as well. And then there was the sense of crisis and urgency, that the money needs to get out quickly. If you recall, when the package was passed was kind of a gloomy time, people very worried. So all those factors together, it was very challenging.
Q: Nationally, hasn't there been criticism of individual projects funded by stimulus?
A: We got national attention on one of ours.
Q: Which one do you mean?
A: The study of the bees (University of Hawaii research about how honeybees learn).
Q: Have people you've talked to taken issue with things like that?
A: You know, I've had to take it pretty much with a grain of salt. I understand it is taxpayer funds and people are very interested in making sure the money is spent well. The package is so broad that people can find things that they don't like in it, for sure. There's going to be projects that perhaps shouldn't have been funded; that's a given. But I've tried to focus on the overall effort of: Our economy needs these federal resources, the governor's given me authority and requested that I take on this authority. So I've just got to do the best I can. ... I just assume that if we do our best job, people can just take a look at it, and I'm sure in the end they're going to say, "If we ever do a stimulus again, these three or four programs don't make sense, we wasted a lot of time there and didn't do much good." And that's valid. There are different ways to do fiscal stimulus, but having accepted the job from the governor, I just had to do the best I could.