Stimulus cash isn't the magic bullet yet

  • Article by: KEVIN DIAZ and MIKE KASZUBA , Star Tribune Staff Writers
  • Updated: June 28, 2009 - 2:06 PM

To see where the hopes and realities of the mammoth federal stimulus plan intersect, look to St. Cloud.

Three months after Vice President Joe Biden stopped there to promote the $787 billion spending package by visiting a plant that's expected to supply 29 Twin Cities buses funded by stimulus cash, the deal is still moving through the federal bureaucracy.

It illustrates how the stimulus is unfolding so far in Minnesota -- in fits and starts, with a lot of money slow to flow.

"I can't just fly an airplane over Minnesota and just start dumping it out," said Tom Hanson, commissioner of Minnesota Management & Budget, which oversees stimulus spending in the state.

In some places, early signs of spending are starting to show. Some are small, like a $400,000 grant to synchronize traffic signals in 11 different highway corridors in central Minnesota. Others are arriving with a bang -- like the $10 million grant to help replace the Lowry Avenue Bridge, which was demolished in spectacular fashion in Minneapolis last week.

But in most cases, the big money is still in the works.

That's prompting many Republicans and other critics of the massive spending program, which is designed to pump new life into the ailing state and national economy, to charge that it is falling short in creating jobs. Or, in some instances, that it may be funding projects that would be going forward anyway or that might not be necessary.

Detailed job-creation figures are not due until October. But with unemployment in Minnesota holding at about 8.2 percent, White House officials say that more than $2 billion in Recovery Act funds are already flowing into the state -- much of it in ways that don't show up in state coffers, such as Social Security, unemployment and tax benefits that go directly to individuals.

Highway money on slow road

The problem for Democrats who support the Obama administration plan is that the most visible federal dollars are the slowest to trickle in.

Though much of the stimulus plan was sold on the strength of road and highway investments, records released by Congress last week show that only 37 transportation and infrastructure projects were underway in Minnesota as of May 31, creating or sustaining 124 jobs.

State officials note that they were among the first in the nation to earmark their allocation of federal transportation money, and that the construction season in Minnesota is just getting underway. "The Recovery Act was signed on Feb. 17," said Dan McElroy, commissioner of Minnesota's Department of Employment and Economic Development. "We had snow on the ground until about April 20."

At this point, the bulk of the $4.8 billion in stimulus money slated to pass through state agencies over the next two years won't start flowing until this week, with the July 1 start of the state's 2010 budget year.

"For us, the money is hitting exactly when we need it," Hanson said. The latest data from his office show that most of the estimated $500 million in stimulus money actually spent to date has gone toward additional Medicaid services promised under the plan.

Medical assistance money can flow speedily through existing programs. But other types of spending -- such as the money for highway construction and New Flyer buses -- has to work its way through multiple layers of bureaucracy between Washington and St. Paul.

And the winners are ...

In some cases, the federal stimulus' effects will be felt in a matter of weeks.

At the tiny Baudette airport, near the Canadian border, ground-breaking is expected by mid-July on a $250,000 remodeling of the sole runway. It's a project, said Emory Vaagen, the airport's manager, that has been on a wish list for years.

"They gave me a call at home and said, 'How would you like some money to fix your runway?'" he recalled. "I was quite ecstatic."

Baudette's runway project is part of $20.8 million in federal stimulus money being spent on airports across Minnesota.

In Coon Rapids, $180,000 in federal stimulus money will be used to upgrade the city's 56 traffic signals, including the installation of electronic buttons for pedestrians to push in order to cross the street. Steve Gatlin, the city's public services director, said construction should start in October, although he acknowledged that there had not been a large public clamoring for them.

Another winner, at least indirectly, is WSB & Associates of Minneapolis, a consulting engineering firm to several municipalities in the Twin Cities. Jay Kennedy, a WSB official, said the company took the lead in writing grant applications for stimulus money on behalf of the cities. WSB was successful in some instances, he said, such as a $195,000 project in Mahtomedi to build a right-turn lane and bypass lane at a busy intersection; $156,000 of the project will be funded with federal stimulus dollars.

"Every community I know of was throwing in anything they could think of," said Kennedy, Mahtomedi's consulting engineer.

"I didn't think this was the type of project anybody would fund with stimulus money," he said of the Mahtomedi project.

Controversial uses

For some recipients, federal stimulus money will be used to fund projects that were going forward anyway.

The reconstruction of the Lowry Avenue bridge, for example, had been moving forward with a combination of state bridge bonds and county money. "It's been a 'go' since the discovery of the problem [with the old bridge's structure]," said Jim Grube, Hennepin County's transportation director.

Other uses have likewise raised eyebrows. Stimulus money will go to "recommission" the three-year-old main library in Minneapolis, a process that will cost $250,000 and is aimed at evaluating whether the building's mechanical systems are working at peak efficiency in order to save energy.

Grant applications are due in the coming weeks for a piece of $316,200 aimed at helping preserve jobs in the state's arts community. Some of the grants, ranging from $10,000 to $25,000 apiece, can be used to support staff positions that are "critical to an organization's artistic mission."

"We know that many [arts] organizations have either laid off staff, or gone to part time," said Sue Gens, executive director of the Minnesota State Arts Board.

Though the Obama administration is pressing for the bulk of the money to be used for projects that would not otherwise be completed, some federal stimulus money will be used in Minnesota to help erase operating budget shortfalls. The Metropolitan Council, as part of $70.6 million that is mainly being spent to buy new buses, will use $17.8 million for preventative maintenance, a move that will "help reduce the $62.4 million shortfall in the [transit] operating budget" over the next two years.

"The stimulus dollars -- the bulk of them -- are really to purchase those buses," said Peter Bell, the Met Council's chairman. By doing that, he said, the agency is "freeing up dollars to deal with what really is a structural deficit in our transit operations, and that will allow us really to balance our transit books for the next four years."

That does not sit well with Republican critics in Congress, who see little but mounting deficits in the stimulus plan.

"The purpose of the stimulus bill was to inject some job creation into the economy, and we have not seen that," said Rep. Erik Paulsen, R-Minn., who joined a unanimous GOP bloc in voting against the stimulus legislation.

Even some Democrats who support the stimulus lament what they see as a shortchanging of public works. Among them is Minnesota Democrat Rep. Jim Oberstar, chairman of the House Transportation and Infrastructure Committee. "Our nation has been underinvesting in this area for the past six years," he said.

But no matter how the money is used, many experts expect the state's unemployment picture to get worse before it gets better.

Said state economist Tom Stinson: "Most economists don't think there's going to be a rapid climb out of this recession."

kdiaz@startribune.com • 202-408-2753 mkaszuba@startribune.com • 651-222-1673

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