On February 17, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the Act). The Act represents the most ambitious effort to stimulate the economy in our nation`s history. Its combination of tax cuts and funding for infrastructure development and job creation focus on some of the immediate problems related to the downturn in the nation`s economy. The Act is estimated to provide approximately $789 billion dollars worth of stimulus, of which more than $16 billion is directed to Texas. Exact amounts coming to the state will not be known for some time but the information below should provide a good idea of the types and amounts of funding that will be divided between state and local governments.
The Act includes $311 billion in appropriations. The following presents these appropriations in key business areas, with Texas dollars indicated (where known):
- Investments in Infrastructure and Science - $120 billion
Makes the largest investment since the establishment of the interstate highway system in the 1950s. It includes historic investments in public transit and high-speed rail, an unprecedented effort to upgrade the nation`s electricity grid, and a new initiative to expand broadband coverage throughout the nation. Texas will receive more than $1.5 billion for transportation construction and repair projects and an additional $67.5 million for transportation enhancement projects. Texas may also receive additional federal dollars in this area.
- Investments in Health - $14.2 billion
Provides incentives through Medicare and Medicaid to ensure widespread adoption and use of interoperable health information technology (IT). This provision will grow jobs in the information technology sector, and will jumpstart efforts to increase the use of health IT in doctors` offices, hospitals and other medical facilities. The Act also includes $1 billion for prevention and wellness programs to fight preventable diseases and conditions with evidence-based strategies. Texas allotments are unknown at this time.
- Investments in Education and Training - $105.9 billion
Provides $53.6 billion for the State Fiscal Stabilization Fund, including $39.5 billion to local school districts using existing funding formulas, which can be used for preventing cutbacks, preventing layoffs, school modernization, or other purposes; $5 billion to states as bonus grants for meeting key performance measures in education; and $8.8 billion to states for high-priority needs such as public safety and other critical services, which may include modernization, renovation and repairs of public school facilities and institutions of higher education. Texas is expected to receive more than $285 million for school improvement grants and about $4 billion from the State Fiscal Stabilization Fund. Texas may also receive additional federal dollars in this area.
- Investments in Energy - $37.5 billion
Creates a Clean Energy Finance Authority and Renewable Tax Credits that together will leverage an additional $100 billion in private investment in the renewables sector. The finance authority will provide loan guarantees and other financial support to help ease credit constraints for renewable energy investors and catalyze new private sector investment. The State Energy Conservation Office is working with the U.S. Department of Energy to receive approximately $211 million from the federal stimulus package. The money is expected to go towards programs to upgrade public buildings for energy efficiency, develop alternative and clean-burning fuels, and promote technical training and education on renewable energy resources. The Alternative Fuels Program in Texas is also a likely recipient of federal money. Texas may also receive additional federal dollars in this area.
- Other areas of the Act that benefit Texas and local governments and businesses:
Economic Development – includes $3.95 billion for job training, and $1 billion for the Community Development Block Grant program for community and economic development, of which Texas local governments will receive just under $50 million and the State just under $20 million. An additional $38.6 million is allocated to Texas for unemployment insurance, which has been impacted not only by the increasing number of unemployed, but the high salaries of those displaced employees.
Tax Incentives – includes a three-year extension of the production tax credit for electricity derived from wind (through 2012) and for electricity derived from biomass, geothermal, hydropower, landfill gas, waste-to-energy, and marine facilities (through 2013), and clean renewable energy bonds for state and local governments.
The Environment – provides $1 billion for NASA, including $400 million for climate change research. Another $600 million is allocated to environmental programs including the Superfund program, leaking underground storage tanks, the Drinking Water State Revolving Fund, cleaning brownfields, and the Diesels Emissions Reduction Act.
Download more information about the estimated stimulus impact on Texas (PDF:183KB).
The State Debate
The large influx of federal money has been problematic for the Texas Legislature. It meets every two years for 140 days, and the proposed federal dollars will substantially impact the state`s biennial budget. In response, the Texas House of Representatives has formed two committees: the Select Committee on Federal Economic Stabilization and the House Appropriations Subcommittee on Stimulus. Both these committees are specifically tasked with overseeing Texas` interest in the economic stimulus package.
The problem that the Legislature and these committees have found is that many rules and regulations governing the federal stimulus money have not yet been written by the Federal Government and are not expected be finalized for another 30-60 days. It also appears that there are a number of laws, rules and regulations by the State that must be changed or modified in order to draw down the federal dollars. Unperturbed, the Legislature and the Governor of Texas have stated their commitments to maximize the amount of stimulus dollars Texas will receive. As such, Texas and its state agencies will soon begin rulemaking and determining processes for granting those dollars. Private sector companies will then contract with the respective governmental entities to receive funding for initiatives covered by the Act.
With rulemaking decisions about to begin, it is imperative that companies know where the money will be spent and how to obtain it as competition for these grants and contracts will be fierce.