Nov. 15, 2009
FREE PRESS SPECIAL REPORT
Billions for state, but where are jobs?
Majority of stimulus awards have brought little help
FREE PRESS WASHINGTON STAFF
WASHINGTON -- Seven months into the massive federal stimulus program, the vast majority of government grants, contracts and loans in Michigan so far have created or retained virtually no jobs, a Free Press analysis shows.
The analysis also revealed that others who have been promised or have received stimulus money have overstated -- in some cases greatly -- the number of jobs created or protected.
Obama administration and state officials say it's too early to draw conclusions about the overall impact of the $787-billion nationwide program to stimulate the economy and generate jobs. They promise that job growth will follow as more funding arrives.
"It looks to us like the program is unfolding much as we hoped in Michigan," said White House economic adviser Jared Bernstein.
The Free Press examination of more than 1,800 government reports of those who have received or expect to receive stimulus money found the biggest impact was spurring or protecting public-sector or summer jobs -- not private-sector jobs. Michigan has the nation's worst unemployment rate.
Officials reported that by Sept. 30, some 22,500 Michigan jobs were created or retained thanks to the promise of $5.2 billion in stimulus money for the state, $1.2 billion of which had arrived.
The analysis also found:
• Three of every four stimulus grants, contracts and loans approved in Michigan created or retained one job or less.
• Fewer than 700 awards had received some money, and nearly half of those -- 327 -- had created one job or less, at a cost per job of $2.7 million.
• Some job estimates were wrong: General Motors Co., for instance, reported 105 jobs saved or created for a government purchase of 5,000 vehicles but later said no jobs were saved or created. The City of Detroit reported 342 jobs it now says were projections -- not jobs already created or retained.
Peter Morici, a University of Maryland economist, said the results suggest the stimulus won't deliver promised results.
"All those claims," he said, "are ridiculous."
Flawed reports raise questions about how stimulus has helped
At first glance, the impact of the federal stimulus act so far in Michigan looks like cause for celebration -- some 22,500 jobs created or saved in about seven months, $1.2 billion received to date and promises of $3 billion more to come.
But closer inspection reveals flaws in the claims and raises doubts about the mammoth spending bill's impact to date.
A Free Press analysis of reports on more than 1,800 awards to agencies, departments, municipalities and firms in Michigan under the American Recovery and Reinvestment Act found huge inaccuracies in job estimates of several recipients and millions of dollars in errors in their reports.
It also found that the vast majority of jobs reported or created -- 85% -- were tied to 15 primary recipients, with three-quarters of all stimulus awards made to date in the state creating or saving one job or less. Most of those funded still were awaiting checks, which could help explain the lag in job creation. Still, hundreds of awards led to reports of job creation before stimulus money arrived.
Some are clearly wrong.
Detroit reported on a grant award -- $10 million for work on 14 improvement projects in the city -- saying 342 jobs had been saved or created, despite none of the money actually reaching the city yet. Last week, city officials told the Free Press those were only projections -- not jobs saved or created.
The White House Recovery Office warns against projecting jobs. It wants an accurate reflection of jobs created or retained to date.
There were other exaggerations.
The Ingham County Health Department reported 97.49 jobs retained, but an official with the agency said without the funding, six jobs would have been lost. The Inter-Tribal Council of Michigan in Sault Ste. Marie, which provides services to member American Indian tribes, reported 99 jobs created or saved thanks to $46,000 in cost-of-living adjustments for Head Start employees. An official with the tribal council said she believes no jobs would have been lost without the government money.
Promise of transparency
Signing the stimulus bill into law in February, President Barack Obama promised an unprecedented amount of transparency in how the money was spent -- even as officials warned that with so much money being poured into the economy so quickly, there was bound to be error and fraud. While few instances of the latter have been charted, there seem to be may indications of the former.
The $787-billion federal stimulus is the equivalent of about $6,800 for every American household.
Leslee Fritz, director of Michigan's Recovery office, spent two days in Washington, D.C., last week talking to stimulus officials from other states about how to improve reporting. Still, she said, she's pleased with the federal investments.
"In a state like Michigan, there's never going to be a situation where we feel they've moved fast enough" to get money flowing and jobs created, she said. But, she added, "I think we're off to a good start."
Jared Bernstein, an Obama administration economist, said the reports from agencies and larger contractors getting stimulus money make up a sliver of the stimulus act.
About a third -- $275 billion -- will be directly spent nationally in areas such as state stabilization funds to support government jobs; building and repairing roads, bridges and other infrastructure; investing in drinking water and wastewater projects; funding alternative energy projects, and much more.
Those are the areas where recipients must file reports on their spending. The rest of the stimulus spending goes for tax cuts -- the Making Work Pay tax cut was worth about $65 a month to the average household, for instance -- and entitlement programs, such as those increasing unemployment benefits and covering the government's commitment to pick up 65% of the premium for health insurance for laid-off workers.
Bernstein says those tax cuts and entitlements have already contributed to the 3 million to 4 million jobs expected to be created or retained through the stimulus.
Last month, the Recovery Office reported that $37 billion in checks had gone out for $159 billion in direct investment awards by the end of September. The estimated jobs created or saved: 640,000.
Errors in reporting
Since then, news media reports across the country have found errors. A Boston Globe review last week of claims of 12,374 jobs being created or saved in Massachusetts concluded the claim was "wildly exaggerated." The Milwaukee Journal-Sentinel found that a report saying 10,000 jobs had been created or saved in Wisconsin was "rife with errors, double counting and inflated numbers."
"Are you surprised?" asked Peter Morici, an economist and business professor at the University of Maryland who is a critic of the stimulus bill. "Using this ruse, we now have unemployment" nationally "above 10%, and it's going to keep going up. In Michigan it's much worse, and worse is going to become terrible."
Morici's biggest complaint is that, despite Obama's claim last January that 90% of the jobs the stimulus created or retained would be in the private sector, it is set up to produce mostly public-sector jobs.
So far in Michigan, the numbers support his claim. Of 22,513 jobs reported, 13,555 were tied to state money for education, doled out to local school districts. Without a huge economic turnaround or more federal money after the 2-year stimulus ends, many of those jobs could be threatened.
Another problem: More than 3,000 were summer-only jobs for youths. Those jobs do little to bring down Michigan's highest-in-the-nation unemployment rate.
Both Bernstein and Fritz say what's missing from any snapshot analysis of the recipient reports to date is that the stimulus spending is still in its infancy. Investments in so-called shovel-ready projects, such as road and bridge building, are just now getting under way.
Job creation tied to high-speed rail improvements have yet to be felt, and $1.35 billion in grants for advanced battery and electric vehicle manufacturing and development are estimated to create 6,800 jobs in Michigan by the end of 2010.
If they're correct, the stimulus may deliver on its promise.
"We think the kind of time-release mechanisms built into the Recovery Act are very appropriate," Bernstein said. "This is not a program we would want either phasing out or fully up and running at precisely this moment. We need to be generating good jobs at least through next year."
Help for more than jobs
Fritz said she expects job creation to swing from the public sector to the private sector soon, but she also notes that much of the money is for purposes other than jobs. Rental assistance grants, for one, help people stay in their homes, she said, and justice grants help police purchase technology to keep people safe.
The Hamilton Community Health Network in Flint received $625,000 of a $920,000 award for equipment at a new facility serving growing numbers of people who have no or inadequate health insurance.
That award didn't create direct jobs, but Chief Executive Officer Clarence Pierce said without the equipment, the hires the network made for the facility would be irrelevant.
In Ingham County, Deputy Health Officer Jaeson Fournier said the department may not have really retained 97 positions -- but the funding it has received has resulted in nine new hires, with four more jobs being posted and more to come.
Perhaps more important, it received a designation that allows it to collect higher federal reimbursements to serve the growing numbers of uninsured people.
"We have not seen so much demand," Fournier said. "It couldn't have come at a better time for us as a community."
Workers with Posen Construction lay concrete in Detroit on Wednesday. The stimulus funding is boosting Michigan construction jobs. (PATRICIA BECK/Detroit Free Press)
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