The Majority of Education Stimulus Funds Haven't Left the Bank

It has been nearly seven months since President Obama signed the American Recovery and Reinvestment Act (ARRA) with the hopes of stimulating the economy and encouraging education reform across the states. While some pundits have already declared the bill a failure, others claim that the stimulus funds are hard at work. At the heart of this discussion are both whether the stimulus funds are available to be spent and whether they have actually been obligated and disbursed to states for spending. Below we discuss the major programs funded through the stimulus and the status of their funds as of August 28^th, 2009.

The ARRA provided nearly $97 billion to the Department of Education (ED) through a variety of existing federal k-12 and higher education programs, as well as a new State Fiscal Stabalization Fund. About $55 billion of this funding is currently obligated to states. Despite encouragement from ED for speedy spending, less than one-third of those funds have been disbursed to states. This leaves nearly $40 billion sitting in ED coffers waiting to be spent.

The State Fiscal Stabilization Fund, a new program authorized by the ARRA, provides funds for states to fill budget gaps in education and other programs for fiscal years 2009, 2010 and 2011. Overall, $34.3 billion of the $48.6 billion program has been obligated to states due to the two step application process used to distribute the funds. However, only $10.2 billion of that amount has been disbursed to states for spending, indicating that states and localities are not identifying spending opportunities as quickly as the lawmakers had intended.

The State Fiscal Stabilization Fund is actually divided into two separate funds. Education Stabilization funds ($39.7 billion) can only be used for K-16 education purposes while Government Services Funds ($8.9 billion) can be used for any government services including education. While the vast majority of the Government Services funds have been obligated to states, only 65.1 percent of the Education Stabilization Funds have been obligated. Actual disbursement of funds from ED to states under both pots, however, remains below 31.0 percent.

The ARRA provided an additional $10.0 billion through the existing federal Title I program for educational services for disadvantaged students. While the Department of Education has chosen to obligate only 50 percent of those funds immediately, only 12.2 percent of that $5.0 billion has been disbursed to states, leaving nearly $4.4 billion left to be spent.

Funds obligated for the Individuals with Disabilities Education Act have also remained predominantly untouched by states even though nearly half of the $12.2 billion has been available to states since April. Only 9.4 percent - just over half a million dollars - have actually been disbursed to states for spending.

Just over half of the $15.6 billion in funding for federal Pell Grants has been obligated to states and nearly half of that has been disbursed to students for tuition for either the 2008-09 or the 2009-10 school year. Only 9.5 percent of Federal work study grants, however, have only been disbursed even though all of the $100 million in funds have been obligated to states.

The ARRA required that the McKenney-Vento Education for Homeless Children and Youths funds be made available to states within 60 days of the law's passage. The program provides funds for school districts with large homeless populations in order to ensure that these students receive continuous education services. Despite this requirement, less than 5.0 percent of the funds have been disbursed to states for spending.

Impact Aid construction is the only program for which nearly 100 percent of the available funds have been disbursed to states. Currently, $39.6 million of the $100 million are obligated to states and all but $53,300 have been disbursed.

Overall, this suggests that education stimulus funds have not been flying out of ED's doors. In some cases, ED has dictated that only a certain percentage of funds be obligated to states immediately. But in the majority of cases, readily available funds sit idly waiting for states to draw them down. This could be the result of internal state bureaucracy preventing the expenditure of funds or a lack of approved spending opportunities at the local level. Either way, we know that more than two-thirds of these funds have yet to see the light of day.