State Fiscal Stabilization Fund Application Update #5

The Department of Education recently approved the State Fiscal Stabilization Fund (SFSF) applications of five more states - Alaska, Nebraska, North Dakota, New Mexico, and New Hampshire. These states join the 31 states/territories that have already begun to receive funds. As of June 26th, nearly $6.2 billion in SFSF monies have been disbursed to states. (Previous posts analyzing the applications of the first 31 states/territories can be found here, here, here, here, and here.)

The full table of all 31 states/territories can be access here.

These five additional states make up another $837 million in Education Stabilization funds and $186 million in Government Services funds under the American Recovery and Reinvestment Act of 2009. These recently approved states/districts are expected to face relatively low 2009 budget deficits as a percent of total state spending. The Center for Budget and Policy Priorities recently updated their state budget deficit projections to reflect recent budget adoptions, painting an even more desperate picture of state fiscal health than before. According to their analysis, New Hampshire is expected to face the highest deficit of these five states - 8.0 percent - while Alaska will face the lowest - 6.8 percent. Estimates were not available for Nebraska or North Dakota. In contrast, states like California and Arizona will face deficits above 35 percent. The average deficit for all states is estimated at 15.3 percent.

All five states with recently approved applications indicate that they do not plan to spend any SFSF Education Stabilization funds in fiscal year 2009. Additionally, Nebraska and North Dakota have not allocated funding to higher education in 2010, while New Hampshire and New Mexico plan to spend less than 3.0 percent of their SFSF funds on higher education. Alaska, on the other hand, will not spend any Education Stabilization funds in either year. Under the SFSF program rules, Alaska's unallocated $93 million will be distributed to local education agencies in 2011 for K-12 programs via existing Title I formulas.

In addition to Alaska, three other recently approved states will have significant percentages of their Education Stabilization funds remaining in 2011. This could be indicative of each state's relatively strong fiscal health. Or, as is likely the case in Alaska, it implies a disapproval of the SFSF program.

Government Services funds under the SFSF can be used for education purposes as well as other services like public safety and health care. Each state's governor determines how funds will be used. Alaska has elected to dedicate 100.0 percent of its Government Services funds to "revenue sharing with local communities. Both Nebraska and North Dakota will use some of their funds for public safety, while New Hampshire and New Mexico have not yet determined a use for the majority of their funds. Of these five states, only North Dakota will spend any Government Services funds on education.

Several more states are waiting for their submitted SFSF applications to be approved. Yesterday Secretary Duncan announced that he will be making the balance of the Government Services funds available to states as early as today. This additional $2.7 billion, which was initially intended to go to states after they completed their Phase 2 SFSF applications, will hopefully help states as they face immediate financial pressures.

Ed Money Watch will continue to provide updates on the SFSF applications. Please check back for this coverage.