DENVER—Imagine coming into money—big money, billions of dollars—and then being asked to spend it all in a few weeks. Oh, and make sure not one dollar of it is wasted.
That’s the unusual predicament facing public officials all over the nation as the federal government dumps some $787 billion in their laps and tasks them with loosening the grip of a recession that many billions of stimulus money has failed to budge.
Colorado is in better economic shape than many states. Home prices haven’t fallen as quickly here, foreclosures aren’t as common and Colorado’s unemployment rate of 6.1 percent would be the envy of some states facing double-digit joblessness.
But still, the pressure is on to sort through how much Colorado is getting and how it should be spent.
It’s too soon even to declare how much exactly Colorado will receive, though estimates by the U.S. Senate put it at some $1.97 billion. That number doesn’t include some of the law’s biggest chunks, such as $830 million in increased Medicaid payments or more than $3 billion in tax cuts.
It’s possible Colorado could walk away with an eye-popping $7.2 billion over the next few years, according to estimates from the Center for American Progress. And that huge figure doesn’t even consider billions in federal grants not designated for any specific state but for which Colorado could compete.
The sums have even economists dizzy.
“It’s a big task,” said Kathy White, project manager for the Denver-based Colorado Fiscal Policy Institute, a nonprofit think tank where analysts are just starting to pore over recovery ledgers showing how much could come to Colorado. “This is a broad and sweeping piece of legislation.”
The easiest way to start making sense of the recovery money is to start where the spending does: roads and health care.
One of the stimulus law’s main targets is infrastructure, a bureaucratic term for the building blocks of development: roads and bridges, sewers and electricity lines, broadband in rural areas and sidewalks in cities. Spending money on infrastructure puts people to work immediately, plus it pays dividends later. A highway built today, for example, helps a trucking company for years.
The stimulus law sends an estimated $507 million to Colorado for highways and mass transit, much of it headed to the Colorado Department of Transportation. The state, in turn, is required to spend $135 million of that within the next 120 days—a deadline imposed by Congress to get people working soon.
“What the government is going to be doing is looking for those capital infrastructure projects that could be accelerated,” said Michael Orlando, a Denver economic adviser who once worked for the Federal Reserve and now runs the private Economic Advisers firm.
Coming to Colorado just as quickly as the roads money is money for Medicaid, which covers health care for the needy. Medicaid is jointly funded by the federal government and the states, and Medicaid is blamed for many states facing soaring budget deficits and draconian cuts such as laying off teachers or closing state parks.
Estimates show $830 million in Medicaid funding headed to Colorado. Analysts say that even people who can afford health insurance are helped by a bigger federal Medicaid spigot because that money allows states to spend more on other things.
Another urgent piece of the stimulus law is getting money to the needy, such as adding dollars for food stamps, unemployment benefits and job training. The thinking is that it makes fiscal sense to prevent the jobless from falling into complete poverty. Plus, poor people spend government assistance almost immediately, so a dollar added to a food stamp allowance today becomes a dollar spent at a grocery store the very next day.
“The general rule is to put it in the hands of people who are going to spend it right now,” Orlando explained.
Short-term stimulants, then, are a major piece of the stimulus pie coming to Colorado. Even bigger chunks are coming later, what politicians are calling investments in things such as education and energy development.
“What you want to do is come out of the recession stronger than you went in, right? So we’re talking about investments to really use this recession and downturn to put people on a better guide plane to compete in the future,” White said.
In these areas, Colorado is getting more than $82 million to make lower-class homes more energy efficient. Almost $250 million for Pell Grants, which send needy students to college. About $135 million extra for public schools attended by students considered at risk.
Plus there are billions in tax cuts aimed at longer-term growth. Tax relief makes up about a third of the national total of $787 billion. In Colorado, estimates show that could break down to almost $2 billion in tax giveaways for businesses that create jobs. State taxpayers could also see about $1.1 billion for a reduction in the Alternative Minimum Tax, a federal tax set up decades ago to target the wealthy that now affects many middle-class taxpayers, too.
The tax cuts are meant to stimulate the economy, but many of them take longer to work than direct government spending. That’s because the downturn has consumers and business squirreling away extra cash or using it to pay down debt.
“In times like these, if you’ve got your head above water, you’re holding onto these tax cuts,” Orlando said.
That outline of how stimulus dollars will come to Colorado is so rough, though, that everyone wants to know more details—including the people charged with cracking open Colorado’s books and overseeing the recovery spending.
“We ought to have a role in any money that goes to any agency in the state,” said Don Elliman, Colorado’s economic development director and chairman of an oversight board appointed by Democratic Gov. Bill Ritter, who will be largely responsible for how the state spends its share of the stimulus money.
It’s an overwhelming task. When everyone from mayors to small business owners is clamoring to know how they can get their hands on the recovery checkbook, the challenge for Colorado officials will be getting the money out quickly—but not so quickly that they can’t account for it.
“Our first and highest responsibility is transparency,” said Colorado Treasurer Cary Kennedy, another member of that oversight board.
Speaking recently to a panel of mayors asking questions about the recession, Ritter assured them the stimulus money will be felt here soon, and that his priorities are getting Colorado out of the recession in a way that makes future downturns less likely.
“The most important thing for us to think about is, how do we usher ourselves out of it and do the least amount of harm?” Ritter said. “And we also think, how do we come out of it poised for growth?”
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