Federal Stimulus Plan Summary

The following information provides a brief summary of the major provisions of the federal stimulus package.  This summary focuses on the spending provisions of the bill (American Recovery and Reinvestment Plan) and how the plan relates to Pennsylvania.  The final stimulus package will total an estimated $789 billion, with approximately $507 billion in new spending and $282 billion in tax relief. 

The plan is a two-year spending package covering calendar years 2009-2010, although some provisions will be retroactive to October 1, 2008.  This will give the program not only 27 months to work, but create a state cash infusion during the first quarter of calendar year 2009.  The plan is projected to create and/or save an estimated 3.5 million jobs, provide 95 percent of American workers an immediate tax cut, and provide unprecedented new investments in roads, bridges, mass transit, energy efficient buildings, alternative energy development, flood control and clean water infrastructure, science, research and education.

Tax Provisions

More than 35 percent of the total package provides targeted tax relief directly to workers and business investment to spur job growth.  Tax credits of $400 per individual and $800 per couple filing jointly (phasing out for individuals earning $100,000 and couples earning $200,000) will be funded immediately.  Other tax provisions include expansion of the child tax credit (qualifying income above $3,000), providing a new partially refundable $2,500 tax credit for families with children attending college, extending current tax provision to shield middle class tax payers from the alternative minimum tax, and new incentives for first time home buyers, and vehicle purchases.  Business provisions include extensions of bonus depreciation and small business expensing for investments in plants and equipment, a delay of the 3% withholding tax on payments on business sales of goods and services to government, a capital gains tax cut for small business investors who hold stock for more than 5 years, incentives for hiring recently discharged unemployed veterans, and youth, and green energy investment.

Human Service Programs

Human Services Programs, such as Medicaid, food stamps and child care, collectively will see approximately $140 billion in additional federal support.  The Recovery and Reinvestment Plan will provide $87 billion for a temporary increase in the Federal medical assistance matching rate through the end of federal fiscal year (FFY) 2010.  The share of Medicaid costs the Federal government reimburses all states will increase significantly.  Currently, the federal government funds about 54% of our medical assistance costs. The new matching rate will be increased  6.2% with additional payments (35% of total) linked to the rate of unemployment increases within the commonwealth.  Pennsylvania’s share of the $87 billion will total more than $4 billion.  The funds can be used during the current year and the following two fiscal years. In addition, the stimulus plan would provide a total of $2.2 billion for the child care development and community services block grant programs, with Pennsylvania receiving nearly $70 million in new block grant funding.  Other significant provisions include $20 billion to extend health care insurance for the unemployed by funding 60% of COBRA premiums for up to 9 months, and $19.9 billion for extended Food Stamp assistance, increasing benefits by an estimated 13% for more than 31 million Americans, half of whom are children.  Temporary extended unemployment benefits will also be extended through the end of December 2009.

Education Grants

The Stimulus plan provides nearly $100 billion in federal fiscal relief through Title I, IDEA, Pell grants, technology, and discretionary state education aid.  Pennsylvania’s share for the categorical program allocations is anticipated to exceed $1 billion.  The final agreement includes nearly $54 billion for a State Fiscal Stabilization Fund, to be administered by the Department of Education.  Of these funds $39.5 billion is to be used exclusively for elementary, secondary, and postsecondary education programs.  An additional $5 billion in education funds will be allocated for performance grants.   The remaining $8.8 billion can be used by states for “high priority” needs such as public safety and other government services.  The Governor’s proposed budget would use the state’s $347 million share of these funds for Corrections expenditures, although, his budget assumed a much larger $25 billion pot would be available for this purpose.  The final stimulus agreement will reduce the available state share by nearly $700 million.  The Governor has proposed making up for this shortfall by committing a portion of the State Fiscal Stabilization Fund committed to education programs to offset State Basic Education Subsidy costs.

Infrastructure Programs

The stimulus proposal includes approximately $66 billion for traditional infrastructure spending on roads, highways, transit, rail, airports, bridges as well as clean water and drinking water.  Highway and bridge projects account for $29 billion of the total Infrastructure package.  Transit programs will receive $8.4 billion, along with $8 billion for high-speed rail investments.  Competitive grants of $1.5 billion will also be provided for New Start projects.  Clean water, flood control and environmental programs will share $18 billion.  It is estimated that Pennsylvania could receive $1.6 billion in federal infrastructure funds from all sources.

Housing Assistance

The final stimulus agreement provides nearly $10 billion for housing assistance programs.  These investments will include $6.25 billion for energy efficiency and basic repair investments in HUD-Assisted housing, $2 billion for the Neighborhood Stabilization Program to enable communities to purchase and rehabilitate foreclosed, vacant property, and $1.5 billion for Emergency Shelter grants.

Energy

During a recent speech, President Obama announced that his stimulus plan would include provisions to double the production of alternative energy in the next three years, modernize more than 75% of federal buildings and improve the energy efficiency of two million American homes.  Among the highlights of stimulus energy investments is $6.3 billion for Energy Efficiency and Conservation Grants, and $5 billion for Weatherization Assistance Program grants.  Pennsylvania could receive more than $260 million in additional Weatherization Assistance funds.

Job Training

The Stimulus plan would provide $4 billion for job training programs.  This assistance would include additional formula grants through the Workforce Investment Act for adult training, dislocated workers, and youth services, $500 million for Vocational Rehabilitation State grants, and $500 million to match the unemployed with job openings through local state employment agencies.

Summary

While many of the details of the recovery plan continue to emerge, it is apparent that states will receive substantial amounts of aid, with significant discretion about how these resources are invested.  Vice President Biden has estimated Pennsylvania’s share including the tax provisions could total more than $16 billion in direct aid.