September 25, 2009
A new report from the U.S. Government Accountability Office (GAO) says that more information is needed to determine whether local school districts that receive federal stimulus money from the State of Illinois are using the funds promptly, as required by federal regulations.
The report stems from the GAO’s effort to track uses of funds under the American Recovery and Reinvestment Act of 2009 (ARRA) in Illinois, 15 other states and the District of Columbia. Together, these governments account for an estimated two-thirds of total assistance available through the Act. A related GAO report provides detailed findings on each of the 16 states and the District of Columbia.
As of September 1, 2009, Illinois had been awarded $1.96 billion in education stimulus funds. Of that total, $1.5 billion consisted of State Fiscal Stabilization Fund money designed to help state and local governments stabilize their budgets by minimizing budgetary cuts. The GAO found that Illinois had disbursed about $1.2 billion to local school districts, but only $165.6 million had been spent by the districts.
According to the GAO, when spending by local districts is substantially below amounts received by a state—as in Illinois—the state might be having cash-management problems. Illinois has distributed funds to local districts in semi-monthly payments, but state officials told the GAO that the State “does not have the ability to identify specific cash needs” from local agencies prior to distributing the funds.
Federal law requires that states pay interest to the federal government if they withdraw funds from the federal Treasury earlier than they are needed. U.S. Department of Education regulations may require local school districts to pay interest on money received but not spent in a timely manner.
The Department of Education’s Office of the Inspector General (OIG) is reviewing the way local school districts in Illinois handle stimulus funds and the Illinois State Board of Education’s role in distributing these funds, according to the GAO report. The first phase of the review is scheduled to be released on September 30, 2009.
The handling of education stimulus money has also been an issue in California. Both the California State Auditor and the U.S. Department of Education OIG have cited deficiencies in cash management, the GAO said.
In total, Illinois has spent $4.5 billion in stimulus funds of all kinds, placing it third in total expenditures behind California and New York, according to the federal government’s ARRA website. Illinois has been awarded $10.6 billion under the program. The State expects to eventually obtain a total of up to $14 billion, Governor Pat Quinn told the General Assembly in a report dated September 11, 2009.
Across the country, the GAO found that as of September 11, 2009 the Treasury had given out $48 billion of the projected $49 billion in federal stimulus funds for federal FY2009, which ends September 30. About three-quarters of the payments have been through increased Medicaid reimbursements and education stabilization funding.
Many state officials told the GAO that their budgets would continue to suffer from revenue shortfalls due to declining tax receipts. However, Illinois officials expect the State to enact legislation to increase tax revenues and to move into FY2011 without the need for additional fiscal stabilization funds from ARRA, the GAO said.
Governor Quinn had proposed an income tax increase for state FY2010, which runs through June 30, but could not get support from the General Assembly for the controversial 50% rate increase. The issue is not expected to come up for another vote until after the primary elections on February 2.