Federal Stimulus Bill of Goods

How might Knox County schools benefit from federal largesse?

The $800 billion—and counting—federal stimulus legislation that Congress seems close to enacting contains a cornucopia of federal largesse for a mind-boggling array of government programs and initiatives.

How much this hastily concocted assemblage of pump-priming outlays will do to shore up the nation's sagging economy is far beyond my ability to assess. But the more than $3 billion that's earmarked for Tennessee over the next two years will go in large part toward covering the $1 billion deficit that state government has been facing for the fiscal year ahead; and the Knoxville area stands to benefit in a variety of ways.

Federally earmarked funds would spare the University of Tennessee from the $61 million (14 percent) cut in state funding that Gov. Phil Bredesen had been mandating. Knox County schools would seem to be in line for an outright increase of some $30 million in federal funding over two years at a time when they, too, have been facing a budget shortfall. Knoxville's share of a $600 million allocation to the state for "shovel ready" road construction and bridge repair projects also promises to be substantial.

What the Lord giveth, however, the Lord can also take away. And both state and local officials are fearful of the withdrawal pains that could result from programs dependent on federal stimulus infusions when the temporary funding stops. "If we're not careful, this could be like taking one of those energy drinks that gives you a quick boost followed by a big letdown," cautions one.

A classic rule in government finances is not to spend one-time revenues to cover recurring expenses. And in preparing his state budget, Bredesen must balance that against what's tantamount to a federal mandate to use the stimulus money to sustain both K-12 and higher education funding at their fiscal year 2008 level.

A $79 billion State Fiscal Stabilization Fund approved by the House would not only have provided far more than needed to satisfy this mandate, but also would have also gone a long way toward covering the overall state budget deficit. Even after the Senate cut the Stabilization Fund in half, Tennessee's $800-$400 million-a-year share of the remainder still includes more than enough to sustain education funding. Since Bredesen is already committed to adhering to the state's formula-driven funding of K-12 for FY2010 at a level well in excess of the FY2008 mandated base, that means only $180 million is needed to satisfy the mandate by way of restoring his directive for higher education cuts on a statewide basis. The $220 million that's left over won't go nearly as far as the House bill would have toward covering the state's overall budget deficit; and because it comes with strings attached, not all of that money can be used to do so.

One of the strings is that some $60 million would seemingly have to be distributed to local school systems per a federally specified formula. If the money could be distributed in accordance with the state's own carefully crafted funding formula, known as the BEP, it could go a long way to fulfilling a pledge Bredesen made two years ago to increase BEP funding in several stages as the state's financial circumstances permitted. But it can't, and anyhow the governor isn't about to use temporary money to fund a BEP increase that's almost obligatorily permanent.

The Knox County school system is in line to get about $12 million a year share of the $60 million overage, and this is just one of several pots of money to which the school system will be entitled under other provisions of the stimulus bill. The others include supplements for each of the next two years of about $6 million in what is known as Title I money and $7.5 million in funding under the Individuals with Educational Disabilities Act (IDEA). The House bill also included funding for about $14 million in one-time school building renovations and repairs, which would more than cover the school system's $10 million capital budget for the fiscal year ahead. However, the Senate deleted school construction funding, and the Title I and IDEA money comes with strings that will prevent it from being used to cover a projected $13 million "fixed" increase in the school system's present $370 million operating budget for which there's no other source of funds in sight.

These two programs, which are already receiving $23 million in federal funding that doesn't even show in the school system's budget, respectively provide specialized mentoring at schools with high concentrations of low-income students and specialized assistance for students with disabilities. But school officials are presently unclear on how supplemental funding for these programs would be used and fearful that any increases in staffing couldn't be sustained.

However, these fears pale by comparison with those associated with the state's other biggest chunk of stimulus bill funding: namely, about $1.5 billion over two years in supplemental Medicaid funding. The extra federal money is intended to cover recession-induced increases in TennCare enrollment, including a provision for opening the rolls to unemployed people with incomes below 200 percent of the federal poverty line. But the question of how to deal with them once the two years is up is one the state is loathe to face.

In sum, the big pots of federal money that are being doled out to the state can no doubt bring some blessings—but without very careful handling they can also become a curse.