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Despite a priority on jobs, stimulus funds in Minnesota not targeting highest unemployment, analysis finds

American Recovery and Reinvestment Act road work sign
REUTERS/Rick Wilking

Tens of millions of dollars in federal stimulus funds have gone to projects in Minnesota counties with relatively low unemployment rates, while counties with higher rates saw less of the money that was supposed to save and create jobs.

In Lincoln County, for example, the jobless rate stood at 4.5 percent in October, and it never rose as high as the statewide average in any single month this year. Yet, some $29 million in stimulus funds have been funneled through the county, according to ProPublica’s analysis of recovery spending. That adds up to nearly $5,000 for each resident in the largely rural county on Minnesota’s southwestern border.

In Mille Lacs County north of the Twin Cities, on the other hand, 10.8 percent of the workers still were looking for work in October. In March, the county’s unemployment rate stood at 15.6 percent, far higher than the state’s peak rate. Yet the county has seen less stimulus funding — about $20 million, or $760 per resident — than Lincoln County.

Creating and saving jobs was the No. 1 stated goal for the $787 billion American Recovery and Reinvestment Act that Congress passed in February.

But as the money flowed through state governments and 28 federal agencies, that priority often took a back seat to other considerations.

Unemployment rarely a factor
Unemployment rates were not even a factor in distributing much of the funding that was funneled through Minnesota state agencies, said Michelle Weber, the state’s Recovery Act Coordinator. In many cases, state officials couldn’t peg the money to job losses because federal rules dictated other priorities.

For example, Minnesota got hefty chunks of stimulus funding through federal education and weatherization programs. And the rules for distributing funds under those programs are based on poverty and other factors, not unemployment rates.

“Many of the dollars in the stimulus package were dedicated to existing federal programs,” Weber said. “We had no choice but to take into consideration the elements that are built into those programs.”

States also were under pressure to come up with “shovel-ready projects” that could serve quickly as conduits for pumping money into the ailing economy, regardless of the region-by-region jobs picture.

That is not to say Minnesota’s jobless workers missed out on the funding altogether. Even in counties that saw relatively low shares of stimulus money, the unemployed benefited from job training, extensions of unemployment benefits and other initiatives. And a few programs — such as community services grants for anti-poverty work — did consider regional economic climates in allocating the funding.

In general, though, steering the money toward regions with high unemployment rates “was not a requirement for all of the programs,” Weber said.

Elusive target
Targeting stimulus dollars toward geographic areas where they are most needed can be tricky work, said Timothy Taylor, managing editor of the Journal of Economic Perspectives, which is based at Macalester College in St. Paul.

“Just to be clear, I thought the Recovery Act stimulus was, broadly speaking, a good idea, although I think parts of it were not structured well,” Taylor said in an email interview.

“This is a standard problem for any big macro stimulus package,” he said. “If you take a long time to target specific geographic areas and groups, then it takes government months or years to figure out who is going to get what. If you get the money out there fast, then some of it isn’t going to be well-targeted.”

What’s true at the county level in Minnesota also is true nationwide, according to an analysis by Veronique de Rugy of George Mason University. She looked at the government’s reports of stimulus-created jobs.

Many higher-unemployment states saw similar numbers of jobs created as lower-unemployment states — or, even worse, saw relatively fewer jobs created, she said in an article published on The Gov Monitor website. In Michigan, where unemployment was higher than 15 percent, for example, the government claimed to have created or saved fewer jobs through September than in California or Washington — states with relatively lower unemployment.

One obvious reason is that it takes far more effort to create a job in hard-hit Michigan these days.

Another reason, de Rugy said, is that “much of the money has been allocated randomly among states without regard for the level of unemployment in those states.”

Rough tracks
Tracking the stimulus-unemployment trends together is not at all simple, even though another Recovery Act goal is “to fully and transparently account for the distribution of the stimulus funds.”

The fed’s website invites you to “track the money.” Minnesota does something similar on its own site. ProPublica, one of several private entities doing their own tracking, says it found thousands of records the government didn’t include in its reports.

The level of detail available on the full range of tracking sites is truly dizzying.

Yet gaps and loose ends abound — especially if you try to link the money to labor markets. Unemployment rates are calculated at the county level, so that was an obvious unit to consider for purposes of evaluating the program’s effectiveness.

“Unfortunately we don’t have a county-by-county sort,” said Cheryl Arvidson, the assistant communications director for the federal Recovery Accountability and Transparency Board in Washington, D.C.

Surely, I thought, state officials could give me the complete picture for Minnesota. Not so.

“We only have information on the programs that were administered by state agencies,” said Weber, the Recovery Act coordinator in St. Paul.

But that excludes hundreds of millions of dollars funneled through Minnesota by federal agencies that doled out a good share of the money at the local level.

“All of the states are struggling with this because of the public’s desire to have the full picture,” Weber said. “Because the federal government awards the grants locally, too, there is no mechanism for us to obtain that information in a consistent manner.”

One county’s case
Even when you scratch through all of the information from all of the entities involved, there is no true clarity.

Take the Lincoln County case. The Minnesota site says the county was allocated $4.2 million in recovery money. ProPublica says it got $29 million, counting all of the dollars from all of the government agencies. Again, the feds don’t slice the data by county.

ProPublica must be closer to the true total because the U.S. Agriculture Department announced in April it was awarding $16.5 million in stimulus money for one project alone — the Lincoln Pipestone Rural Water System, a utility based in Lake Benton.

But Dennis Healy, the water utility’s CEO, told me the project actually got $17 million in a stimulus-funded grant-loan package.

You try to reconcile these numbers. I cannot!

Worthy? Yes. But jobs? Uncertain.
To question whether the money flowing through Lincoln County was needed to create jobs is not to say this water project wasn’t needed.

A few rural residents in southwestern Minnesota lack working wells, and they must haul water from town, Healy said. Many others rely on wells that are contaminated by nitrates and other toxins. The stimulus money combined with other funding is expected to deliver piped water to as many as 800 rural homes.

Doing so isn’t cheap in a sparsely populated region. “We average almost a mile of pipe per customer,” Healy said.

So the need is clear. But does the project also create jobs where they are needed? That’s not at all clear.

Healy is waiting for guidance from the feds on how to calculate and report the jobs the project will create. The utility will add two field men for sure. And he estimates that more than 100 people will work on the construction.

The bulk of the initial work will be done by specialized companies from Illinois and South Dakota that bring their own crews to the site, Healy said. Maybe those workers come from counties suffering high unemployment. Who knows?

Meanwhile, Healy said, local workers are likely to get a share of the paychecks before the project is finished.

“I certainly hope that we get some local contractors more involved, and I expect that we will,” he said.

Lincoln County surely would appreciate the jobs. Last March, its unemployment rate climbed to 8.2 percent before settling below 5 percent in August.

Still, Southwestern Minnesota has not suffered nearly the job losses that hit the state’s east central region.

Anoka County saw less total stimulus funding than Lincoln County, even though its population is far larger and its unemployment rate was stuck at 7.8 percent in October. ProPublica calculates that Anoka County got $50 in stimulus funds per resident — compared with $4,997 for Lincoln County.

Kanabec County, with an unemployment rate of 10.4 percent, saw far less total funding, too.

Rarely clear
Eventually, the full account of how well stimulus dollars matched employment needs may come in the government’s compilation of jobs created with each project.

Don’t count on it, though. Getting an accurate tally on this side of the equation also will be a challenge, said Taylor at the Journal of Economic Perspectives.

“It’s rarely clear with such projects whether the jobs ‘created’ are really new, or might have happened anyway, or whether they to some extent took the place of other projects or spending that might have happened,” Taylor said.

“Again, I think the overall balance is probably positive, but the task of identifying particular jobs saved in a direct way is hard,” he said.

Sharon Schmickle writes about national and foreign affairs and science. She can be reached at sschmickle [at] minnpost [dot] com.

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Comments (19)

  1. Submitted by Tom Weyandt on 12/15/2009 - 09:21 am.

    What correlation is there between money spent and jobs created? How can contruction jobs, for instance, be measured? Were there changes in rates of unemployment in areas where money was spent? Is it a job created in Minnesota or South Dakota if the money goes to a water project in Minnesota but the work is done by a South Dakota firm?

    I suspect that shortly stories of fraud and abuse will start to surface just like they did when KBR was granted exclusive rights to the war projects. Profiteering will be found.

  2. Submitted by dan buechler on 12/15/2009 - 09:50 am.

    An article surely worth expanding but never coming to a firm conclusion because that is just the nature of “things”. Any one who comes up with firm pat answer is a fool. I am remided of the economist Sen’s parable of the flute. There is one flute but three children. The first child says the flute should be hers because she can make beautiful music. The second child claims it shoould be his because he crafted it out of wood. The third child says he has a claim because he has no other toys with which to play.

  3. Submitted by Joe Johnson on 12/15/2009 - 11:04 am.

    Dan says, “Any one who comes up with firm pat answer is a fool.”

    I totally agree, global warming = man made?

  4. Submitted by david granneman on 12/15/2009 - 01:36 pm.

    hello all
    i have a solution to minnesota’s budget problems. two large oil fields have been discovered in north dakota and montana – possibly more oil then in the middle east. how can minnesota profit from oil in north dakota. minnesota should use stimulus money to build oil refineries in northern minnesota. oil could be pumped by pipeline or trucked from north dakota and the canadian oil sands. the oil could be refined into gas and oil and pumped to suppliers. this would not only ensure minnesota has cheap and abundant energy but also create thousands of high paying jobs. it would create all kinds of jobs everything from truck drivers to doctors. where there is energy developement there is growth and prosperity. there is no recession or deficits in texas. texas is creating jobs and has a budget surplus. minnesota could be the texas of the north. northern minnesota could be changed from a depressed area to a place where children could remain where they grew up and raise a family, instead of having to leave home and go to more prosperous areas to find a job. LET US NOT LET ALL THE WEALTH IN NORTH DAKOTA TO SLIP THRU OUR FINGERS.

  5. Submitted by dan buechler on 12/15/2009 - 01:49 pm.

    What does this article have to do with global warming and 99% firm consensus amongst scientists? Joe if you want to comment on Copenhagen you have plenty of opportunities to do elsewhere on Minnpost. Have the common decency and self regard to address the direct topic at hand. McCain would have done nothing or very little at least we have some direction after 8 years. You are free to refer to Professor Samuelson’s remarks on the near total lack of regulation of Wall Street and the aftermath that will be felt for 10 years. Or go cut down a tree if you like.

  6. Submitted by Thomas Swift on 12/15/2009 - 02:38 pm.

    “…at least we have some direction after 8 years.”

    And the fact that the direction is swirling downwards does not deter the left one iota….Trillions of dollars are floating around out there, no one knows where it’s landing for a certainty, it’s just out there somewhere. It makes me nauseous to consider the consequences of this unmitigated disaster.

    I wonder just how many people really knew that Hopey/Changey meant “onwards towards the pit”!

  7. Submitted by Joe Johnson on 12/15/2009 - 03:25 pm.

    Dan I was not commenting on global warming but rather reiterating your very correct statement that anyone who comes up with a firm pat answer is a fool and I thought that some individuals within the global warming movement should take heed to your advice. 99% of scientists at some point thought the world was not round and that the universe revolved around the earth, so to your point don’t accept a firm pat answer.

  8. Submitted by Tim Brausen on 12/15/2009 - 03:33 pm.

    Swift ignores the fact that 8 years of Republican misdirection of all resources to the rich and wealthy was what led us to the edge of the pit (didn’t Bush give the first trillion away in the financial system bailout?)

    I agree with Buechler that now we have an effort to direct the funds to help all segments of society, not just the rich. Whether they are successful rests with other government bureaucrats, including state agencies. Here in Minnesota we have been incredibly unsuccessful in following the mandates of the stimulus recovery bill to direct monies to areas hardest hit by unemployment, such as inner cities. An example is the early stimulus money that MnDOT spent primarily on freeway projects beyond the I694/494 beltway, subsidizing suburban sprawl (and the prior white flight?) also has reports on the misdirection of these funds.

  9. Submitted by dan buechler on 12/15/2009 - 04:15 pm.

    David one note maybe Minnesota could tap into our neighbor’s oil fields just like Bush I did with some horizontal drilling or Saddam. Thomas did you prefer the Bush response to stimulate the economy by giving out one time money to households to spend? There is a great deal to be said for targeting money if you want to stimulate the economy and there are plenty of economists from both camps who would agree. Even if their targets were different.
    Joe the vast majority of readers would take your comment as being directed to global warming which has very little to do with this specific article. Now go smoke a cigar outdoors in the cold. I’ll meet you in 3 hours.
    And Sharon most of all I apologise to you but your article is very good and certainly worth expanding upon.

  10. Submitted by Sharon Schmickle on 12/15/2009 - 05:42 pm.

    No apology needed, Dan.
    Do you really mean to suggest expanding on the article? Or do you mean bearing down on the causes and culprits in this case?

  11. Submitted by david granneman on 12/15/2009 - 05:42 pm.

    hello dan
    is everything so polictal for you that you would look a gift horse in the mouth. north dakota is experiencing a boom in prosperity do to the oil discoveries. why would you not want northern minnesota to also prosper. this area is perhaps the most depressed area in the state. why not allow the people in this area a chance to have good jobs and enjoy the prosperity many of the rest of us enjoy. take off you party glasses and look thru the eyes of a RANGER.

  12. Submitted by Thomas Swift on 12/15/2009 - 07:03 pm.

    Rich and wealthy…Rich and wealthy…bwaaak..Rich and wealthy.

    How sad, how wearying it must be to be burdened with the task of carrying around so much bile and avarice for people one knows nothing about.

    “The wealthy” have nothing to do with the disaster unfolding before our eyes today; in fact they are probably taking it in the shorts worse than most.

    Leftists are free to continue to try and place the blame where they will, but with Obama’s approval rating at 42% after just 11 months, it’s patently obvious that the American people know who is pulling the levers.

    As the truth of just what a mess this Trillion dollar boondoggle is, and of how thoroughly the Democrat party has botched the job starts to be presented, I doubt very much if any one is going to be listening to mindless drivel about how much our neighbors have in their bank accounts.

  13. Submitted by dan buechler on 12/15/2009 - 07:31 pm.

    I for one do not know how these comments got so off track. Sharon it is a very good article and sometimes I like a short version, a medium length version, sometimes even longer is best. Maybe extending it, I am not an editor just a reader.

  14. Submitted by Richard Schulze on 12/15/2009 - 10:20 pm.

    I think you confuse bookkeeping (when the money is paid out by the Feds) with its economic impact. Since the States know they are going to receive money next year to pay for a teacher they don’t lay him off today. The effect of the stimulus has been felt even though no money has been disbursed.

    This is as good as it gets (as far as the stimulus adding to GDP). There will be a little in Q4, and then flat for a couple of quarters, and then a drag later next year.

    Of course the economy will be on it’s feet by then. Right? Bueller? Sorry …

    This is part of the reason I think GDP growth will be weak in 2010 with downside risks … the consumer isn’t ready to take over.

  15. Submitted by dan buechler on 12/16/2009 - 04:20 am.

    Who is Bueller? I have never heard of him. I referred to two nobel prize winning economists who were in favor of a mixed economy and some keynesian spending. Counter cyclical.

  16. Submitted by Richard Schulze on 12/16/2009 - 06:49 am.

    Sorry Dan, an obscure inside reference. “Ferris Bueller’s Day Off”. An old movie and he was the main character.

    It would have been irresponsible for the government not to step in and fill a part of the over 2 trillion dollar void in our economy. The spender of last resort. We went from 6.4 negative GDP growth at the end of the previous administration to 2.4 after less than 1 year into the current administration. Anything else would have been Hoover like policies.

  17. Submitted by John Olson on 12/16/2009 - 08:14 am.

    As each side of the aisle has blamed the other, the reality is both parties share the blame. Which one gets more of the blame over the other is certainly open to debate.

    I would argue that a major factor in the current mess began in the Clinton years when portions of the Glass-Steagall Act of 1933 were repealed. Specifically, the partial repeal signed into law in 1999 allowed commercial banks, investment banks, securities firms and insurers to once again consolidate.

    Part of Obama’s problem now is that between his administration and the congressional Democrats, many people believed that the stimulus would be the “magic potion” to right the economy the same way a couple of pills can alleviate a headache. Expectations were set way too high, in my view.

    This is a long-term job; Richard’s comments in #16 are spot on.

  18. Submitted by Richard Schulze on 12/16/2009 - 09:47 am.

    @ 17 You nailed it John.

    //”The largest S&L non-prime lenders have failed or are in crisis because of their
    non-prime lending. They could not have made these loans but for the removal of
    rules that required responsible underwriting. The repeal of Glass-Steagall Act
    contributed to the problem.”//

  19. Submitted by dan buechler on 12/16/2009 - 05:52 pm.

    Thanks Richard for your follow up comment(s).

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