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Local governments, schools unsure of stimulus package impact

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When President Barack Obama signed the American Reinvestment and Recovery Act into law Tuesday, it was heralded as the first step in the nation’s road to economic revival.

But as the week wore on, it became clear governments didn’t know exactly how the federal stimulus package would impact on the local level.

“It looks like we’ll benefit to some degree, but it’s still way too early in the game to know exactly when or by how much,” Murfreesboro City spokesman Chris Shofner said.

This was the same response, in essence, given by Rutherford County Schools, Murfreesboro City Schools, the Rutherford County Finance Department and even the State of Tennessee’s Finance Department.

“We’re still trying to understand the formulas and what will be required,” Tennessee Finance Commissioner Dave Goetz said.

All local and state government and agencies know is that money is coming, but not exactly how much, when it will get here and how it should be used.

In all Tennessee should see $4.2 billion in discretionary funds from the federal government over a three-year period, thanks to the stimulus package.

“It's important to remember that this is one-time money,” explained Lola Potter with Tennessee’s Department of Finance. “We will still have to make tough decisions, which could include layoffs, as we will have to be able to balance revenues with expenditures when the stimulus money is no longer available.

“That said, the stimulus will likely help minimize some of the cuts that will need to be made to the state's budget, but it's clear that it won't last beyond two years, and will not solve our budget issues,” she continued.

The Road to Recovery

In a broad sense, the stimulus package contains three main elements – tax cuts, direct spending and discretionary spending – all meant to jumpstart the economy and lead the nation down the road to recovery.

The federal money will come into the state to distribute to local school systems and governments over a two to three year period, in hope the economy will have improved by then.

The tax cuts, $280.8 billion of the bill, include a break for middle-class families, homebuyers and car buyers in 2009, as well as college students and homeowners.

The direct spending, $198 billion of the bill, will add to unemployment benefits, food stamps, COBRA insurance holders and Medicaid. These funds are intended to support those who have been laid off and are unable to find work.

The bulk of the bill come in discretionary spending, which is intended to create and save jobs by flooding state and local budgets with money for transportation, housing and urban development and education, among other departments.

Murfreesboro should receive funds for the Community Development Block Grant and “shovel-ready” infrastructure projects, but it’s unclear how the bill will affect county government.

The bill is expected to create 3.5 million jobs nationally over the next two years, with 8,700 of those in the Rep. Bart Gordon’s 6th Congressional District, which includes Rutherford County.


Some of the jobs will come in education from funds designated to prevent teacher layoffs, improve instruction for impoverished and special education students, and minimize the downturn’s impact on state universities.

From the stimulus package, Rutherford County Schools is set to receive an estimated $8.7 million with $2.1 million for schools with a high percentage of impoverished students and more than $6.5 million for special education students.

“This money will allow Rutherford’s School District to continue educating children that need help most,” Gordon (D-Murfreesboro) said.  “In these tough economic times, Rutherford County might have been forced to cut back funding for their special education programs to continue providing basic government services.”

The funds are expected to offset falling sales tax revenues in the county and the state. 

“With people spending less money, the county is not receiving enough in sales tax revenue to sufficiently fund these programs,” Gordon said.

Murfreesboro City Schools should receive an estimated $2.4 million total with $747,000 for impoverished students and $2.4 million for special education.

These funds can also be used to prevent teacher layoffs.

One part of the initial package that would have helped the county was proposed funds to aid in school construction costs, but those funds were removed in the Congressional Conference Committee.


The state will also receive $250 million over two years to stabilize state-funded university budgets and reduce tuition and fee increases, Goetz said.

The state must fund universities and college at 2006 levels to receive the funds and schools must reduce potential tuition and fee increases, Goetz explained.

“The situation is this allows us to make reductions over two years as opposed to three months,” he continued. “It gives us the ability to stretch out the reductions and do some restructuring in a thoughtful way.”

But at the end of two years, the state will have to find a billion dollars to fund the schools at this level.

“It looks as if the stimulus money for higher education will give us a little bit of breathing space to make the needed changes we’re going to make. It doesn’t solve any problems, but it does buy us some time, and we are grateful for that,” Tennessee Board of Regents Chancellor Charles Manning said.

MTSU has already begun its budget reduction process in an attempt to trim 20 percent from its budget for fiscal year 2009-10. Some of the recommendations include cutting temporary professors, furloughing tenured professors and reducing energy consumption.

MTSU President Sidney McPhee said the university will stay the course and continue trimming from its budget, because this is one-time money and “it is too early to know how those funds will be apportioned among the various institutions in the state. …

“In short, it will still be necessary for us to tighten our belts,” he said, adding the school will become more financially sound over the coming years without losing any academic quality.

Michelle Willard can be contacted at 615-869-0816 or mwillard@murfreesboropost.com.

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City, Economy, MCS, MTSU, RCS, RuCo
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