John Baer: End of stimulus funding an opportunity?

Posted: December 15, 2010

G. EDWARD DeSeve knows something about government spending.

He just left his post as special adviser to the president and assistant to the vice president for day-to-day disbursement of $787 billion in federal stimulus funds under the American Recovery and Reinvestment Act.

He also worked in the Clinton administration, first as chief financial officer at HUD then as deputy director of the Office of Management & Budget.

He was an assistant to the late Gov. Casey. And locals might recall that he was Philly's finance director in the early '80s under Mayor Green.

I caught up with DeSeve yesterday to chat about the coming end of most stimulus money and what lies ahead for a state such as Pennsylvania.

Surprisingly, I didn't hear gloom and doom.

"I think there's a perfect storm of opportunity for states," he says.

He notes that efforts to right and stabilize the economy include "major changes in structure for the federal government" that could benefit states.

He points to proposals, for example, by the president's National Commission on Fiscal Responsibility and Reform, a/k/a the deficit commission, to enact broad tax reforms by 2012.

Such proposals advocate change ranging from reform of mortgage-interest deduction rates to closing corporate-tax loopholes and set up potential revenue gains for most states.

And although many commission recommendations are controversial, and it's unclear exactly what Congress might enact (or when), DeSeve says, "Doing nothing isn't an option; they'll have to do something . . . [and] states need to figure out where the opportunities are."

And, it seems to me, quickly.

Stimulus money will be 80 percent to 85 percent spent by the end of this month. An additional 10 percent to 12 percent is already under contract. All funds are to expire by the middle of 2011.

Will states then fall off the table, I ask?

"Well, it's more like you had help from your uncle to get through college," he says, "and you know once you graduate the end of that help is coming."

As to future stimulus aid, DeSeve says states will continue to benefit through extension of unemployment compensation and Bush-era tax cuts for all income levels (assuming that pending legislation passes).

But, he says, "I don't think we're going to see another bill with 250 separate categories of specific stimulus spending."

Pennsylvania, by the way, got more than $12.6 billion in stimulus money through November, according to the governor's office.

DeSeve, now a senior adviser to the Pew Foundation's Center on the States, spoke last week at a two-day fiscal leaders' seminar in Phoenix, sponsored by Pew and the National Conference of State Legislatures.

Philly Rep. Dwight Evans (despite his recent ouster as House Democratic Appropriations Committee boss) is a longtime state-budget expert and attended the seminar. His trip was paid for by the NCSL.

His view of DeSeve's message?

"I totally agree states have opportunities tied to federal changes," says Evans, "but I'm concerned about Democrats and Republicans working together and about leadership to take advantage of opportunities.

"I worry people aren't paying attention. I worry if you're not at the table, you're on the menu."

I worry, too.

In a matter of weeks, a new legislature and governor take office to face a budget deficit projected at $4 billion to $5 billion by June.

Gov.-elect Corbett promises no new taxes, fees or payroll deductions. So the challenge is cutting, say, $4 billion from a budget of roughly $27 billion.

How that happens - since you could eliminate the Legislature and all state funding for the departments of Agriculture, Environmental Protection, Health, Insurance, Labor and Industry, Revenue, State and Transportation and save a total of $1.3 billion - remains a mystery.

So while DeSeve sees opportunities and Evans sees inattention, all I see are question marks.

Send e-mail to baerj@phillynews.com.

For recent columns, go to

http://go.philly.com/baer.

comments powered by Disqus
|
|
|
|
|