Posts from — May 2009

MCH, Inc. has released an updated edition of its BudgetAware^TM Bulletin. The free report is designed to help B2B marketers stay informed about state budget deficits and how ARRA stimulus funding is impacting institutions in each state. In addition, education marketers will benefit from the special focus on estimated increases in State Fiscal Stabilization Funds (SFSF), Title I, IDEA, Early Childhood, and Technology funding dollars available to each state.

According to a study by the US Government Accountability Office, states will spend nearly 60% of the ARRA stimulus funds they receive on healthcare and education. The study also projects ARRA spending totals for each year through 2016 with the largest portion of state stimulus funds being spent in FY 2010.

MCH Director of Marketing, Kirk Chritton, said, “State budget shortfalls are a moving target. The fiscal condition in each state will influence how the governor will spend ARRA discretionary funds. MCH believes the most effective way for B2B marketers to capitalize on stimulus spending is to create a state-by-state strategy. The StimulusMarketing website and BudgetAware Bulletin are solid resources that can be used by marketers in fine-tuning their strategy for 2009.”

MCH is America’s leading compiler of business-to-institution (B2i) databases and mailing lists and has served institutional marketers for 80 years. The MCH database features information on 1.1 million institutions and 8 million decision makers. The largest institutional markets include governments, hospitals, medical practices, schools, school districts, and churches. MCH also provides custom telephone research and data processing services. Click here to get a copy of the free BudgetAware^TM Bulletin.

The Associated Press has created an interactive map that can be used as a resource in determining where economic pressure is the greatest and least across the country. The map calculates a stress index for the current month and compares that figure to October 2007 figures for unemployment, foreclosure, and bankruptcy rates.

In his introductory comments, author Ted Anthony stated:

• “Places with large numbers of government jobs – state capitals, university towns, communities with concentrations of hospitals – remain fairly recession-proof. These are places like Columbia, Mo.; Madison, Wis.; the Raleigh, N.C., area; and Athens, Ga.”
• “State government is not hurting that much – at least, not yet.”

Those two statements lend additional support to MCH’s position that institutions are the B2B Growth Markets of 2009!

John F. Hood, President
MCH, Inc.

I have been in touch with the Department of Education and now have a better understanding of the distribution of funds.On April 1st 50% of the total authorized funds for Title I and IDEA were made available to the states to be distributed and spent according to previously established guidelines for those programs. This funding represents close to a 50% increase and is additional to the normal funds available each year. The second half will be distributed in about one year and is also in addition to normal funding.

The state stabilization funding, the largest of the ARRA education funding programs, is being handled differently. Two-thirds of the money, $32.6 billion, is available within two weeks of a completed application by the states. The last one third will be made available this Fall. $26.6 billion of the $32.6 billion is specifically for education, K-12 first and the rest, if any, for colleges. The other $6 billion is for government services which may include education.

As of this writing, money has been made available to the following states. See table below:

  
This way of distributing the funding clearly cries out for a state-by-state marketing strategy. The states will (eventually) report back to the Department of Education and at that point the spreadsheet I mentioned in May 4th’s blog will be updated to show the state/district spending by moving the funds to the “Outlay” column, in other words after the fact. The big question now is how fast the states will move.

I would expect that the states that apply and get the money the soonest are the most eager (or desperate) and will move it into the school district/local government pipeline quickly.

For instance, California required each district to complete a very simple on-line application to get their share. The deadline for the applications was May 4th. I expect that the state is now in the process of apportioning the money to the districts that applied and that it will be made available to them within the month. In Illinois, the districts had to apply by April 17th, 3 days before the state application was approved and the funds were made available.

However, Minnesota has to pass legislation to enable it to distribute the $547 million, and depending on the outcome of the legislation, may have to reapply to the federal department of education. This might take some time.

The districts have until September 30, 2011 to spend the money. They can start spending as soon as they receive their portion from the governor. The same rules apply generally to Title I and IDEA, except with more program restrictions. So the key to the timing of the stabilization funding lies with first with the states – which ones have the money, and then with the districts who get to spend it whenever they want.

Please keep an eye on StimulusMarketing.com where we will be posting information on states that are getting their stabilization money.

John F. Hood, President
MCH, Inc.

On May 4th I posted a blog about the fact that the much touted stimulus money is still sitting in Washington, at least the part controlled by the Department of Education. The Department of Education, among other funds, holds the keys to the State Stabilization funding, $billions of which can also be used to support local government.On May 5th, the Institute for Supply Management (ISM) issued its “April 2009 Non-Manufacturing ISM Report On Business”. Non-manufacturing business covers the services sectors of the economy including the major B2i (Business to Institution) components: health care, government, and education. The picture in April, while improving, is not very good.

The non-manufacturing index covers 18 sectors. The three major B2i components above are three of them. By looking back at the monthly ISM non-manufacturing reports, we can get another view of the outlook for health care, government, and education. The results are more pessimistic than the employment statistics from the Bureau of Labor Statistics that we have commented on before.

There was a positive outlook in government in May 2008, but the sentiment turned down in June and has remained so with one exception since. (The technical terms in the reports are growth and contraction.) In the education sector the sentiment was positive from May through September, turning down in October and remaining so through April 2009. Health care was even or up in eight of the ten months from last May through February. Health care sentiment has been down in March and April.

ISM asked special questions in their March 2009 survey about whether the respondents thought that the ARRA (stimulus) money would help their industries (sectors). All three B2i segments responded positively. (Please see the ISM website, for more information on their surveys and survey techniques.)

What does this mean? I think it means that the employees in our B2i markets are well aware of the stimulus money, see it as a benefit, and are waiting for it to arrive. Given that they are institutions and bound by rules that prevent them from spending money in anticipation of receiving it as a for-profit business might, they have to wait until the money shows up. It’s clear that the institutions are aware and awaiting; when the money does show up, they’ll start spending. The ISM will begin showing growth in B2i again. Regrettably, we are in the unfortunate position of waiting on the Department of Education and other federal agencies to start pushing the $billions out the door the way the Obama administration wants them to.

John F. Hood, President

MCH, Inc.

On March 7, 2009 U.S. Secretary of Education Arne Duncan announced that: “$44 billion in stimulus funding from the American Recovery and Reinvestment Act (ARRA) will be available to states in the next 30 to 45 days.” I might be crazy but that sounded to me like $44 billion would be at the states by April 21 at the latest. Well, guess what? It’s not.

I have advocated being in front of your customers so when the money hits you will be “top of mind”. As I have followed up with clients, none yet have been able to attribute sales to ARRA funding. Needless to say, this is very frustrating as all press releases speak with a sense of mission and urgency. In a March blog, I quoted from the press release above. I also noted that some exhibitors at NSSEA (education publishers and manufacturers at the National School Supply and Equipment Association conference which I had just attended) seemed skeptical about ARRA funding and the windfall headed their way. Guess who was right? The skeptics!

I have just reviewed a spreadsheet “Spending Reports by Program, April 24, 2009″.

This report shows that about $18 billion of ARRA money is available and obligated at the Department of Education. However, the amount distributed, the outlays, are about $350 million or 2%. To be technical, the press release said $44 billion “would be available to the states”. As of April 24th, $18 billion is available – available but not yet provided.

Of the $350 million that has moved beyond the Department of Education, 88% is for student assistance in the form of Pell grants. Below are outlays for the programs we have been watching:

• Title I (Aid for the Disadvantaged) $0.00
• IDEA (Special Ed) $1,400,000
• State Stabilization $0.00

In other words, virtually nothing!

On a more positive note, the Department of Education has released guidelines for the proper use of these funds. See Using ARRA Funds to Drive School Reform and Improvement. While there are program limitations with Title I and IDEA, the guidance document notes that the state stabilization funds (the largest of the funds) may be used for all the examples listed. Here is help on determining how well your products fit with the wishes of the Department of Education.

So when will the money hit the street? I don’t feel qualified to answer. However, the spreadsheet available at the link above is quite clear and will be updated periodically. We will keep an eye on it; you might want to also.

Vice President Joe Biden has promised that guidance on tracking stimulus funding with “new flexibilities for states” will be provided in early May. For state government staffs, that guidance can’t arrive soon enough.

With deadlines looming, state governments are scrambling to find the people and funding needed to comply with Washington’s transparency and tracking mandates. The federal government provided $250+ million to federal agencies to be used for tracking funding but it neglected to provide funding to states for the same purpose. Many states have reduced staff in an effort to close budget gaps. Further complicating the issue is that the funding is being released in waves. The first wave could be considered an “emergency” disbursement – everyone gets a piece of the pie. The second wave has strings attached. States, school districts, and other entities must comply with reporting requirements and show that they have spent previous funds in “a fiscally prudent way that substantially improves teaching and learning.” Recipients of ARRA funding are concerned that one misstep in tracking or reporting could result in the loss of subsequent funding.

Nearly 60% of ARRA stimulus funds will be spent on healthcare and education. The US Government Accountability Office has analyzed the ARRA and projected spending totals for each year through 2016. It is projecting that the largest portion of stimulus funds ($108 billion) will be spent in FY 2010. Ron Naples, Pennsylvania stimulus czar, aptly summed up the challenges “The whole thing has been a train moving down the tracks and trying to hang on…there are a lot of moving parts.”