Institutions continue to receive billions in stimulus funds

John F. Hood
President, MCH Inc.

The press gets a bad name sometimes, and sometimes I think they deserve it. Not for what they do say, because it’s mostly factual or defensible. My criticism is about what’s left out. What’s left out helps you put what is said in perspective, and that is important. For instance, when arguing about tax levels, those who say federal taxes are regressive include Social Security taxes. Those who say taxes are progressive leave out Social Security. Both can show data that proves their point, but the part about what taxes they are counting is often obscure or left out; hence, no perspective for the reader.

But today is not about taxes. It’s about employment. In today’s (September 8, 2009) New York Times, there is an article entitled Schools Aided by Stimulus Money Still Facing Cuts. It begins: “Children are returning to classrooms across the nation during one of the most tumultuous periods in American education, in which many thousands of teachers and other school workers – no one yet knows how many – were laid off in dozens of states because of plummeting state and local revenue. Many were hired back, thanks in part to $100 billion in federal stimulus money.” It goes on with several wrenching examples. But where is the perspective?

We do know something about educational employment. While not particularly upbeat, it is far from what most other sectors of the economy are facing. According to the U.S. Bureau of Labor Statistics in their most recent employment economic news release covering the period from last August through this August, 72,000 or 0.5% of education jobs were lost in the last year. In the same period, the rest of the economy lost 5,758,000 or over 4% of jobs. So how bad is unemployment in education? Maybe not good, but better than almost everywhere else. Perspective!

If you look at the table below which contains industry segments selected from the press release, you can see that local and state government fared slightly worse than education with a 0.6% rate of job loss and that health care gained 373,000 jobs, an increase of 2.3%. So all told, B2i industry segments had a net gain of 249,000 jobs in the last year while the rest of the non-farm economy lost 6,079 million or 6.2%. B2i is still the best market right now and the stimulus money is helping it stay that way.

U.S. Bureau of Labor Statistics
Economic News Release

Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail.

*Seasonally adjusted employment (in thousands)*

John F. Hood
MCH President

An MCH employee brought in a copy of the newsletter of a neighboring school district, the Concordia R-II School District of Concordia, MO. In an article Show Me the Money, the distribution and use of the ARRA funds are discussed.

“Most of the money coming to the state will be used to help fund the state formula to ensure districts get the amount of funding required by state law.” This refers to the state stabilization funds of which Missouri received over $750 million. Although this is the greatest part of the ARRA money, it receives no further comment by the district. It is possible that they do not know how much they are getting because it is blended into their funding from the state. Regardless, this portion of ARRA is keeping the district “whole” in terms of sustaining jobs and other aspects of “normal” operations.

The rest of the article details the spending of Title I and IDEA money. All districts receiving those funds got an increase of over 40% over the 2 years of ARRA. The district: “will be receiving $191,700 in new funds. The money is being allocated through special education and Title programs. This means there are specific guidelines in how the money can be spent.” The article goes on to explain that the money can’t be spent for artificial turf for the football field or a new roof for the high school.

Here is how the money will be spent:

• an additional special education teacher for the high school for 2 years,
• a paraprofessional at the elementary school for 2 years,
• updating computers and providing projectors in special education classrooms,
• in-service to special education staff,
• outfitting a life skills classroom,
• a part-time Title I Math program, and
• the materials and training necessary to start a new program and supplies for the Title I Reading Program.

“… utilizing new, short-term federal funds can be an exercise in frustration. There are many needs in a district that will have to continue to go unmet as we fill lesser priorities which meet the funding requirements.”

I believe this to be a pretty typical reaction to the ARRA. The largest portion of the money, which sustains the basic operations of the schools, gets spent without much attention, and the federal government doesn’t seem to get much credit. Smaller, but still significant amounts of money that are genuine increases but are also restricted, get the attention and draw some complaints in the process. You can’t please everyone.

The National Governors Association Annual Meeting will be held July 17-20 in Biloxi, MS. The governors will be discussing the economic outlook for their states, healthcare reform, energy independence, emergency preparedness, and stimulus funding as it relates to education, early childhood, and workforce training.

NPR reporter Renee Montagne interviewed the NGA Annual Meeting host, Governor Haley Barbour, on Morning Edition today. She asked the governor how the stimulus package was impacting Mississippi’s economy since Mississippi is one of the country’s poorest states. Governor Barbour said that the state had passed a balanced budget but that he had concerns regarding the requirements that governed stimulus spending. Under the federal government’s mandate, K-12 education will see a 7.2% increase in funding for FY10. He said that all levels of education in the state would receive record-high appropriations this year. Conversely, public safety is facing a 6% reduction in funding for FY10. He said the legislators would have preferred to be able spread the stimulus funds more equitably across state agencies.

It’s no doubt the governors will have a lot to talk about. The daily headlines are full of positive and negative reports regarding state budgets. Here are just a few examples: California budget talks have stalled while Illinois averted a government shutdown when lawmakers adopted a FY10 budget. Alabama begins a new fiscal year in October and Governor Bob Riley is already predicting education cuts because tax collections are falling. Florida’s Governor Charlie Christ said stimulus money saved 26,000 teachers’ jobs and enabled the state to boost unemployment benefits.

We’ll have a better idea of FY10 projections after the NGA annual meeting and the National Association of State Budget Officers annual meeting in August.

Click here to get the latest information regarding State Fiscal Stabilization Funds. Find out:

• Which states have successfully completed Part 1 of the State Stabilization Application?
• How much funding did each state receive?
• How is the state planning to spend the discretionary portion of the SFSF funding it receives?

Check back often to get the latest news you can use in developing your state-by-state ARRA marketing strategy.

John F. Hood, President
MCH, Inc.

The Department of Education, which controls the distribution of all the $48 billion in state stabilization funds, announced yesterday that they were releasing immediately the final third of the government services portion, $2.7 billion. The government services portion is $8 billion or 18.2 percent of the $48 billion, two-thirds of which has already been made available to states whose applications have been approved. As of today, over 40 states have been approved. 90% of the $2.7 billion or $2.4 billion has just been added to the pot.

The government services portion is distributed to state agencies at the discretion of the governor. The money is to be used for such things as education, school modernization, public safety, and other government services. Some guidance about where the money is going in each state is available on our spreadsheet. In many cases, however, states have put much of the money in an “undecided” classification so we can’t know.

Obviously, the Department of Education is trying to make available as much money as quickly as they can. It’s still up to the states to put it to use.

MCH invited a special panel of leading education administrators from across America to share their insight regarding school spending and the impact of ARRA stimulus funding in 2009 and beyond.

Panelists for the webinar were Kim Brightwell, CFO of the Blue Springs School District in Blue Springs, MO and Marjorie Murray, Director of Special Projects at Seminole County Public Schools in Sanford, FL. The event was well attended and there were a number of targeted questions from our audience. Key takeaways from our panelists:

• They have been overwhelmed with emails and calls from vendors and have a difficult time sorting through inquiries and replying appropriately.
• They appreciate vendors who take time to understand their particular school district’s needs and who were willing to work with them on delivery dates, payment schedules, etc.
• Marjorie and Kim agreed that they were more likely to give their attention to a strategically written direct mail piece that related a vendor’s products and services to programs approved under the funding guidelines.

Feedback regarding the webinar content was positive and included high praise for our panelists. Here are just a few of the comments we received in response to the survey question “What did you like best about the webinar?”:

• “The honest talk from two decision-makers in the trenches.”
• “Confirmed our thoughts about volume/pressure being placed on administrators by suppliers.”
• “Two educators doing different things so we could see both ends of the spectrum.”

Attendees were reminded to utilize all of the MCH resources available including the BudgetAware™ Bulletin, white papers, and other information at www.mailings.com.

To listen to the webinar in its entirety, you will need to listen to Part 1 and Part 2.

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.