Will the Stimulus Have Any Lasting Impact on States and Cities?

Of course we've all heard a lot about the stimulus over the past several months. And we're about to hear a lot more ...
September 30, 2009

Mgmt conf day 1 for HP

Of course we've all heard a lot about the stimulus over the past several months. And we're about to hear a lot more -- the October 10 reporting deadline for states is looming large. (By the way, you can get a preview of how states have been spending their recovery cash in Josh Goodman's October Governing story.)

But what are the long-term implications of the stimulus? Will it have any lasting impact on states and cities?

A panel of stimulus experts tackled that question at the kick-off session for Governing's Managing Performance conference in Atlanta.

The bottom line? Will the stimulus have a lasting impact? No. Except...maybe.

Everyone on the panel seemed to agree that the American Recovery and Reinvestment Act won't have any long-term fiscal impact on states and localities. "I don't know of any governor who's counting on this money continuing," said David Quam, the director of federal relations for the National Governors Association. "They see this as a one-time thing."

The ARRA influx of cash did delay states' "day of reckoning," as Mike Mower, Utah's planning coordinator and stimulus czar, put it.

But Mark Muro, policy director for the Metropolitan Policy Program at The Brookings Institution, was blunt about the stimulus' ultimate effect: "I don't think ARRA will be seen as transformative at all," he said. "I think it will be seen as one of the last gasps of federal business-as-usual, a highly visible case-study of the way we've delivered government services for the past 30 years."

So, okay, no movement of the tectonic plates when it comes to states' fiscal picture. But there is one way that the stimulus may change government for the long-term: accountability. The reporting and transparency required by the ARRA may fundamentally shift the way states and cities report on how they deliver services. "I do think we're starting to see a trend" toward great accountability, said Quam. "If it's done right, I could see this having a long-lasting effect."

Quam also said the working relationship between states and the federal government has improved dramatically. "I'm hopeful that the cooperation that's come from working together to create this [reporting system] is actually a model for building a relationship that, instead of being coercive, is actually cooperative."

So, the stimulus: a necessary one-time shot in the arm for state budgets. But maybe the beginning of a long-term evolution toward better accountability and an improved give-and-take federalism.

Or maybe not...