Nearly a third of President Obama’s $447 billion package would provide direct support to state and local governments. Local leaders are generally supportive of a plan they say will provide much-needed funding at a time when their revenue is still below-precession levels.
The centerpiece of the package is variety of tax reductions and credits for both businesses and workers. But its largest direct impact for states and localities will be through the $140 billion it provides for hiring employees, building infrastructure and renovating empty buildings.
Of that direct funding, the biggest portion is $50 billion for “immediate” improvements to the country’s transportation infrastructure. Here's a breakdown by category.
- Highways: $27 billion
- Transit: $9 billion
- High-speed rail corridors: $4 billion
- Intercity passenger rail: $2 billion
- TIGER/TIFIA: $5 billion
- Airport improvements: $2 billion
- Air traffic control: $1 billion
The funding would be authorized all at once and spent over time. It would be in addition to the transportation funding being considered in Congress as part of the surface transportation authorization that has stalled. Sen. Barbara Boxer (D-Calif.) has outlined a two-year, $109 billion program, while Rep. John Mica (R-Fla.) is pitching a six-year, $230 billion bill.
The president's proposal also calls for the creation of a national infrastructure bank, which would initially be capitalized by $10 billion. The program would help finance big projects – those in excess of $100 million – that create transportation, water or energy infrastructure. The bank, which Obama has championed in the past, has enjoyed some bipartisan support but many Republicans are still skeptical. House Major Leader Eric Cantor is among those who instead prefers promoting state-based infrastructure banks.
The president’s plan calls for spending $30 billion to rehire or prevent layoffs of up to 280,000 teachers, plus another $5 billion for cops, firefighters and EMS workers.
Also in the plan is $25 billion that would be spent to modernize at least 5,000 schools, and $5 billion for modernizations of community colleges.
The plan includes a $15 billion effort for a program, dubbed Project Rebuild, which would fund refurbishments of vacant and foreclosed properties. The cleanup would directly employ people and could increase property values in blighted areas, which would in turn generate more revenue for localities. It’s an outgrowth of the Neighborhood Stabilization Program, which has provided about $7 billion over the past three years for similar projects. But this aspect of the package could face an uphill battle too, as Republicans have tried to end the Neighborhood Stabilization Program in the past.
The president's proposal requires states “to design more rigorous reemployment services for the long-term unemployed,” though the details of those requirements are unclear. It also encourages states to develop more flexible unemployment programs, such as allowing benefits to continue while an unemployed individual performs voluntary work or training.
The plan would infuse $49 billion into the unemployment insurance (UI) program, and also create a summer jobs program for young people to work in the public sector.
The president hasn’t released the legislative language of the bill, so state and local leaders and experts have questions. Chief among them: Will states and localities have to provide matching funds to get the many benefits he's outlined?
They’re also wondering whether states’ must reform their UI systems to qualify for new money. And they want to know whether state and local governments will qualify as employers for the $65 billion plan to temporarily cut businesses’ payroll taxes in half – and eliminate them for new workers.
The plan may not be perfect. If the funding winds up being used to shore up operating budgets of state and local governments, they may be left with a hole they simply have to fill a few years a later if their revenue still hasn’t rebounded. That’s already happening to some jurisdictions as the original 2009 stimulus funds dry up.
The president’s plan faces a tough road ahead. Obama has tasked the existing super committee of 12 legislators, already tasked finding $1.5 trillion in deficit reductions, with finding out how to pay for his program too. Essentially, he wants them to now find $1.85 billion in spending cuts and revenue increases.
The plan will need the support of Republicans to become law, and they have been resistant of many of his proposals. Meanwhile, both Republicans and Democrats on the super committee say the president's request will only add to the challenge of their task.