Federal Stimulus Package considered by Resources Budget Subcommittee today

SACRAMENTO, 2 April 2009 – The Senate Budget Subcommittee on Resources considered the impact of the American Recovery and Reinvestment Act at their hearing today.  They directed staff to develop strategies for incorporating these funds into the 2009/2010 budget.

The following material is excerpted from the staff report for this hearing:

American Recovery and Reinvestment Act
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (ARRA) of 2009, H.R. 1. The spending and tax-cut plan is intended to help stabilize state budgets and spur economic growth. The ARRA commits a total of $787 billion nationwide. The funding provides: (1) $330 billion in aid to the states, (2) about $170 billion for various federal projects and assistance for other non-state programs, and (3) $287 billion for tax relief.

Funds for California
Of the $330 billion available under ARRA nationwide for state aid, the LAO estimates that California will receive approximately $31 billion in additional federal funds during the current and the next two federal fiscal years (FFY). California’s health programs will receive the largest share of these federal funds, about $9 billion, and education-related programs will receive nearly $8 billion in additional federal funds. These programs are followed by labor and workforce development and social services programs, which will receive about $6 billion and $3.5 billion, respectively. 

Funds for California Natural Resources
The ARRA includes several resources and environmental protection-related provisions that will have a fiscal impact on California. All of these additional federal funds supplement spending on resources and environmental protection-related programs and do not benefit the state’s General Fund.

 · Water – The ARRA includes about $283 million provided directly to the state in grant and loan funding for wastewater infrastructure, through the existing Clean Water State Revolving Fund. The funds will all be made available in Federal Fiscal Year (FFY) 2008-09. The State Water Resources Control Board administers the program on behalf of the state in cooperation with the U.S. Environmental Protection Agency (U.S. EPA). 

· Energy – The ARRA includes $3.1 billion for State Energy Programs under the existing Energy Policy and Conservation Act, of which $239 million will come to California. The ARRA directs states to focus on funding energy efficiency programs (such as energy efficient retrofits of buildings and industrial facilities) and renewable energy programs, and in particular to expand those programs already approved by the state. States are also directed to prioritize joint projects between states. All funds must be obligated by September 30, 2010.

· Energy Efficiency – The ARRA includes $2.8 billion for Energy Efficiency and Conservation Block Grants (EECBG), of which $784 million is to be allocated nationwide directly to the states. (The majority of the remainder will be allocated to local jurisdictions, with a small amount for tribes and other entities.) Of the allocation to the states, California will receive a total of $56 million, with $22 million available for state use and $34 million to be passed through to small cities. An additional $400 million is available nationally in the form of competitive grants, although there is currently no information available on how these grants are to be awarded.

 · Underground Storage Tank Funds – The ARRA appropriates $200 million nationally to the U.S. EPA for the Leaking Underground Storage Tank Fund Program. The state is expected to receive between $15 million and $17 million in the first year of funding and may be eligible to receive an additional $5 million in the second year should other states be unable to fully utilize their grants. These funds must be applied for and are distributed in a competitive grant process.

 · Diesel Emission Reduction – The ARRA appropriates $300 million to the U.S. EPA for grants and loans awarded nationally for on- and off-road diesel emission reduction projects, including for diesel engine retrofit and replacement. Of this total, $90 million is allocated directly to states (and California could receive at least $1.8 million). The remaining balance — $210 million — is to be awarded directly by the U.S. EPA as competitive grants. As the U.S. EPA’s grant guidelines have yet to be developed, it is not known what amount of grant funds that the state could potentially access directly.

 · Wildland Fire Management – The ARRA appropriates $250 million to the U.S. Forest Service for state and private forestry activities, including hazardous fuels reduction, forest health, and ecosystem improvement activities on state and private lands. While the U.S. Forest Service has yet to determine how this funding will be delivered to the state, it is likely that a significant portion of the funding coming to the state would be administered by the California Department of Forestry and Fire Protection. The department has already submitted a $176 million list of potential projects to the U.S. Forest Service.

 · Brownfields – The ARRA appropriates $100 million nationally for projects to be awarded by competitive grants under the Comprehensive Environmental Response, Compensation, and Liability Act. There is no cost-share requirement in order to receive the money. While there is no allocation specific to California, projects in California may be eligible for grant funds. The Department of Toxic Substances Control (DTSC) would be the state’s applicant agency.

 · U.S. Department of Defense Environmental Cleanup – The ARRA appropriates $5.1 billion to the Department of Defense for environmental cleanup activities. There are several former military installations in California that could be eligible for these funds. The DTSC administers the cleanup of some of these sites with federal reimbursement through the state budget.