[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
TRACKING THE MONEY: PREVENTING WASTE, FRAUD, AND ABUSE OF RECOVERY ACT 
                                FUNDING

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 8, 2009

                               __________

                           Serial No. 111-87

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform
TRACKING THE MONEY: PREVENTING WASTE, FRAUD, AND ABUSE OF RECOVERY ACT 
                                FUNDING



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TRACKING THE MONEY: PREVENTING WASTE, FRAUD, AND ABUSE OF RECOVERY ACT 
                                FUNDING

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 8, 2009

                               __________

                           Serial No. 111-87

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform
              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio             JOHN L. MICA, Florida
JOHN F. TIERNEY, Massachusetts       MARK E. SOUDER, Indiana
WM. LACY CLAY, Missouri              JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California          MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts      LYNN A. WESTMORELAND, Georgia
JIM COOPER, Tennessee                PATRICK T. McHENRY, North Carolina
GERALD E. CONNOLLY, Virginia         BRIAN P. BILBRAY, California
MIKE QUIGLEY, Illinois               JIM JORDAN, Ohio
MARCY KAPTUR, Ohio                   JEFF FLAKE, Arizona
ELEANOR HOLMES NORTON, District of   JEFF FORTENBERRY, Nebraska
    Columbia                         JASON CHAFFETZ, Utah
PATRICK J. KENNEDY, Rhode Island     AARON SCHOCK, Illinois
DANNY K. DAVIS, Illinois             ------ ------
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
------ ------

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 8, 2009.....................................     1
Statement of:
    Dodaro, Gene L., Acting Comptroller General, Government 
      Accountability Office; and Robert L. Nabors II, Deputy 
      Director, Office of Management and Budget..................    28
        Dodaro, Gene L...........................................    28
        Nabors, Robert L., II....................................    82
    Patrick, Deval, Governor, Commonwealth of Massachusetts; 
      Martin O'Malley, Governor, State of Maryland; and Edward 
      Rendell, Governor, Commonwealth of Pennsylvania............   122
        O'Malley, Martin.........................................   141
        Patrick, Deval...........................................   122
        Rendell, Edward..........................................   152
Letters, statements, etc., submitted for the record by:
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............   169
    Dodaro, Gene L., Acting Comptroller General, Government 
      Accountability Office, prepared statement of...............    31
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................    12
    Nabors, Robert L., II, Deputy Director, Office of Management 
      and Budget, prepared statement of..........................    85
    O'Malley, Martin, Governor, State of Maryland, prepared 
      statement of...............................................   145
    Patrick, Deval, Governor, Commonwealth of Massachusetts, 
      prepared statement of......................................   126
    Rendell, Edward, Governor, Commonwealth of Pennsylvania, 
      prepared statement of......................................   156
    Towns, Chairman Edolphus, a Representative in Congress from 
      the State of New York:
        Prepared statement of....................................     4
        Prepared statement of the National Governors Association 
          and the National Association of State Auditors, 
          Comptrollers, and Treasurers...........................    15


TRACKING THE MONEY: PREVENTING WASTE, FRAUD, AND ABUSE OF RECOVERY ACT 
                                FUNDING

                              ----------                              


                        WEDNESDAY, JULY 8, 2009

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the committee) presiding.
    Present: Representatives Towns, Maloney, Cummings, Tierney, 
Lynch, Quigley, Kennedy, Van Hollen, Cuellar, Hodes, Foster, 
Speier, Issa, Burton, Souder, Turner, Bilbray, Jordan, Flake, 
Chaffetz, and Schock.
    Also present: Representatives Brady and Dent.
    Staff present: Aaron Ellias, staff assistant; Linda Good, 
deputy chief clerk; Jean Gosa, clerk; Adam Hodge, deputy press 
secretary; Carla Hultberg, chief clerk; Marc Johnson, assistant 
clerk; Phyllis Love and Christopher Sanders, professional staff 
members; Mike McCarthy, deputy staff director; Jesse McCollum, 
senior advisor; Leah Perry, senior counsel; Jason Powell, 
counsel and special policy advisor; Jenny Rosenberg, director 
of communications; Leneal Scott, IT specialist; Mark 
Stephenson, senior policy advisor; Ron Stroman, staff director; 
Lawrence Brady, minority staff director; John Cuaderes, 
minority deputy staff director; Jennifer Safavian, minority 
chief counsel for oversight and investigations; Frederick Hill, 
minority director of communications; Dan Blankenburg, minority 
director of outreach and senior advisor; Adam Fromm, minority 
chief clerk and Member liaison; Kurt Bardella, minority press 
secretary; Howard Denis and Christopher Hixon, minority senior 
counsels; Brien Beattie, Alex Cooper, and Mark Marin, minority 
professional staff members; and Sharon Casey, minority 
executive assistant.
    Chairman Towns. The committee will come to order. Good 
morning and thank you all for being here.
    This is the third in a series of hearings this committee 
has held on the implementation of the American Recovery and 
Reinvestment Act of 2009. The purpose of this hearing is to 
examine the unique challenges faced by States, localities, and 
agencies in using and tracking Recovery Act funds. This hearing 
will also examine the paramount question: Is the Recovery Act 
working?
    Five months ago, Congress committed nearly $790 billion of 
taxpayers' money in an effort to stave off and reverse a tidal 
wave of State deficits, rampant layoffs, and sinking personal 
income. With billions of taxpayer money on the line, it is 
vital that we keep a watchful eye on the money being spent, the 
programs being executed, and the methods by which we measure 
progress toward revitalizing our economy.
    Today, GAO is releasing its second bimonthly report on 
State and local use of Recovery Act funds. Frankly, there is 
good news and bad news.
    The good news is that money is flowing from the Federal 
Government to the States at a faster rate than the 
Congressional Budget Office predicted at the beginning of this 
year.
    I am also pleased that the Recovery Act has helped States 
and localities reduce the severity of budget cuts to the 
programs that unemployed people need most. In New York, for 
example, GAO found that the New York City School District 
anticipates saving 14,000 jobs as a result of the Recovery Act 
funding.
    But there is also bad news. GAO found significant 
shortcomings in the targeting and tracking of Recovery Act 
spending.
    The Recovery Act places a priority on directing funds 
toward projects in economically distressed areas. However, 
there are substantial variations among States as to what 
constitutes an economically distressed area. For this reason, 
it is unclear as to whether Recovery Act funds are going where 
they are needed most.
    This is particularly important with respect to 
transportation-related spending in distressed areas. Therefore, 
today, I am requesting a personal meeting with the Secretary of 
Transportation to discuss the importance of ensuring that 
Recovery Act spending on highway and other transportation 
infrastructure projects is focused on these economically 
distressed areas. I believe this is one of the key ways in 
which we can help create real jobs and do it quickly.
    I want to note, however, that without appropriate guidance 
from the Office of Management and Budget and other Federal 
agencies on spending and accounting for Recovery Act funds, it 
will be difficult to measure our true progress in creating jobs 
and in minimizing waste, fraud, and abuse of Recovery Act 
funds. GAO found this to be a critical issue for New York and 
for other States as well.
    OMB's failure to provide timely and necessary guidance begs 
the question, are we asking the States to do the impossible? 
Can they really provide accurate and reliable data on Recovery 
Act spending and job creation by the October 10th reporting 
deadline? I look forward to hearing how OMB intends to resolve 
this problem.
    I also remain concerned that the States are being asked to 
administer a funding program of unprecedented size without 
being given the necessary resources. They have been asked to 
fix the car but not given the mechanic or the tools to do so, 
or even the spare parts that are needed. And I see that GAO 
agrees with us that this is a serious problem.
    In fact, that is why I introduced H.R. 2182, of course with 
the ranking member, Congressman Issa of California. Our bill 
increases the percentage of Recovery Act funds that may be used 
by States and localities to conduct administrative and 
oversight functions.
    The House has passed H.R. 2182, but it has yet to be taken 
up in the Senate. I hope that one result of today's hearing and 
the release of the GAO's report is that it will reinforce the 
message to the Senate that this bill needs to be enacted as 
soon as possible. I would hope we can find ourselves in 
conference with the Senate prior to the August recess, at which 
time I also intend to address the Single Audit issues 
highlighted by GAO in its report.
    Both this Congress and the administration have instituted 
an unprecedented level of oversight designed to ensure 
transparency and accountability of Recovery Act spending. In 
doing so, we have committed to an enormous undertaking to deal 
with the toughest economic times this country has faced since 
the 1930's.
    I hope that our distinguished witnesses can help us 
identify what needs to be done, what lessons have been learned 
so far, and what best practices have been identified so that we 
can ensure that taxpayers' money is being used effectively and 
responsibly.
    Again, I want to thank our witnesses for appearing today, 
and I look forward to your testimony.
    At this time, I yield time to the ranking member from 
California, Congressman Issa, for his opening statement.
    [The prepared statement of Chairman Edolphus Towns 
follows:]

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    Mr. Issa. Thank you, Mr. Chairman. And thank you for 
holding this important hearing today.
    Mr. Chairman, just today, the USA Today's headline read, 
``States Aren't Using Stimulus Funds as Intended.'' Mr. 
Chairman, thanks to your work on this issue, we were already 
well aware that ultimately a great deal of the money delivered 
to the States has, in fact, been cost-shifted to projects not 
originally intended and that our funds have gone toward 
maintenance of many jobs, including, as we will hear today I'm 
sure, the retention of teachers or even retention bonuses to 
hold on to teachers. I will be interested today to hear from 
the GAO and others how we score a job saved or created when, in 
fact, it goes to a retention bonus.
    Mr. Chairman, when the government spends $787 billion in 
this make-work stimulus effort, in selling the stimulus package 
the administration promised the American people that the 
legislation would create or save 3.5 million jobs and prevent 
the U.S. unemployment rate from rising above 8 percent.
    Mr. Chairman, I opposed the stimulus. And I might remind 
you, it was the second stimulus, having already tried handing 
out dollars under the previous administration. I voted for that 
stimulus. One might say, fool me once, shame on you; fool me 
twice, shame on me. In fact, I believe that the discredited 
Keynesian economic theory behind the effort is misguided, and I 
am convinced that it won't work.
    Unfortunately, recent economic data has validated my 
opposition. The U.S. economy lost 433,000 net jobs in June, 
bringing the unemployment rate to 9.5 percent. These job losses 
come on the heels of other declining economic indicators that 
bring total American jobs lost since President Obama took 
office to 2.6 million.
    Mr. Chairman, I might remind you, all those jobs lost are 
in the private sector. In fact, the public sector, and 
particularly the Federal Government, has increased employment. 
We are, in fact, a job factory.
    As the committee Democrats rightfully noted in their 
briefing memorandum, the purpose of the stimulus was putting 
the unemployed back to work. Mr. Chairman, these troubling job 
numbers have shown beyond a doubt that so far the stimulus has 
failed to do that.
    When Vice President Biden was asked to justify the 
administration's stimulus job promises in the face of economic 
reality, he admitted the administration, ``misread the 
economy.'' The misreading, however, didn't stop the 
administration from touring the country, hyping the success of 
stimulus efforts creating 150,000 jobs.
    These job claims are based on the same flawed macroeconomic 
models that the Vice President now admits were mistaken. These 
macroeconomic models also reflected the unaccountable measures 
of jobs saved. Since no one can possibly dispute or disprove 
the jobs-saved claims of the administration, in fact, we are by 
definition forced to say, ``The jobs must be saved, but others 
were lost.''
    Mr. Chairman, I'm not going to dispute that the money was 
spent by the administration in good faith in order to help the 
economy. Many of the, ``down payments'' made on programs are, 
in fact, programs which the administration believes in the long 
run will do a great deal of good. Even the dollars sent in 
checks that ultimately ended up being deposited, rather than 
spent, were intended to be spent to help stimulate the economy.
    The OMB guidance fails to include today a requirement for 
receipt of reports to be accessible to the public in raw data 
feed. That is one of the areas I'm most concerned at and will 
be asking. Aren't the American people, in this day and age in 
which we can Google and find out what the neighbor's house 
next-door is worth, when it last sold, what it's appraised at, 
and when in fact it goes into escrow, why are we not in fact 
able to see when money was spent, no matter how spent, by the 
Federal, State, or local governments?
    I look forward to discussing these issues today with OMB 
Deputy Director Rob Nabors, and I thank him for appearing 
before this committee. I also look forward to hearing from Mike 
Pickett, CEO of Onvia, the private-sector provider of 
Recovery.org.
    And I know my time is expiring. I just want to ask 
unanimous consent to put the rest of it in the record and take 
just one moment to note that we're going to see today in 
written testimony that Recovery.org, in fact, outperforms and 
is out used by the Federal Government's own Recovery.gov.
    And I think that's very telling of what we're going to ask 
our first panel today, which is: Why is it government, at 
greater expense, cannot equal the private sector? And if we 
cannot equal the private sector in providing information, then 
should we, in fact, simply dump our raw data and allow private-
sector companies to monetize it or pay them to make it 
available rather than to continue to invest countless tens of 
billions of dollars into IT infrastructure that always seems to 
look pretty and seldom delivers its promise?
    And, Mr. Chairman, I'll put the rest in for the record, and 
thank you for your indulgence. I yield back.
    [The prepared statement of Hon. Darrell E. Issa follows:]

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    Chairman Towns. Thank you very much, Congressman Issa.
    In addition to receiving the testimony of the witnesses 
before us today, the committee has received statements for the 
record from the National Governors Association and the National 
Association of State Auditors, Comptrollers, and Treasurers. 
These organizations provide the financial support that the 
States need to create and preserve jobs. Of course, without 
objection, I enter these written statements into the record.
    [The information referred to follows:]
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    Chairman Towns. We will now turn to our panel of witnesses. 
It is committee policy that all witnesses be sworn in, so if 
you will raise your right hands and repeat after me.
    [Witnesses sworn.]
    Chairman Towns. Let the record reflect that the witnesses 
have answered in the affirmative.
    You may be seated.
    Our witnesses today: Mr. Gene Dodaro is the Acting 
Comptroller General of the United States and leads the 
Government Accountability Office. Under the Recovery Act, GAO 
was charged with tracking stimulus dollars to promote 
efficiency and track waste and fraud. And today, GAO is issuing 
its second bimonthly report.
    Welcome, Mr. Dodaro.
    Mr. Rob Nabors is the Deputy Director of the Office of 
Management and Budget. Previously, Mr. Nabors served the House 
as clerk and staff director of the Appropriations Committee. 
OMB is also monitoring stimulus spending and is responsible for 
implementing the transparency requirement of the Recovery Act, 
including providing guidance to States.
    At this time, I ask that each witness deliver their 
testimony within 5 minutes. And I'm sure you've been here 
before, but I just want to sort of re-emphasize, because every 
now and then we have to re-emphasize this. Starts out with a 
green light, then it goes to a yellow light, and then 1 minute 
later there's a red light. Now, red light everywhere means 
stop.
    So with that in mind, Mr. Dodaro, why don't you start.

   STATEMENTS OF GENE L. DODARO, ACTING COMPTROLLER GENERAL, 
  GOVERNMENT ACCOUNTABILITY OFFICE; AND ROBERT L. NABORS II, 
        DEPUTY DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET

                  STATEMENT OF GENE L. DODARO

    Mr. Dodaro. Thank you very much, Mr. Chairman, Ranking 
Member Issa, members of the committee. I'm very pleased to be 
here today to discuss GAO's second bimonthly review of the use 
of Recovery Act funds by selected States and localities.
    In order to carry out our statutory responsibilities, we've 
selected 16 States and the District of Columbia to review over 
the next 2 to 3 years to do a longitudinal study of the use of 
the money by those localities, how they're safeguarding the 
money, and reporting on the impact. Now, these 17 jurisdictions 
will receive approximately two-thirds of the Recovery Act funds 
that will be flowing to these States and localities.
    Now, one of the reasons we're doing a longitudinal study, 
as you can see from this chart here, while about $49 billion 
was estimated by CBO to flow to the States and localities in 
2009, the peak period for Recovery Act funds to be outlaid will 
be 2010. And 2011 will continue the funds distributed to the 
State and localities in outlay. So the money will be 
distributed. Approximately $280 billion will be going to the 
State and localities. So far, of the $49 billion that was 
estimated to go to the States nationally, about $29 billion has 
been distributed there as well.
    Now, the character of the spending is shown for this fiscal 
year, 2009, in this following chart. The predominant amount of 
money that will be outlaid to the States and localities is in 
the Medicaid program, where the Federal Government's matching 
share has been increased. Every State received an increase of 
6.2 percent and then additional increases based upon 
unemployment rates in those States and localities. Among the 17 
jurisdictions, ours range from an increased Federal share of 
6.2 percent in Iowa up to 12.24 percent in Florida.
    So far, the 17 jurisdictions that we looked at had drawn 
down $15 billion in the Medicaid spending area, about 86 
percent of the approximately $17.5 billion that had been 
allocated to them through the third quarter of this fiscal 
year. They're using the money to maintain Medicaid benefit 
levels and provide services. Most of the States that we visited 
also had increased caseloads in the Medicaid area, and this has 
enabled them to be able to do that. The increased Federal share 
also freed up State moneys potentially that could be used in 
other areas and to help them with their fiscal stresses.
    The second area is the State Stabilization Fund. About 82 
percent of that money is to be used for education purposes and 
distributed to local education agencies or institutions of 
higher learning; 18 percent can be used to stabilize public 
services, particularly public safety, and could be--they have 
more discretion on using the money.
    The 17 jurisdictions we visited had been allocated by the 
Department of Education almost $17 billion. So far, they've 
drawn down $4.3 billion or about 25 percent of the money that's 
been allocated.
    And the highway area is the next largest area. The 17 
jurisdictions we had received had been allocated about $15.5 
billion. They've obligated about $9.2 billion or slightly over 
that. So about 59 percent of the money's been obligated.
    Now, obligated here means that the Federal Department of 
Transportation and the State have agreed on the nature of the 
projects. The projects in the localities we visited, there were 
about 2,600 projects that had been approved already, most of 
them for paving roads or widening roads since that could be 
allocated more quickly, in the State's opinion.
    So far, the way that program works is that States are 
reimbursed as they're making payments. So, of those 17 
localities, so far they've been reimbursed $96 million. So that 
money is beginning to go through the system, but a lot more is 
obligated than has been outlaid at this point in time.
    And, as you mentioned, Mr. Chairman, we believe that the 
Secretary of Transportation, in consultation with the Secretary 
of Commerce, needs to clarify the ``economically distressed 
area'' issue now before a lot of the money is spent, the 
remainder of the money.
    Now, the Recovery Act funds have clearly helped States deal 
with fiscal stresses, but they've also increased the 
accountability requirements for the States. And we're concerned 
that, under fiscal stress, the States have been cutting back on 
some of their management and audit function areas, thereby 
reducing some of the safeguards.
    So, Mr. Chairman, Ranking Member Issa, and the committee, 
we support passage of H.R. 2182. We think it's very much needed 
and in line with the recommendations in our report, which is to 
really increase the utility of the Single Audit area. And I can 
talk more about that in the Q&A session.
    Also, while OMB has taken important steps to clarify the 
guidance, additional clarification is needed and better 
communication with the States is needed as well. And I'd be 
happy to elaborate on all these areas in the Q&A session.
    Thank you very much. And we look forward to continuing to 
support the Congress in their important oversight over the 
Recovery Act spending.
    [The prepared statement of Mr. Dodaro follows:]

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    Chairman Towns. Thank you very much for your testimony.
    Mr. Nabors.

                STATEMENT OF ROBERT L. NABORS II

    Mr. Nabors. Chairman Towns, Ranking Member Issa, members of 
the committee, I appreciate the opportunity to speak with you 
today about the status of our economic recovery and, more 
particularly, the Recovery Act's role in restoring sustainable 
economic growth to our country.
    To understand where we are, it's important to recognize 
just how dangerous a path our economy was on just a few months 
ago. We are working on coming out of the worst economic crisis 
since the Great Depression. For the fourth quarter of 2008, the 
United States experienced a negative growth rate of 6.3 
percent, the worst since the recession of 1982. Employment fell 
every month in 2008. The economy has lost a record 5.7 million 
jobs over the past year and 6.5 million since the recession 
began in December 2007.
    After a long and unprecedented boom, housing prices have 
fallen 11 percent since their peak in April 2007. And over that 
same period, residential investment has fallen by more than 40 
percent.
    $9.8 trillion of wealth has been lost in the market. The 
financial crisis has choked off lending, contributing to 
further economic decline. And some of our most prominent 
businesses have closed, merged, or been forced to take drastic 
steps to stay afloat.
    In January and February, when Congress and the President 
worked in concert to approve the Recovery Act, all of us knew 
the economic situation was bad. None of us anticipated just how 
weak the economy truly was, though.
    The financial meltdown contributed mightily to this 
situation, but so did deficiencies in the foundation of our 
economic growth: infrastructure, health care, education, and 
clean energy. When we have failing drinking water systems, 
crumbling roads and highways, substandard or nonexistent 
broadband service, bridges that are graded as dangerous for 
travel, wastewater treatment plants in poor condition, schools 
that are overcrowded and falling apart, thousands of dams 
labeled as high-hazard or unsafe, the picture is clear.
    While these deficiencies are not the only cause of the 
economic problems we face, it is a significant contributing 
factor. It places substantial strain on State and local 
governments and inhibits the ability of businesses to compete.
    From the moment he was elected, the President has put the 
economy front and center. Working with Congress, the 
administration has stabilized the financial market and started 
to see stabilization on housing. We are slowing the economic 
freefall.
    As a Nation, we are moving from a long period of economic 
slowdown to a time of new industry, opportunity, and 
innovation. The Recovery Act is an important part of that 
effort. The Recovery Act is designed to help millions of 
families weather this downturn, create new jobs, and spark the 
engines of long-term growth.
    It's a work in progress, but it's steady progress. Just 
this month, 8 days into July, the Department of Education is 
helping States with their increasing budgetary pressures by 
accelerating more than $2.7 billion in Recovery Act funds well 
ahead of schedule. The administration opened competition on 
more than $15 billion in high-speed rail, smart grid, and 
broadband programs. All 50 States obligated at least half of 
their highway funds before the July 1st deadline, and, as a 
result, right now there are more than 1,900 highway projects 
under way across the country.
    Also this month, the Department of Energy moved forward 
with more than $460 million for cutting-edge emission reduction 
projects that will be central to the Nation's innovative clean 
energy future; the Interior Department pressed forward with 
another $134 million for critical water reclamation projects in 
the West; the Department of Veterans Affairs completed $500 
million in recovery payments to approximately 1.9 million 
veterans and beneficiaries to help them keep pace with their 
bills.
    Overall, more than 20,000 Recovery Act projects have been 
approved. Almost $201 billion of all Recovery Act funding has 
been obligated or distributed.
    These are many of the things on which the Recovery Act 
focuses, but more importantly, the Recovery Act invested in 
people. Within a few weeks of the act becoming law, we 
implemented the broadest tax cut in history. The Recovery Act 
provided $288 billion in tax cuts and incentives to families 
and businesses.
    We extended and expanded unemployment benefits and medical 
coverage for people who are still looking for work. We have 
modified the First-Time Homebuyers Tax Credit so it can be used 
for a down payment or for closing costs, helping to stabilize 
the housing market. And, to date, nearly 1.1 million new 
homeowners have claimed the $8,000 credit.
    And the Recovery Act does more, focusing on improving the 
skills and abilities of the American people so we can build 
better products more efficiently and effectively. That means 
improved schools and teachers, specialized training for 
cutting-edge industries, and financial help for those men and 
women ready to start their own businesses.
    The American people know that getting out of the economic 
hole will not be easy or quick. They also have every right to 
know that these investments are making a difference. To that 
end, the administration has put forward an unprecedented 
transparency effort that is reliable, accurate, and open. This 
has never been done before at the Federal level. Beginning in 
October, as Congress mandated, the American people will be able 
to see how dollars are being spent in their local community, 
who is getting the funds, for what projects, and when will the 
project be finished, and what is the benefit to their 
community.
    The Recovery Accountability and Transparency Board, led by 
Earl Devaney, has the responsibility to track how dollars are 
being spent. OMB is working in full partnership with the board 
to make sure that the dollars are invested smartly and to stop 
waste, fraud, and abuse.
    Our mission is simple: Fund projects that can make a 
difference today with new jobs and opportunities while building 
strength for the economy for many years to come.
    Is this easy? No. Is our work complete? Not even close. But 
we are on the right path. Last month, the economy lost 467,000 
jobs. And let's be very clear about this: 467,000 jobs lost in 
a month is 467,000 jobs too many, but is much slower than the 
pace that we saw in the first quarter, when the average monthly 
job loss was 691,000 jobs.
    We are making progress, but we still have a long way to go. 
A 9.5 percent unemployment rate is not acceptable. Neither are 
the daily----
    Chairman Towns. Mr. Nabors, could you summarize? Your time 
is up.
    Mr. Nabors. I thank you again for the opportunity to 
testify before you, and I look forward to answering any 
questions that you have.
    [The prepared statement of Mr. Nabors follows:]

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    Chairman Towns. Thank you very much.
    We will now move to the question period. Each Member will 
have 5 minutes, and, of course, I will begin.
    Mr. Dodaro, has the act helped to lessen the financial 
burden on States, or are we currently in a wait-and-see mode?
    Mr. Dodaro. In terms of the current financial crisis in the 
States? I'm sorry, Mr. Chairman, I----
    Chairman Towns. Yes. Has the act helped to lessen the 
financial burden on States, or is it too early to tell?
    Mr. Dodaro. No, I think it's clear that the Recovery Act 
has helped in accomplishing one of its objectives, which was to 
help stabilize State and local government budgets. I mean, the 
States are under fiscal stress.
    If I might, Mr. Chairman, there's a chart that I brought 
here in anticipation of this question. If you look at the solid 
line, this is the estimated path of the Federal Government's 
annual deficit. You can see it's on a downward trajectory under 
current expectations. And this chart hasn't been fully updated 
yet because we're using State data.
    If you look at the trajectory for State governments in the 
aggregate in terms of their fiscal condition to the Federal 
Government, you get the dotted line on the bottom, which means 
that the States and localities are on the same unfortunate 
trajectory that the Federal Government is with regard to a 
protracted period of time of deficit situations.
    So I think--and you can see the drop in 2009 there in the 
beginning. And we report in our latest update that the State 
revenue projections are falling short in virtually every State 
due to the economic recovery. But this is not a short-term 
phenomenon, we believe, with the States and local governments, 
and there's a long-term structural problem with the Federal 
Government's financing, as well.
    But, in the short term, the Recovery Act is helping the 
States deal with their fiscal stresses. But we haven't seen the 
full story here that will unfold over the next few years.
    Chairman Towns. Now, in the 16 different States measuring 
the progress of the implementation of the Recovery Act, in your 
opinion, what is the greatest difficulty that may prevent 
States from being ready to report on October 10th? What do you 
see as a problem?
    Mr. Dodaro. I think the States face the same challenges 
that the Federal Government faces in that the time objectives 
here, the timeliness of the reporting and the accuracy and the 
completeness of the reporting will be a stretch goal for the 
States, as well as it will be for the Federal departments and 
agencies.
    Now, I think OMB, in their latest guidance, has made a good 
step to clarify a number of areas regarding the reporting area. 
They've given some guidelines on data that's required and what 
formats. So I think that's a good step in the right direction. 
We've made some recommendations for OMB to continue to work 
with the States to clarify some of the reporting guidance, give 
some examples of how it's to be implemented.
    But I think underlying it all is the timeliness of the 
reporting and the accuracy and completeness of the reporting. I 
see that as the biggest challenge. And that's why we 
recommended increased support on the part of the Federal 
Government to help with the oversight structures in the States.
    Chairman Towns. Right.
    Let me ask you this, Mr. Nabors. How great is the risk of 
inaccurate job creation and preservation numbers?
    Mr. Nabors. Could you repeat that question, sir?
    Chairman Towns. Well, let me ask another one first. June 
guidance, the definition of a full-time job is basically left 
up to the States and other entities receiving Recovery Act 
dollars. How great is the risk of inaccurate job creation and 
preservation numbers?
    Mr. Nabors. I think with all of our data collection efforts 
we're very concerned----
    Chairman Towns. Is your mic on?
    Mr. Nabors. Yes.
    I think with all of our data collection efforts we are very 
sensitive about the possibility of incorrect or inaccurate 
data.
    One of the things that we are planning on doing in order to 
followup with State and local governments, in part based on 
recommendations from GAO and in part based on comments and 
concerns that we've heard from the Hill and from the States, is 
we are planning on doing a series of Web-based seminars so that 
we can walk through with the States exactly what we are looking 
for in terms of the various reporting requirements that we 
have, to help clarify exactly what we intend to do and what we 
expect them to report with regard to all of the data elements 
due in October.
    Chairman Towns. Could you be specific? When exactly do you 
expect to have that?
    Mr. Nabors. We are actually planning, I believe, to 
announce today the specific dates on the Web-based seminars. 
And that will be occurring in the next few weeks.
    Chairman Towns. My time is up. I have to respect the red 
light, too, my staff just said.
    Thank you very much.
    I now yield to the ranking member, Mr. Issa.
    Mr. Issa. Mr. Chairman, you know, now that the gentleman, 
the Capitol Hill policeman who used to occupy C Street has 
retired, you could, in fact, be known as the Red Light King, 
replacing him. But I thank you for your holding us all to that 
high standard. That's an inside thing for those of us who tried 
to cross at that street over the years.
    Mr. Nabors, a quick question. If the Governors we're going 
to speak to later, if they issue a retention bonus--in other 
words, new dollars, additional dollars--to retain State 
employees, is that a job retained, those dollars, in your 
opinion?
    Mr. Nabors. I would have to look at explicitly what they 
are doing, but I would not necessarily include it as a job 
retained.
    Mr. Issa. OK, so you will come back to us with a written 
answer, whether you're discounting that?
    Mr. Nabors. Absolutely, sir.
    Mr. Issa. Now, the American people are not enjoying cost-
of-living increases, for the most part. As a matter of fact, in 
many cases, their pay is going down.
    If a State uses stimulus money to support a cost-of-living 
increase across the board for State employees, would you 
discount that, because if they didn't receive it and chose to 
do a freeze on cost-of-living increases, wouldn't they, in 
fact, have retained every job while not spending our money?
    Mr. Nabors. Well, it's not clear that Recovery Act dollars 
can be used specifically for that purpose.
    Mr. Issa. All money is fungible, Mr. Nabors. The question 
very specifically, because I need to know your standard if I'm 
going to appreciate the numbers that you say are so hard to 
get: If, in fact, the assumption is that States are not using 
money for cost-of-living increases but they do cost-of-living 
increases, isn't that reasonable to discount off the jobs 
saved, since not doing cost-of-living increase is likely not to 
lead to mass losses and a 10, 11, 12 percent unemployment, 
depending upon the State?
    Mr. Nabors. I think that is a fair----
    Mr. Issa. OK. Well, I would appreciate, when your numbers 
come back, if you'd address those two issues, of whether they 
were calculated in or out.
    Mr. Dodaro, your chart there--like most people who got 
business degrees, we were required to take stats, and we hated 
it. But the one thing I learned about statistics and a curve 
like that is that, if you begin the start date at a particular 
time, any curve can look like almost anything. That curve 
begins when, since it's so far away?
    Mr. Dodaro. I think it's 2008. It's 2008.
    Mr. Issa. It's 2009, isn't it?
    Mr. Dodaro. 2009 is the second data point where you see the 
drop-off--oh, I'm sorry, excuse me. It starts at 2005, and then 
the next data point is 2009. I'm sorry.
    Mr. Issa. OK. So the big dip, what is that big dip year?
    Mr. Dodaro. The big dip is the effect of the recession on 
revenues, both at the Federal Government level and at the State 
government level, and, in addition, the additional Federal 
expenditures for both the stability for the banking system as 
well as the economic stimulus.
    So it's the net effect. This is the net deficit figures.
    Mr. Issa. OK. I wanted to understand that because it is an 
unusual chart to see.
    Mr. Nabors, I was very interested in your testimony and 
particularly a statement which I'll read quickly that says, 
``Since almost all States have to balance their fiscal budgets 
even in the face of recessions, 40 have cut benefits and 
services''--which is why I prompted the first question--``28 
have raised taxes, and more are considering both measures. 
These actions deepen the impact of the downturn, but the cuts 
and tax increases would have been much larger without the 
Recovery Act.''
    Now, it seems like you're saying tax increases are bad 
there. Is that true?
    Mr. Nabors. I think in a time of an economic recession we 
believe that we should try to avoid additional tax increases.
    Mr. Issa. OK. So you would join me in saying that the tax 
increases with cap-and-trade last week were probably a bad idea 
in Congress at a time of deep recession?
    Mr. Nabors. I don't necessarily agree with that.
    Mr. Issa. Oh, so you're out of step with the administration 
in this statement.
    OK. Well, I'll take it as appropriate that, in fact, tax 
increases should be avoided, but I do have a question. When you 
say 40 have cut benefits and services and more are considering 
both measures, just taking the benefits and services as my 
final question, at a time when there's 10 percent unemployment, 
at a time when the burden and the deficits--is it your opinion 
and the administration's opinion that these cuts are 
inappropriate? Or is it your opinion that States should look 
for opportunities to cut any program that is not essential in 
their services?
    Mr. Nabors. I think the President has been very clear at 
the Federal level, and we would look at this at the State and 
local level as well, is that inefficient programs should always 
be reduced or cut.
    I think that the concern that we have right now is that the 
chief problem facing the economy is a demand problem. We need 
to ensure that there's appropriate amounts of goods spending 
going on in the economy to make sure that the demand is 
increased so that economic growth can actually occur.
    What we are concerned about is that, because of the 
balanced budget amendments in various States, that States are 
making unwise choices right now simply to balance their budget, 
not based on the relative success or failures of particular 
programs.
    Mr. Issa. Thank you.
    And thank you for your indulgence, Mr. Chairman.
    Chairman Towns. Thank you very much.
    I now yield 5 minutes to the gentleman from Maryland, Mr. 
Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Dodaro, let me ask you this. You were talking a little 
bit earlier about--you showed the chart, you were pointing to 
the chart and showing how the Federal economic situation is and 
then comparing it to the States.
    Mr. Nabors just mentioned something that's so significant. 
States, many of them--I guess all of them, most of them, have 
some kind of requirement that they have a balanced budget. 
That's a real problem, isn't it?
    Mr. Dodaro. Well, it's----
    Mr. Cummings. The reason why I'm trying to make this 
comparison is, when they are trying to balance a budget, and 
they've got to have one, that is kind of an unfair comparison, 
isn't it?
    Mr. Dodaro. Well, we're not trying to compare it from the 
standpoint of saying that it's not a difficult challenge. In 
fact, most of the States in the discussions we've had with 
them--and I have a lot of contact with State auditors, as well. 
What we're trying to illustrate is that the States are going to 
be under fiscal stress.
    So the challenge for them to balance their budget right now 
is difficult, and it will be difficult for the foreseeable 
future based on these trends. So we're trying to just 
illustrate it that they have a significant challenge ahead of 
them that's similar to the Federal Government's challenge in 
dealing with its deficits.
    Mr. Cummings. And so, Governors play a very significant 
role in this process, is that right?
    Mr. Dodaro. That's definitely true.
    Mr. Cummings. And on that note--I know our Governor from 
Maryland will be testifying shortly, Governor O'Malley, who has 
done an outstanding job with regard to this stimulus program.
    But, speaking of Governors, Mr. Nabors, in Governor 
Rendell's written testimony--I don't know if you've seen it, 
but he comments on behalf of the National Governors 
Association. Governor Rendell expressed concern that Governors 
are not informed when Recovery Act funds are sent from a 
Federal agency directly to recipients located within their 
State. For instance, the Department of Housing and Urban 
Development approves and sends funding directly to local public 
housing authorities.
    GAO recommended in its April 2009 report and again in their 
report today that OMB take steps to notify States of such funds 
flowing into a State. Mr. Dodaro just said that Governors play 
a significant role. We'll have three of them here in just a few 
minutes.
    The question becomes, why has not GAO taken on those 
recommendations and done that?
    Mr. Nabors. Well, I think as we continue to work on 
developing our relationships with our State and local partners 
and with our Governors, we are looking at the mechanisms by 
which we can do that. We take GAO's recommendation very 
seriously. And I think, going into the future, you will see us 
do a better job of informing the Governors when those types of 
allocations are made.
    Mr. Cummings. Is that a--I take it that now that you have 
made that twice, GAO, I guess that's something very 
significant? Is that right?
    Mr. Dodaro. Yes, Congressman Cummings. The reason it's 
important is that the States are going to be in a position to 
make decisions themselves on how to fund money at the local 
level, and, if they don't know what Federal money is going 
directly to the localities, there could be some duplication, 
there could be gaps. And, also, I think they feel some level of 
responsibility for understanding the full impact of the 
program.
    So we think it's very important. We're going to continue to 
keep making the recommendation until it gets implemented.
    Mr. Cummings. Well, no, no, no, no, no. You can't keep 
making recommendations and they not be followed.
    I would suggest, Mr. Nabors, that you adopt the President's 
words, the ``urgency of now.'' Because we are holding these 
Governors responsible, and if they don't even know what's going 
on with regard to money coming into their States, I think 
that's very unfair to them, very unfair. And I think we want to 
be most effective and efficient with these funds, and we don't 
want folks saying that they're not being used properly. So 
basically what happens is that if they don't know where the 
money is going, they can say, well, we don't know. We don't 
want that position.
    And I guess the reason why I'm spending so much time on 
this is that the recommendation's already been made twice, and 
we're still talking about, ``We're thinking about it,'' ``We 
are trying to figure it out.'' No, no, no, time out. We've got 
to do it.
    Mr. Nabors. Well, Mr. Cummings, let me be clear on this, 
then. I have heard what you have said, and we will go back and 
we will find a way to implement that recommendation.
    Mr. Cummings. So do we have a deadline then? Can we set a 
deadline? Because around here you could be next year doing it.
    Mr. Nabors. It's not going to be next year. I need to go 
back and talk to our technical folks and figure out. But you 
will receive a phone call from me, and I will tell you 
specifically how we are doing it and when we are doing it.
    Mr. Cummings. Would you give it in writing to the chairman, 
please?
    Mr. Nabors. I would be happy to do that.
    Mr. Cummings. Thank you.
    Mr. Dodaro or Mr. Nabors, there have been reports that the 
Department of Transportation, specifically Federal highway 
infrastructure investment programs, are running much smoother 
and quicker than many of the other programs under the Recovery 
Act.
    Can you comment on this observation? What exactly has DOT 
done differently from other Federal agencies, and how can DOT's 
best practices be implemented across other agencies that may 
have greater challenges?
    Mr. Dodaro.
    Mr. Dodaro. First, I would say--I mean, the Department of 
Transportation has a set program that's been in existence for a 
number of years, and so they're following that same basic 
Federal program. So they really have not had to make that many 
adjustments for the Recovery Act purposes.
    Mr. Cummings. So they basically were already set to go.
    Mr. Dodaro. Right, right.
    Mr. Cummings. OK. And so these other programs, they've had 
to, sort of, create to use the money; is that what you're 
saying?
    Mr. Dodaro. Yes. I mean, some of the programs, like the 
State Stabilization Fund, is brand-new. I mean, that's a brand-
new effort. The Medicaid matching has gone smoothly, as well. 
So I wouldn't want to say that the highway program is the only 
program that's operated effectively. Where there have been 
existing programs in place, they've carried out their normal 
processes, and that's helped to distribute the money quicker.
    Mr. Cummings. Thank you, Mr. Chairman.
    Chairman Towns. Thank you very much.
    I now yield 5 minutes to Mr. Turner of Ohio.
    Mr. Turner. Thank you, Mr. Chairman. I thank you for 
holding this important hearing and the important issue that we 
have facing us today.
    And, Mr. Nabors, Mr. Dodaro, I want to thank you for being 
here and the tough work that you have, for both of you.
    I know that everyone wants this money to be spent wisely. 
They want this money to be spent in a way that moves the 
economy forward and in a way that creates jobs. Now, 
personally, I voted against the stimulus dollars, and I voted 
against them because I thought that the purpose was not well-
defined, that it would create a lot of waste, and that there 
would be spiraling deficits.
    So, in knowing what the framework was of the original bill 
and the authorization of these dollars, I personally believe 
that your job is that much more difficult to try to fashion out 
of the stimulus package funding and approval for projects that 
will actually achieve its goal. And we want you to be 
successful in that goal.
    Mr. Nabors, I was looking at your written testimony, and 
you have told us that ``the role of the Office of Management 
and Budget is to coordinate the nuts and bolts of the Recovery 
Act implementation within the executive branch and make sure 
that these implementation efforts are consistent with the act's 
mission and the President's priorities.''
    So, today, my question to you is going to be pretty 
important and goes directly to what your responsibilities are 
even in your testimony.
    I represent the Third District of Ohio, and in that 
district, a company that had been located in our district, with 
its corporate headquarters for over 100 years, NCR, recently 
made an announcement that it would be relocating to Georgia, to 
some suburbs around Atlanta, Georgia, and communities around 
Atlanta.
    News reports indicate that Columbus, GA, plans to use 
stimulus dollars as part of the implementation package for the 
relocation dollars that were offered to NCR to move these jobs 
from Ohio to Georgia.
    Now, as you know, Ohio's economy has been significantly 
impacted. Hundreds and thousands of jobs are being lost 
throughout Ohio, and this corporate headquarters has 1,200 jobs 
that will be moving from my community to Georgia.
    Obviously, my community is very upset about the prospects 
of stimulus dollars--dollars that, in fact, they will have to 
pay for--being used to fund the relocation of jobs from their 
community to another.
    Now, I believe this is a nonpartisan issue. The Governor of 
Georgia is a Republican, the Governor of Ohio is a Democrat. 
The Governor of Ohio thinks this is the wrong thing to do; I'm 
assuming the Governor of Georgia thinks this is the right thing 
to do. I'm a Republican; our President is a Democrat. I believe 
that three out of four of those ought to believe that this is 
the wrong use of stimulus dollars.
    So my question to you, Mr. Nabors, the individual who 
fashions the guidance and implementation, is, is this an 
appropriate and allowable expense under the stimulus 
guidelines? And once the administration knows that a State or 
community intends to use stimulus dollars to, in effect, buy or 
steal jobs from one community to another, how do you stop it? 
How, Mr. Nabors, can you assure the people of Ohio that their 
stimulus dollars, their tax dollars that they're going to have 
to pay back with interest, are not being used to merely move 
jobs from one State to another?
    Mr. Nabors. Well, let me answer your first question first.
    I don't have the specifics on this example, but it is 
disturbing. Based on what you have just said, that does not 
sound like an appropriate use of recovery dollars. As the 
ranking member has pointed out, dollars are fungible, and I 
would like to get smarter about exactly what dollars were used 
to do what.
    With regard to your second question--but before I leave, 
let me say that I will followup on this specific example. I 
will talk to our general counsel and I will talk to people at 
OMB to find out specifically what happened in this case.
    With regard to what tools OMB and the administration has 
with regard to the way specific dollars are spent, there have 
been various instances that have come up through the last 4 
months where we have expressed concern about the way certain 
States or certain local communities have proposed to use their 
funds.
    In certain instances, we believe that we actually had the 
authority to stop the use of those funds, and we've exercised 
that use. In other instances, based on the existing statutes 
and the existing legal authorities, we've had less of an 
ability to stop the funds, but we've tried to make it very 
clear that we do not think that is an appropriate use of 
Recovery Act dollars and goes against the spirit of the 
dollars. And I think the Vice President has been very clear in 
those types of instances.
    I'd like to go back and look at this example more 
specifically and be able to get back to you on that.
    Mr. Turner. I would appreciate that.
    I'll give you a copy as you leave, also a copy of a June 
3rd letter that myself and the minority leader, John Boehner, 
sent to the President detailing this issue when it came to 
light, when the announcement was made in the news media by 
officials in Georgia of their intent to use these dollars. 
We've not received a response to this yet, and I'd appreciate 
your attention to it.
    Mr. Nabors. Will do.
    Chairman Towns. The gentleman's time has expired.
    I now yield 5 minutes to the gentleman from Massachusetts, 
Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    The Government Accountability Office, Mr. Dodaro, indicated 
that in Massachusetts and the Boston school officials noted a 
difference between the guidance that the Department of 
Education was giving and the goal that was in the Recovery Act. 
The goal in the Recovery Act on education funding is job 
creation, and the guidance that the Department of Education was 
giving was that districts should invest those one-time funds 
thoughtfully to minimize the funding cliff that would occur 
once the funds are no longer available.
    So I want to ask each of you a question on that, especially 
since the Title I funds are said by the Education Department to 
be only for limited purposes. So, Mr. Nabors, what's your 
impression of that, sort of, seemingly contradiction on that?
    Mr. Nabors. Well, I think that the bridge between the 
contradiction is that we always view the Recovery Act as being 
a short-term effort. The President has been very clear that we 
need to get the economy jump-started. We need to expend 
resources now to actually get that started. But, over the long 
term, the funding levels that are contained within the Recovery 
Act should not be thought of as permanent.
    And what we are asking States to do is to do the things 
necessary to maintain the employment that they have currently, 
but, at the end of the day, they can't count on these funds 
being here in 2011, 2012, 2013. This is a short-term stimulus 
program in order to jump-start the economy.
    Mr. Tierney. All right. I'm not certain I see the bridge.
    Let me ask you, Mr. Dodaro. I mean, what do you propose 
States do in order to meet those two criteria, one of job 
creation and the other of making sure that they spend the money 
so that they aren't falling off of a cliff, so to speak, when 
the money is no longer available?
    Mr. Dodaro. Yeah, I think the act gives great flexibility 
to the States in order to do that. In a number of areas, there 
are multiple objectives--often, as you're pointing out and 
we're pointing out, some of the officials, conflicting 
objectives and some tensions between what to do. And I think it 
depends on the specific circumstances of those State and local 
levels in order to understand what would be the best use of the 
money, from their perspective. And, if they have questions, 
what we've urged is greater communication between the Federal 
departments and agencies and the State and local governments.
    So, you know, I think some States are having a lot of 
fiscal stress right now. They would have to lay off teachers, 
whatever. I think they're in a different situation than other 
States that aren't in that situation. But they have to balance 
these objectives.
    Mr. Tierney. I think what they're doing is having trouble 
balancing the objectives.
    Mr. Dodaro. I agree.
    Mr. Tierney. What I'm looking for in the question was a 
little guidance here. What they're finding is that there's one 
intent, where the money was to be used to retain jobs, and the 
other intent is that just means that in the next year twice as 
many jobs are going to have to go by the by because the money 
is gone. Then they haven't really used the money for a long-
term purpose.
    Neither one of you seem to be able to meet that crossover 
there, probably deal with both of those issues. But if you 
think about it a little bit and want to share something, I 
would be happy to share with my districts who are in that 
dilemma and appreciate that.
    Mr. Nabors, on the reporting and transparency aspect of it, 
we have had some communication with your office on the idea 
that you do require in your guidelines that when the money goes 
to the Federal, to the State government, that is all 
reportable; when it goes from the Federal Government to a city 
or town, that is reportable. But your requirement guidelines 
that if the city or town puts it out to a contractor or 
subcontractor, that information is reported as well. The 
statute allows for that.
    When do you think your guidelines will push a little 
further down to make that mandatory?
    Mr. Nabors. We have done two things. The first thing our 
guidance did in response to some of the concerns that you 
raised was we did push the system as much as we thought we 
could do right now, and we are collecting vendor information 
from the subrecipients at the point. So to the extent that 
cities are hiring vendors, for example, in weatherization types 
of activities, we will be capturing that type of information.
    We are also designing our systems such that in the future, 
as we get better information from State and local governments, 
we will have the capacity to grow our system to collect that 
subcontract information.
    Mr. Tierney. Right now, you only require the identity of 
the vendor.
    Mr. Nabors. Correct.
    Mr. Tierney. Wouldn't it be useful to have not only the 
identity of the vendor but also the amount of money that they 
received and the location of where that vendor is?
    Mr. Nabors. Those are all things that we are looking at 
possibly expanding. We thought that in talking to the Recovery 
Board, the things that they emphasized to us the most was, 
``please don't let the audit trail go cold,'' we at least need 
the identity. And we thought that from what we have heard from 
a number of smaller communities in particular, this information 
is very hard to track normally, so even maintaining just the 
vendor names was going to be difficult.
    But in terms of ensuring that the Federal Government, GAO, 
the Recovery Board, the IGs have the ability to follow the 
money chain, that getting the vendors' name was absolutely 
critical. We are starting with that, but that won't be the end.
    Chairman Towns. I yield to Mr. Chaffetz from Utah.
    Mr. Chaffetz. Thank you, Mr. Chairman. I appreciate it.
    Thank you both for being here. I know you want to do what 
is best for the United States of America, and we appreciate 
that. But I do have some questions, particularly for Mr. 
Nabors, if I could.
    How many jobs have been created?
    Mr. Nabors. Based on the last estimate that we have done, 
the Recovery Act created 150,000 jobs.
    Mr. Chaffetz. And how do you come up with that number?
    Mr. Nabors. At this point what we are doing is we are using 
an economic model created by the CEA. The specifications behind 
that model are similar to the specifications that we developed 
in terms of describing the impact that the Recovery Act would 
have when we were first pushing for the----
    Mr. Chaffetz. In the essence of time, that formula--if you 
could share with us in writing what that formula is and how you 
could achieve that, I would be fascinated to see that.
    Mr. Nabors. I believe that the CEA report is on line, but 
we will share it with your committee.
    Mr. Chaffetz. How many jobs have been saved?
    Mr. Nabors. We do not make a distinction between the jobs 
created and jobs saved.
    Mr. Chaffetz. Why not?
    Mr. Nabors. I think it becomes increasingly difficult from 
a macrolevel to make that determination. What we are able to 
say is, based on looking at what we believe the trends of the 
economy are, we can say--we can compare what the Recovery Act 
is doing and how many jobs currently exist versus what we were 
predicting----
    Mr. Nabors. Yes.
    Mr. Chaffetz. If you look over at this chart here, right, 
the goal was jobs, jobs, jobs. And you look at that 
unemployment number, and you claim that we are slowing the free 
fall; how can you justify that number?
    Mr. Nabors. I think--let me start with two points. We are 
not happy with the unemployment number. The unemployment 
number----
    Mr. Chaffetz. I understand that. My question is how do you 
justify saying that you are slowing the free fall?
    Mr. Nabors. I think what we would do is we would look back 
at the job loss that we saw in the first quarter, which was 
approaching 700,000 jobs a month, and look at where we are 
right now. We are not happy with the job----
    Mr. Chaffetz. I know you are not happy. We are not happy 
either. But the projections that the administration put forward 
and what would happen or not happen if we did or didn't do the 
stimulus are dramatic. They are unacceptable.
    Mr. Nabors. We believe that the job loss is unacceptable as 
well.
    Mr. Chaffetz. The President is quoted as saying that the 
stimulus ``has done its job.'' Is that true or not true?
    Mr. Nabors. We believe this stimulus has had the impact 
which we had predicted, which is job creation.
    Mr. Chaffetz. The Vice President said--I think it was just 
yesterday--that it hasn't had the impact.
    Mr. Nabors. I think what the President said is accurate. 
The President has made it clear that----
    Mr. Chaffetz. That it has or has not done its job?
    Mr. Nabors. The President has said two things: One, he has 
said that we did not have full information at the time 
concerning the growth of the economy; and two, that the 
Recovery Act has had an impact in putting people back to work.
    Mr. Chaffetz. I still do not understand how you justify 
that it is ``slowing the free fall.''
    On page 3 of your written testimony, you said the Recovery 
Act extends or expands programs like unemployment insurance. 
Does unemployment insurance create or save a job?
    Mr. Nabors. Unemployment insurance ensures that people have 
money to----
    Mr. Chaffetz. I recognize there are benefits to it, but the 
question is: Does it create or save a job?
    Mr. Nabors. We believe that any dollar spent in the Federal 
system will create or save a job, because what is going on is 
we are putting dollars into people's pockets to spur demand.
    Mr. Chaffetz. What about Social Security income and FMAP? 
Because the rest of your quote is, ``These programs account for 
about 29 percent of total Recovery Act funds.''
    If 29 percent of the Recovery Act funds are being used for 
these three things that you cite, do they directly create or 
save a job?
    Mr. Nabors. They directly put money into the economy so 
that demand can be increased. Absolutely.
    Mr. Chaffetz. But they do not, dollar for dollar, save or 
create a job.
    Mr. Nabors. I don't see how you can say that, because every 
dollar spent--when you go to a store and spend a dollar, that 
is a dollar more that the business will have in terms of 
profits in order to either ensure that a business doesn't shut 
down or to hire new staff.
    Mr. Chaffetz. My time is short here.
    Going to the very end of your testimony on page 11, second 
to last paragraph. ``Mr. Chairman, we know that, in times of 
economic crisis the government did not make the solutions. 
Rather, government gave the American people the tools to fix 
what was broken.''
    What tools have you given the American people to fix what 
is broken?
    Mr. Nabors. I think that what we are doing is the 
following:
    One, we are ensuring that in the short term, that people 
who are out of work or who are facing difficult economic 
situations have the resources in order to sustain their current 
existence.
    The second thing we are doing is we are putting--we are 
creating job opportunities through infrastructure projects and 
the like, to make sure there are jobs for people.
    Mr. Chaffetz. But what tools are we giving the American 
people to fix what is broken?
    Mr. Nabors. And third, we are providing tax relief in the 
short term, the broadest tax cut in American history through 
the Making Work Pay.
    Mr. Chaffetz. I would happen to agree with you that tax 
relief is probably the No. 1 thing we can do to stimulate the 
economy and get people back to work.
    Thank you, Mr. Chairman.
    Chairman Towns. I now recognize the gentleman from 
Illinois, Mr. Quigley, for 5 minutes.
    Mr. Quigley. I wasn't here for this vote, for this package. 
So it is easier to second guess or use hindsight; I just don't 
think it's appropriate.
    Watching from afar, it was easy to understand the exigency 
of what was taking place, the extraordinary circumstances that 
haven't been seen in 80 years in this country, probably, from a 
financial point of view.
    So I also think it is important to recognize the obvious, 
that beyond the attempt at laser-point precision of how many 
jobs were created or retained, what is being said here today is 
that it had more than one purpose. And it is also important to 
recognize that previous administrations have attempted, often, 
to calculate the number of jobs created, retained with their 
programs. It has been borne out that this is extraordinarily 
difficult to do.
    So gentlemen, I recognize that having said all of that and 
recognizing that this program needs to move forward, I do have 
concerns, to a large extent at the State level, we are flying 
blind. You yourselves have talked about their cutbacks from 
auditors and people who would be, I guess, called fiscal 
watchdogs, given the vast amounts of dollars and the speed at 
which it had to go out.
    What is your best guess on timeframe to do things you 
started talking about: clarification on rules, Internet 
access--which was talked about in the GAO report--improved 
communication, and a specific understanding of what the States 
can and can't do?
    Both of you would be great.
    Mr. Dodaro. I will start with our recommendations.
    There is a process in place called the Single Audit Act. It 
was passed in 1984. And it is a primary accountability vehicle 
for overseeing State use of Federal funds that have been 
provided along with States' use of money. The Single Audit 
legislation could be modified here and guidance put out to make 
it a more effective, timely tool for Recovery Act purposes. 
From our perspective at GAO, this is a potential huge missed 
opportunity unless the guidance is changed to require earlier 
reporting.
    If I might put up the chart on the distribution of funds, 
please.
    What this chart shows, Congressman, that a lot of the money 
at the State and local level--not that one. The one by year. 
Shows that most of the outlays to the States and localities 
will occur in 2010 and 2011. So there is an opportunity to look 
at what controls are going to be in place over those moneys, up 
front, through the Single Audit Act. But guidance needs to be 
modified and the auditors need to be funded to do the work. 
This is a very important investment, could pay big dividends 
down the road.
    Second, there is a need for continual dialog between OMB 
and the States, to communicate with the States and provide them 
information, particularly on the amount of money going directly 
to the localities in their State, not going through the State 
entities.
    And third, there needs to be some flexibility given to 
States to make sure they have the proper systems and the proper 
people and the safeguards on the management side on the 
programs that are being funded, to have adequate management 
oversight.
    Some strengthening of those things is important.
    Mr. Quigley. Are you talking about dictating that?
    Mr. Dodaro. I am talking about, in part, giving 
requirements for early internal control reporting, and funding 
it. But unless that is done, OMB has certain flexibilities 
administratively. Some of this could be done legislatively. 
H.R. 2182, it is important that gets passed as well.
    Mr. Quigley. It would appear that there are almost no 
ramifications for not following the rules a, because the rules 
seem loose or not tight enough; and b, because there are no 
actual restrictions on what will happen if you don't use the 
money in the way we described.
    Mr. Dodaro. There are some areas where if money is not 
obligated, it can be redirected; for example, in the highway 
area. But most States have met those requirements. And there 
are some maintenance-of-effort requirements that the States 
maintain their spending both for highways and education. We are 
following those requirements to make sure that they are met 
going forward.
    But by and large, your point is right. And that is why it 
is important to have these safeguards in place.
    Mr. Nabors. We are very sensitive about the concerns that 
GAO has raised, and for the most part we agree. We are 
supportive of the chairman and ranking member's bill to 
increase the funding that would be available for administrative 
types of activities, and we are looking to what extent we can 
relieve some of that pressure administratively.
    I think we want to continue to explore options with regard 
to single audits. We believe that the single audit is a key 
component of appropriate oversight. We do have some concerns 
about how quickly and effectively we can shrink the reporting 
deadline, but it is something we want to work very closely with 
GAO and State auditors.
    With regards to communications, we couldn't agree more with 
the comments that GAO has made or the committee has made. The 
State and local governments are our partners. Every day we are 
trying to improve our communications. It is not something where 
traditional mechanisms have worked.
    So we are exploring new options, such as doing more work 
through the Internet and making ourselves more available to 
conferences; the NCSL, the NGA, wherever we can find 
opportunities to communicate directly with our State and local 
partners, we are going to take advantage of those efforts.
    Chairman Towns. The gentleman's time has expired.
    Mr. Quigley. Thank you, Mr. Chairman. If someone could 
followup and talk about the Internet a little bit more.
    Chairman Towns. I now yield 5 minutes to the gentleman from 
California, Mr. Bilbray.
    Mr. Bilbray. Mr. Nabors, Patrick and I are sailors. If you 
look at the course that--basically the graph off over here to 
your left--and look at it as being a course that is projected 
by a navigator, as opposed to the course that is actually 
steered, according to that course our navigator was 80 degrees 
off course. From what was projected by the administration to 
what really happened was 80 degrees off.
    Now, I don't know about you, but I am not so sure I would 
get on a ship or a boat with a navigator with that kind of 
navigation skills. So the projected course of our economy, our 
job market, and the actual course were 80 degrees off.
    Now, do you really think that is an example for the future, 
that the same navigator ought to be used in the future? Or do 
we have to go back and take a look at who predicted the course 
that we were setting, because it definitely wasn't anywhere 
close to the course that we have taken?
    Mr. Nabors. Well, sir, I am not a sailor so I wouldn't get 
on any boat with me.
    But with regards specifically to the economic projections, 
what I would say is that the projections that the 
administration made at the time were fully consistent with the 
Federal Reserve Board, outside economic analysts, people like 
Mark Zandie, and private sector analysts.
    What happened was something that was unpredicted by any of 
the observers at the time.
    Mr. Bilbray. In other words, the experts were all wrong and 
had no idea what they were talking about at the time because, 
obviously, we are talking a right-hand turn being made, or a 
lack of a right-hand turn, when you are predicting we were 
going to take a hard to starboard. And we kept full bore, 
basically, the pattern we were going otherwise, and did not see 
any change in the course set by the job market after we 
committed a trillion dollars in stimulus.
    Mr. Nabors. I think the general economic consensus was that 
the economy was going to be bad. I don't think anybody 
predicted it was going to be as bad as it was.
    Mr. Bilbray. So we accept that. The experts didn't know 
what the hell they were talking about at the time they 
predicted this.
    Mr. Nabors. I think predicting economic performance is 
always difficult.
    Mr. Bilbray. One hundred fifty thousand jobs created or 
saved; how much money have we spent?
    Mr. Nabors. Based on the most recent information that we 
have, we have obligated $57 billion.
    Mr. Bilbray. How much of that per job?
    Mr. Nabors. I can do the math real quick, but I haven't 
done the big calculation completely.
    Mr. Bilbray. I think that is least--if we are going to 
claim--it is kind of interesting the way we work this thing, 
because the credibility of this administration is going to be 
threatened if we do not come up with the facts and 
justifications for the people.
    We already saw what happened before with the previous 
administration, when you didn't have people that were willing 
to call down the previous administration for making statements 
they couldn't verify. We want to make sure the new 
administration doesn't fall into that same trap, because 
credibility means a lot during this crisis. And frankly, with 
this navigation course, this promise that was made 5 months ago 
or 3 months ago or 6 months ago, and then seeing what reality 
is, you see why the average citizen doesn't believe the so-
called experts in Washington, including the new administration, 
if that is the kind of result we are going to have.
    I think that we need to justify how much money we are 
spending and where are the jobs saved and where have they been 
preserved. And I think we have a major credibility crisis here, 
and I think we just can't continue to say that--just because 
you keep saying it doesn't make it right and doesn't make it 
the truth. And the American people are sophisticated enough to 
know that Washington is not going to be able to sell its bill 
of goods when you end up with a failure rate of over 50 percent 
when you are going to hard to port when you are saying you are 
going to hard to starboard. No man in the world would get on a 
ship or a ship of State and follow this navigation for the 
future. So I think we need to straighten this out.
    Mr. Issa. Would the gentleman yield? Mr. Nabors, I just 
have one followup question on the gentleman. And I, too, am not 
a sailor so I won't go that way.
    How many jobs are created when you obligate money?
    Mr. Nabors. The CEA estimates that roughly $92,000 of 
government spending equals one job.
    Mr. Issa. OK. But let me go through that. I understand if I 
start handing out $92,000, I can get a lot of people to work 
for me for a year each. But when you obligate, don't you create 
no jobs? And when you spend, you create a job. I mean, 
obligating is an interesting term because it is the amount 
that, in fact, is disbursed that creates a job, at least for 
that day. Isn't that right, that obligating alone creates no 
jobs?
    Mr. Nabors. That is correct. We have obligated $158 
billion, and we have outlaid, actually spent, about $57 
billion.
    Chairman Towns. The gentleman's time has expired.
    I now yield 5 minutes to the gentleman from Illinois, Mr. 
Foster.
    Mr. Foster. I have a specific question regarding the 
weatherization formula. And it is my understanding there is a 
formula that allocates funds among different States. Have you 
been able to develop whether--an opinion whether that formula 
is actually all right in the sense of you are actually putting 
weatherization funds where you are going to save BTUs?
    And as a follow-on to that, is there a system in place for 
actually tracking the energy savings that are occurring as a 
result of this program?
    Mr. Dodaro. I will yield to Mr. Nabors on the details of 
the program. We at GAO have, just in this last 2-month 
assessment, started looking at how States were using 
weatherization. So far only about 10 percent of the money had 
been allocated to the States to begin planning activities 
there. More money is going to be coming down the road. We have 
not yet looked at the allocation formula yet. We will be happy 
to do so, and also look at the measures of performance.
    Now the agencies--OMB has allowed the individual agencies 
to identify performance measures beyond jobs created or saved, 
and so we will be looking at that going forward. But since that 
program is just getting started, so is our work.
    Mr. Foster. In a similar vein, in The Economist about a 
month ago, I believe they were reporting work from the Peterson 
Institute that indicated that the technologies that we were 
subsidizing as part of the AARA had costs of between, I 
believe, $60 and $140 per ton of carbon averted, which makes 
them not very promising in terms of--I was wondering, are we 
putting in place a mechanism to track how effective we will be 
at actually avoiding greenhouse gases in programs where that is 
a goal?
    Mr. Dodaro. I will defer to Mr. Nabors on that.
    Mr. Nabors. That is one of the things that we are looking 
at as far as developing performance metrics for all of our 
programs.
    Mr. Foster. So they will extend to the environmental goal 
as well as to the job creations?
    Mr. Nabors. Correct.
    Mr. Foster. A little more on this economic modeling. I 
would like to say I am at least one Member of Congress who 
understands that the predictive power of these models in a 
differential sense is much better; that they are more accurate 
at predicting the difference between turning a policy option on 
and off rather than just the absolute predictive power, which 
was missed in terms of the big downturn we had.
    And the CEA model that you reported, is it similar to the 
Zandie model?
    Mr. Nabors. It is.
    Mr. Foster. I have looked in some detail at the formulas 
behind the Zandie model, and it was not entirely satisfactory, 
frankly, on things like the interest rate models going out and 
stuff like this. Are the CEA reports or the details of that 
model, are they published?
    Mr. Nabors. They are available on our Web site, and I will 
provide it to the committee for the record.
    Mr. Foster. Another thing that we ought to be tracking is 
the fraction of jobs that are created offshore in this. So, for 
example, when we put a lot of money into health IT, obviously 
we are going to buy a bunch of Chinese-made computers. If we 
put a lot into Smart Meter on grids, most of those are produced 
offshore.
    And so I was wondering, are we actually separately tracking 
the jobs created onshore versus offshore for the different 
programs?
    Mr. Nabors. We are not currently. Currently we are only 
attempting to estimate the number of jobs created within the 
United States.
    Mr. Foster. I guess those are my questions.
    I yield back.
    Chairman Towns. I now recognize the gentleman from Indiana, 
Mr. Burton.
    Mr. Burton. Thank you, Mr. Chairman.
    Mr. Nabors, I served with Ronald Reagan during his 
administration, and when he came into office we had 12 percent 
unemployment and 14 percent inflation. And he decided against 
some of his economists' recommendations to cut taxes instead of 
just throwing money at everything. And as a result, we created 
millions of jobs in one of the longest economic expansions in 
U.S. history. And the economy at that time was as bad or worse 
than it is right now.
    Now you said, and Mr. Issa quoted you, you said since 
almost all States have to balance their fiscal budgets, even in 
the face of recession, 40 have cut benefits and services and 28 
have raised taxes and more are considering both measures. These 
actions deepen the impact of the downturn.
    It sounds a little bit like you may have agreed with what 
President Reagan did, because instead of raising taxes which 
would have precipitated a bigger downturn when we had 12 
percent unemployment and 14 percent inflation, he chose to cut 
taxes. And he believed that if you did that, you would get more 
disposable income to individual citizens, their families, and 
to businesses so that they could make more investment in their 
businesses, in plant equipment, and it would create more jobs. 
People would have more money to buy more products; therefore, 
you create more jobs because they had to be produced.
    So what I can't understand is why we're are doing what we 
are doing. The President has proposed raising taxes on health 
care. It is going to hit everybody. I mean, I think everybody 
in the place knows that. He's talking about a carbon tax for 
cap-and-trade that is going to cost the average family about 
$3,100, $3,200, maybe $4,000 a year. We have already 
appropriated--authorized and appropriated $787 billion for the 
stimulus package, $350 billion for the omnibus, $54 billion so 
far for the auto bailout. And, of course, the stimulus is $787 
billion, and now you're talking about another stimulus.
    How can you square blowing all of this money when it is not 
creating jobs? Vice President Biden said the stimulus created 
150,000 jobs, and President Obama asserted on June 8th that the 
stimulus would create 600,000 jobs over a hundred days. And 
they said it wouldn't go above 8 percent when you started 
throwing all of this money at it, and now it is 9\1/2\ percent.
    It seems like the approach that Reagan took was the more 
realistic approach because it let people make the decisions and 
let companies make the decisions on how to get themselves out 
of that mess instead of having the government trying to do 
everything. And I just want to quote a couple things real 
quick.
    Here's where some of this money is going. Did you know the 
Florida Department of Transportation is planning to spend $3.4 
million recovery funding on the road-crossing for turtles and 
other animals on U.S. 127; that in Minneapolis they are going 
to spend $2 million for the theater for dance and music events; 
that in Kansas the Tall Grass Prairie National Preserve's new 
visitor center and pedestrian bike project over the highway is 
going to be--they are going to spend how much on that--a couple 
million. A million dollars in Michigan for decorative sidewalks 
and crosswalk planters, landscaping, and so on and so on.
    It just seems to me that a more realistic approach to 
solving the problems--and I hope you will carry this back to 
the administration--would be instead of throwing money at it 
and talk about another stimulus package, we should be cutting 
taxes, stimulating economic growth by letting people have more 
of their own money to spend, and letting businesses have their 
money to invest in things they need to be invested in, instead 
of this sort of stuff, so they can expand their business and 
sell their products.
    You can respond.
    Mr. Nabors. I will take your comments back to the 
administration. I do feel the need to clarify a few points.
    No. 1, no one in the administration is talking about a 
second stimulus at this point. What we are focused on right now 
is implementing the Recovery Act that Congress has already 
passed, and doing the best that we can with the dollars you've 
entrusted us with. So that's where our focus is right now.
    Second, with regard to the way the package is actually 
structured. I think it's important to note that over one-third 
of the package is actually focused on dedicated targeted tax 
relief, which we believe is a part of a very balanced package 
to----
    Mr. Burton. Pardon me for interrupting, but Laura Tyson 
yesterday did mention a second stimulus. I just thought I would 
clarify that.
    Mr. Nabors. Laura Tyson is not an administration official.
    Mr. Burton. She's an economic adviser.
    Mr. Nabors. She's an outside economic adviser. She does not 
work for the administration.
    But to clarify, the package that was signed into law 
actually does include what we believe is effective tax relief 
for the middle class, and we think it will have benefits. But 
in addition, because of the output deficiencies that the 
economy is currently facing, spending has to be part of the 
equation. And what the President has said is that over the long 
term, this spending--we need to bring the entire Federal budget 
back under control.
    So I recognize the point that you were saying that there 
has been a lot of spending that has been done, and it's 
something that the President is very sensitive to and very 
focused on. It's one of the reasons why he is pushing so hard 
to make sure that comprehensive health care reform is 
completed.
    Over the long term, the key to long-term deficit reduction 
is going to be bringing our health care costs under control. In 
addition, we made it very clear that the Recovery Act spending 
is something that we are looking at as a short-term stimulative 
impact into the economy. It is not something that we believe is 
sustainable over the long term, or even visible over the long 
term.
    Chairman Towns. The gentleman's time has expired.
    I now yield 5 minutes to Mr. Hodes from New Hampshire.
    Mr. Hodes. Gentlemen, thank you for being here.
    The Recovery Act was put in at a time of global financial 
collapse and severe economic distress in this country, and we 
are still facing a stubborn recession.
    I am a sailor, and I know that sometimes when you set 
course from point A to point B, sometimes the wind changes and 
you need to adjust. And that happens, and sometimes the 
predicted course isn't the course that you end up sailing.
    The good news for me from New Hampshire is that I was able 
to go out on the highway with Secretary LaHood and know that 
New Hampshire was the first State to put highway funds to use. 
So the transportation dollars seem to be flowing OK.
    What I am hearing from home is that other agencies are 
having a hard time implementing and reporting the funds that 
are coming in. The States are implementing billions of dollars 
of funds, but the concern is that the Federal Government, we 
aren't providing the clear, coherent guidance that we really 
need to put Americans back to work faster and to provide 
taxpayers with a comprehensive, transparent accounting of those 
funds that everybody understands.
    And the chart that, Mr. Dodaro, you have put up, shows that 
it looks like the projections for when the full impact of the 
stimulus dollars is going to hit is a little bit later than 
what we had originally projected. Is that so?
    Mr. Dodaro. Actually that chart, the white bars are the 
estimates that CBO made during the time the bill was in 
conference. So that was always the estimated outlays 
contemplated under the act. I think Mr. Nabors can corroborate 
that.
    The gray bar, in terms of what has been actually outlaid 
already, we think is, you know, potentially slightly ahead of 
the pace that was estimated; and I think it is because the 
unemployment rates have been higher, so that means more 
Medicaid and Federal matching assistance is there. And given 
the fact that the States are under fiscal stress, I think they 
are moving as expeditiously as they can.
    The other factor, I would say, is most of the States, as 
you know, end the fiscal years on June 30th. So they were 
waiting for a lot of approval from those State legislatures. 
Now that's occurred, I think the funds will flow according to 
pace.
    Mr. Hodes. So it's fair to say that while there are some--
including some in this room--who are complaining about job 
creation, that as we see more of the stimulus dollars flowing 
to the States--and the quicker the better we can get them 
flowing--the more job creation, preservation we are going to 
see. Is that true, Mr. Nabors?
    Mr. Nabors. That is absolutely correct.
    Mr. Hodes. Now, in New Hampshire and around the country, 
the growth of small businesses is very critical to creating 
jobs. OMB has stated that in its implementing guidelines that 
one of the goals of the Recovery Act is to provide 
opportunities for small business, and the SBA has estimated 
that 60 to 80 percent of new jobs annually over the last decade 
are small business jobs.
    Have you at OMB set targets for the amount of Recovery Act 
funds directed to small businesses?
    Mr. Nabors. We have not set targets, but there are targets 
in the statutes that we are trying very hard to meet. And we 
believe that we have been able to increase the initial amount 
of small business funding dramatically. Originally, we were 
looking at spending at about 4 percent. We went back and talked 
to the agencies and made it clear that it was a priority of the 
administration that small business be an engine for the 
Recovery Act, and that amount of spending through small 
business has gone up dramatically.
    Mr. Hodes. Are you providing any education or outreach to 
small businesses to ensure that they know how they can access 
the opportunities for them in the Recovery Act?
    Mr. Nabors. Absolutely. Both through OMB, but specifically 
through the individual agencies that have existing 
relationships with small businesses and small business 
consortiums, we are trying to get the word out what type of 
Recovery Act money is available.
    Mr. Hodes. Mr. Dodaro, do you think that the reporting 
requirements to which recipients of Recovery Act dollars must 
adhere are discouraging small businesses from pursuing or 
accessing Recovery Act funds?
    Mr. Dodaro. I think that the reporting requirements--first 
of all, I don't have an empirical basis to that answer that 
question. We have not consulted any small businesses or talked 
with them. I do think we made a recommendation, apart from the 
one here, about making sure that small businesses and others 
knew of the availability of the funding opportunities and made 
recommendations to OMB because the Web site grants.gov was 
unable to handle the volume and there would be other avenues 
explored to make people aware of how to apply for the funding. 
So that is the extent of our recommendations there so far.
    Mr. Hodes. Thank you.
    Mr. Nabors, I encourage you to continue your efforts to 
make sure that small businesses have access to easily getting 
these funds to help create jobs in America.
    And with that, I yield back.
    Chairman Towns. Mr. Schock of Illinois.
    Mr. Schock. Thank you both for your testimony.
    I have two quick questions. Mr. Dodaro, I come from the 
State of Illinois, a State that has roughly a $9 billion 
deficit. Our Governor has proposed a 60 percent increase in the 
income tax, and we are struggling with the programs and 
services that our State currently has. A part of the stimulus 
plan--and part of your testimony speaks to the maintenance 
effort and the commitment by States that they have to make in 
order to get the requisite stimulus dollars.
    My question is specifically, what are we doing as a Federal 
Government, and what--to ensure that when a State says yes, we 
will continue to maintain these programs to get X funding now, 
what are we doing to ensure that actually happens, No. 1.
    And then No. 2, what happens in 2 years from now in a State 
like mine in Illinois where we don't have the money for the 
services we have today, and now we have additional services we 
don't have today that we will have to support on into the 
future, and what true force can we take or what measures are 
you suggesting that we have that can force them to basically 
come up with the money at the State level?
    Mr. Dodaro. First of all, there are a number of 
maintenance-of-efforts requirements in the Medicaid program. 
For example, that eligibility standards remain the same as they 
were through June 2008. In the Medicaid program, there are 
maintenance-of-effort requirements in the Medicaid program, in 
the highway program, and the education programs. Those are the 
big three so far.
    We are carefully looking at how the Federal agencies are 
monitoring those maintenance-of-effort requirements. In 
Medicaid, it hinges on eligibility requirements, highways, they 
have to provide--Governors have to provide certifications. 
Transportation is reviewing those certifications right now. And 
there are waiver provisions, however, in there that the agency 
heads have in order to entertain waivers from the States.
    Mr. Schock. That is for today. What happens in 2 years when 
the agreement that was signed by Governor A, who is no longer 
in office, and Governor B is now having to deal with the 
reality of whatever commitments were made by that State to 
maintain those Medicaid reimbursement levels or income levels 
to qualify for Medicaid? What happens in 3 years from now when 
the legislature--who is duly elected and has a fiduciary 
responsibility to balance their budget--decides, you know what, 
we can't afford these new rates that were specified in the 
Recovery Act 3 years ago that a former Governor, and maybe a 
former legislator, agreed to?
    Mr. Dodaro. Well, first of all in the Medicaid area, that 
money ends December 2010. So it is only for a 27-month period 
in any event. I do think there is a responsibility on the part 
of the Federal agencies to make sure that they monitor as it's 
going along. They shouldn't wait----
    Mr. Schock. What specific action can we take to force them 
to honor their word? Because I guess what I am confused about 
is we have some Governors saying, ``thanks for the money, we 
will take it;'' and we have other Governors saying in 3 years, 
``we can't afford the commitment that you are all asking us to 
take in exchange for taking the money today.''
    And yet I am having difficulty seeing where our power in 
the Congress or the President or your office has in 3 years to 
ensure that a new Governor and a new legislature has to honor 
that commitment.
    Mr. Dodaro. You are raising a good point. I think that is 
something that needs to be monitored all along and----
    Mr. Schock. I know I am cutting you off. I have a question 
for Mr. Nabors.
    My question is, why shouldn't every Governor take the 
money, tell you whatever you want to hear? Because up until 
now, I haven't heard a good explanation from you as to how we 
are going to force them to honor the commitment that we are 
expecting them to take in exchange for the money.
    Mr. Dodaro. For example, in the Medicaid area, if they 
don't honor commitments then they don't get the matching share 
of----
    Mr. Schock. For the first 2 years.
    Mr. Dodaro. That is the only amount of funding that is 
available. I will go back and provide you with a specific 
answer for the record for each of these programs of what 
mechanisms are in place to make sure that those commitments are 
honored.
    Mr. Schock. I am specifically interested in not how we are 
going to monitor and tell them they didn't do it, but what 
specifically, in years 3 and 4 which, from talking to the 
Governors who haven't taken the funding, is their concern in 
keeping those higher income levels and places and so on, what 
our force will be to go after them if they don't; because I 
guess my suggestion to those Governors who haven't taken the 
money, it sounds like you take the money, tell them whatever 
you want to hear, because there's not a whole lot we can do in 
year 3 and 4 and into the future.
    Mr. Nabors, real quick. Reviewing what I have heard in the 
testimony, I couldn't agree with your final several paragraphs 
in your testimony which basically said it's not government that 
creates jobs, it's not government spending that will stimulate 
the economy, it's private investment, private entrepreneurs and 
risk taking. And I truly believe that to be the case.
    Chairman Towns. The gentleman's time has expired.
    Mr. Schock. Can I have 30 seconds?
    Chairman Towns. Thirty seconds.
    Mr. Schock. I guess what we know, and it's been said by my 
companions up here, you know, the President said unemployment 
would peak at 8 percent. It is at 9\1/2\ percent. He is 
conceded that it's going to reach double digits by the end of 
the summer.
    Your testimony here today, $75 billion has been spent to 
create 150,000 jobs. That comes out to half a million dollars a 
job. Your comment earlier was roughly $92,000 in government 
spending should create a job.
    So my question specifically is in the jobs number, if we 
are not going to say we failed in terms of being off course on 
what the unemployment rate would actually be, we are not even 
near what the expectation is in terms of job cost of government 
spending to create a job. We are usually operating under a 
$92,000 per job creation number and we have spent 75 billion to 
create.
    Chairman Towns. The gentleman's time has long expired.
    I now yield 5 minutes to Congresswoman Speier of 
California.
    Ms. Speier. Mr. Chairman, thank you.
    As we look at the chart that the GAO has provided us, we 
are going to be outlaying twice as much money next year as we 
have this year, which would suggest that if there's going to be 
waste and abuse, it is going to be twice as bad next year as it 
is this year, unless we take steps to make sure that it doesn't 
happen.
    So I would like to understand what happens when an outlay 
has been made to a particular entity. Let's say it is $10 
million. And when the first reporting period occurs, they've 
spent half that money, and we now are aware of the fact that 
they didn't really generate new jobs, or the program that was 
anticipated to be constructed is not followed up with.
    How do we, one, rescind the rest of that money; and, two, 
do you have enough resources to go out there and determine 
whether the money is being spent appropriately or not?
    Mr. Dodaro. The answer to your first question is there are 
sanctions for withholding some of the future funding for 
certain programs, but it differs by programs. So there are some 
options if there's disclosures that requirements aren't being 
met for action to be taken by the Federal agencies; but they 
have to be aware of it and they have to make sure that they 
promptly address it.
    On the second question is, no, we do not have at the GAO 
enough resources to go out and monitor all of the activity 
across the country, and that is why we are suggesting that the 
single audit process where the State auditors are already in 
place and they audit this money annually, that they be required 
to do earlier internal control reporting now, before a lot of 
the money is spent in 2010, and that they are provided some 
funding to make sure that they can carry out their normal 
activities.
    If changes aren't made, the single audits for the fiscal 
year 2009 won't be issued until 6 to 9 months after the end of 
the fiscal year. So you will already be into the next fiscal 
year.
    There is a network in place through the single audit that 
can be exercised, with modifications, to provide greater 
assurance that the money is being spent properly. But OMB and 
the Congress need to act on the recommendations in order to 
effectuate those changes.
    Ms. Speier. Mr. Nabors, what is your position on that?
    Mr. Nabors. We concur that the single audit is an important 
component of ensuring that there is appropriate oversight. We 
want to make sure there is appropriate money to the State and 
local governments to make sure that they don't have to reduce 
the administrative staff and the oversight staff that we have, 
and we are dedicated to making sure of that. We are working 
with the chairman and the ranking member to--in support of 
their bill to make sure that even more funding could be 
available to State and local governments to conduct those 
audits.
    A second piece that we are doing, which I don't want to get 
lost, is that working with Earl Devaney, who is the head of the 
Recovery Oversight Board--he has made it very clear that he 
sees one of his primary responsibilities is getting in on the 
front end of projects to make sure that as much as possible we 
can make smart decisions and we can help the agencies make 
smart decisions so that we have the mechanisms in place so that 
money isn't wasted. Once the money is wasted, it's a shame for 
all of us. If we can get in and shape the programs ahead of 
time so that we can minimize the amount of waste that comes out 
the other side, that would be best for the American taxpayers 
and for the Congress. So we are working very hard with Earl and 
with the various IGs to try to set up those mechanisms ahead of 
time as well.
    So I think between the State auditors, the local auditors, 
and the IGs and the Recovery Oversight Board, we are trying as 
much as possible to create a network of oversight that will try 
to minimize the amount of waste that could occur from Recovery 
Act spending.
    Ms. Speier. Final question. If there is fraud, there should 
be a means by which that money could be returned to the Federal 
Government. Have you put that in place? Have you thought about 
it? What are you going to do about fraud?
    Mr. Dodaro. That's the basic responsibility of the Federal 
Government agency. If we find fraud or potential fraud, we will 
refer the matter to the Justice Department for further 
investigation. We don't have law enforcement authorities, but 
we do make referrals to inspectors general and the IGs. We have 
made available to the public a hot line where people can submit 
allegations of fraud. The Recovery Act also requires the 
inspectors general to do the same.
    Ms. Speier. How do you advertise that hotline?
    Mr. Dodaro. It's on our Web site. We have put out press 
notices regarding it.
    Ms. Speier. How many calls have you received?
    Mr. Dodaro. We have received about 61 allegations so far. 
We have referred some things to the inspectors general. There 
are about 25 or so that we are looking into more deeply to 
assess the merits of it. We will be following that up.
    Ms. Speier. Could you report back to the committee on what 
you find from those hotline inquiries?
    Mr. Dodaro. I would be happy to.
    Chairman Towns. I now yield 5 minutes to the gentleman from 
Arizona, Congressman Flake.
    Mr. Flake. I thank the chairman, and I thank the witnesses. 
I'll ask a series of questions and if I could get a quick 
answer, I'll get to more.
    The Vice President has said that he is kind of the sheriff 
on this, that his role is to provide oversight. What specific 
role does he play? Does he go to meetings? What does he do?
    Mr. Nabors. The Vice President holds regular meetings with 
the Cabinet agencies and with the implementation officials with 
the agencies, and he is also very involved in terms of 
reviewing agency plans with regard to broad goals of Federal 
spending.
    Mr. Flake. When we see programs that we are told are 
getting funding, it kind of makes us wonder when you say no--if 
you say no. For example, we are told that $800,000 of this 
recovery funding will be used for a runway at an airport in 
Pennsylvania that has around 20 passengers a day that fly to 
Washington. Why wasn't that money turned down? And if it's not, 
can you give me any specific examples where you've said no?
    Mr. Nabors. There are a number of examples where we have 
gone back to the agencies and asked a series of very hard 
questions, and projects were removed. With this specific 
project, I would have to go back to the Department of 
Transportation and find out more about the criteria that were 
used to make this award.
    Mr. Flake. But you don't know of any examples where you 
just said no? Just hard questions?
    Mr. Nabors. Most of this work is done at the agencies. I 
would want to go back to the specific agencies and get the 
examples of them.
    Mr. Flake. The Vice President has said that some people 
have been scammed already. That is his quote. Can you give any 
examples of that?
    Mr. Nabors. I am not sure what the Vice President was 
referring to there.
    Mr. Flake. Should we ever take anything serious said by the 
Vice President or somebody assigned to go and retract what is 
said?
    Mr. Nabors. I take what the Vice President said very 
seriously.
    Mr. Flake. It would be good to know what he's referring to.
    Mr. Nabors. I'm just not familiar with that quote.
    Mr. Flake. CNN Money just put something out saying that $75 
billion had been allocated already, paid out. You say $57 
billion. Which is correct?
    Mr. Nabors. The most recent information I have is $57 
billion.
    Mr. Flake. And you say 150,000 jobs have been created. That 
is some $380,000 per job where the goal is $92,000 per job.
    Mr. Nabors. I think there is a discrepancy. I'm giving you 
the most recent information that we have with regard to 
obligations. It's $57 billion to date. I would have to go back 
and look at when the job creation number was actually 
calculated. It's not the exact same time period.
    Mr. Flake. But it's safe to say that we are considerably 
north of the figure of $92,000. That's the goal.
    Mr. Nabors. I would have to go back and take a look at 
that, but I will provide that information for the record.
    Mr. Flake. So with projects--and we were told initially 
that they needed to be shovel-ready. I have to tell you, I grew 
up on a farm and my dad always had projects that were shovel-
ready. They usually involved rubber boots and a corral.
    I'm just wondering if there is any other criteria, again 
going back to this thing. I still have not heard of examples 
coming from any agencies. And, again, going back to this one--
and Mr. Burton named some others--these projects where you 
would have to say, you know, unless you just concede that 
throwing money out is going to create jobs somehow or improves 
the economy, that perhaps it would be better to give it in the 
form of tax relief and allow individuals to spend it.
    But I still would love for you to come back to the 
committee and give us information on at least one instance 
sometime where an agency has said no. Just because it's shovel-
ready doesn't mean it's worthy.
    Mr. Nabors. I'll be happy to provide that information for 
the record.
    Mr. Flake. I yield to Mr. Issa.
    Mr. Issa. If they could put the ``Federal Deficit Will 
Reach Levels Never Seen Before'' up on the board.
    Mr. Dodaro, earlier you showed us your declining one. This 
one appears to be your chart, but referred to in positive 
deficit. And I want to make sure, because again I told you I 
had to take stats and I hated it. Your downward one appears to 
be the equivalent of that one; same thing, but everything in 
reverse, that obviously states a little different. And if I 
read it correctly, we have increasing deficits as far as the 
eye can see projected. When you express it positive--because we 
are in deficit and your chart was a negative deficit because 
you have these minus numbers.
    Can you explain the difference between those two charts?
    Mr. Dodaro. It's basically just the reverse explanation. I 
mean, there are different ways to explain this and to display 
it.
    One, the chart I am showing is the annual deficit, what it 
is expected to be as a percent of gross domestic product. There 
are also measures that you could show where there is a percent 
of debt held by the----
    Mr. Issa. My time is expiring.
    Isn't it more standard when you talk about deficit to have 
it as a positive deficit? In other words, a growth in deficit 
normally is an upward number. In your case, the downward might 
have people think that things are getting better, when in fact, 
down in your case or up in the other case, both are growing 
deficits.
    Mr. Dodaro. Right. ``Down'' in our case means you are going 
bad. You are heading in the very wrong direction.
    Mr. Issa. I wanted to make everybody understand that 
downward chart is really bad and that's where we are headed 
right now.
    Mr. Dodaro. Correct.
    Chairman Towns. The committee will adjourn, and we will 
reconvene 5 minutes after the last vote.
    [Recess.]
    Chairman Towns. Let me just reconvene the committee and to 
say to Mr. Nabors and, of course, Mr. Dodaro that we really 
appreciate your being here; and, as you know, that, based on 
the comments made by Members, there's a lot of things that we 
need to sort of get clarification on, you know. And one in 
particular, that if jobs are retained, how is that in terms of 
job creation, you know, and that a lot of areas, you know, they 
would have had to lay a lot of people off, but as a result of 
the money, they were able to retain them. And I think in many 
instances it just made so much sense to do that. Because when 
you look at education where you're able to have teachers, you 
know, that would have been laid off and would have these huge 
class sizes that now are able to have their jobs, I think it 
makes sense.
    And, of course, I want to thank you and want you to look 
into these issues, because we're going to always have these 
until we come up with some clarification.
    So, OMB, you really have to have some guidelines to make 
certain that people understand, you know, what job creation 
means. Is it a part-time job, half-time job, whatever. I mean, 
these things need to be sort of made clear so we know where 
we're going so we can answer questions when they come up.
    And I now yield to the ranking member, and then after the 
ranking member we're going to dismiss this panel.
    Mr. Issa. I would like to echo the chairman's accolades of 
your being here today and your willingness to respond both here 
today and some of the followup that you've promised.
    This committee is dedicated to have you back essentially 
every time there's a new report, which is every 2 months; and I 
hope you will indulge us in something close to that schedule. 
Based on what the chairman may want, we may do it informally or 
formally, but it's very clear we feel it's one of the core 
responsibilities of this committee and one that we want to work 
on on a bipartisan basis.
    And with that, Mr. Chairman, I agree we should go to the 
next panel; and I thank you for your service.
    Chairman Towns. Thank you very much.
    And now we will move to panel two.
    Our next panel, the Honorable Deval Patrick is Governor of 
the Commonwealth of Massachusetts. Governor Patrick's career 
includes leadership experience at the top of levels of business 
and nonprofits and government, including as Assistant Attorney 
General for Civil Rights at the Justice Department.
    Governor Patrick recently signed into law legislation to 
maximize the Commonwealth's eligibility to receive Recovery Act 
funding. The new law builds on the work and ideas of hundreds 
of people who have participated in a task force to establish a 
plan for the best use of Federal stimulus dollars.
    Governor, will you stand and let me swear you in.
    [Witness sworn.]
    Chairman Towns. Let the record reflect that he answered in 
the affirmative. You may be seated.
    Governor, we would allow you 10 minutes. You know, after 
all you're a Governor. You get 10 minutes. So if you can 
proceed.

    STATEMENTS OF DEVAL PATRICK, GOVERNOR, COMMONWEALTH OF 
 MASSACHUSETTS; MARTIN O'MALLEY, GOVERNOR, STATE OF MARYLAND; 
   AND EDWARD RENDELL, GOVERNOR, COMMONWEALTH OF PENNSYLVANIA

                   STATEMENT OF DEVAL PATRICK

    Governor Patrick. Well, Mr. Chairman, thank you, I think, 
for the 10 minutes.
    I'm going to be brief, and I want to apologize in advance 
that I have to leave early for an appointment elsewhere in the 
city, but my staff and I will be happy to followup with you and 
Congressman Issa and members of the committee, our own members 
of the Massachusetts delegation and others and their staff on 
any specific questions you might have.
    Chairman Towns. We respect your time constraints.
    Governor Patrick. Thank you very much, Mr. Chairman; and 
thank you for the opportunity to testify today about the 
American Recovery and Reinvestment Act and its impact on the 
Commonwealth of Massachusetts.
    I want to ask that you accept my written statement for the 
record and permit me to just summarize it.
    Chairman Towns. Without objection.
    Governor Patrick. Thank you.
    First, I want to acknowledge and thank the Congress and the 
President for providing these much-needed resources. These are 
the tools that we need to help us weather these unprecedented 
economic times and to begin to transition our economy over time 
to the next chapter of sustained growth.
    So far, Massachusetts has received close to $2.6 billion in 
Federal recovery funds. Most, I think like most States, has 
come for Medicaid and education; some as the first installment 
on transportation projects.
    While we've not been able to avoid all layoffs and cuts in 
State services, without our funds these cuts would have been 
much more drastic and disruptive. With them, Massachusetts has 
been able to sustain critical safety net programs and services 
such as in education and health care, and I just want to get 
into that a little bit more.
    In education, Recovery Act funds enabled us to maintain our 
investments in education reform, a 15-year commitment that has 
placed our students first in the Nation on the NAIPs scores and 
in the top six in the world on the TIMSS measure of science and 
math.
    The recovery funds have also enabled us to continue our 
pioneering experiment in health care reform where over 97 
percent of our residents are insured today, the highest level 
in the Nation.
    In fiscal year 2010, the increased FMAP will allow us to 
maintain eligibility and benefits for hundreds of thousands of 
low-income residents who rely on State-subsidized health 
insurance.
    We estimate that the Recovery Act's education and FMAP 
funding have helped us retain thousands of teachers, social 
workers, health care workers and others.
    Our initial highway funds are putting people back to work 
today and laying the foundation for future growth. We're using 
highway stimulus funds in Fall River, an area especially hard 
hit by the recession, for a new interchange opening up 300 
acres of property for commercial and industrial development. 
Investments are also being made in the western part of the 
State for an intermodal facility to allow for the more 
efficient interaction of different transportation methods.
    We are ready to put forthcoming Recovery Act funding and 
our people to work especially in the innovation economy. The 
clean energy field is the fastest growing sector in the State, 
with 20 percent growth in 2007. Today, we have more than 500 
firms and 14,000 people working in those--in that field. With a 
program I announced just last week to use Recovery Act funds to 
install solar panels on State buildings, including all four 
terminals at Logan Airport, those numbers will grow. Town 
halls, libraries, and other municipal buildings are also set to 
receive funds for solar installations and homeowners for 
weatherization, and small businesses are likely to undertake 
the majority of this work, which I think is very good news for 
that important sector of our economy.
    Our plans are ready to implement for investments in 
transportation projects, labor, and work force development 
programs and new technology, including broadband expansion to 
unserved and underserved communities. These Federal 
investments, coupled with State bonding resources we have 
committed, will create jobs today and improve our 
infrastructure for tomorrow.
    I just want to point out, 4,900 jobs were created in the 
Massachusetts economy in May, the first new jobs created in a 
year in the Commonwealth. And while not all of those can 
necessarily be attributed to the Recovery Act, I can tell you 
that certainly they helped. It's way too soon, in my view, to 
unfurl the mission accomplished banner, but we're on the right 
track.
    The Recovery Act has provided an opportunity to make 
fundamental changes to the way we do business. For instance, 
the use-it-or-lose-it requirements helped motivate us to 
examine and improve the process for contract awards. As a 
result, the time from bid opening to notice to proceed has been 
cut from 120 days to less than 60 days without any loss of 
oversight, and the members of the Massachusetts delegation will 
know that this has been a particular challenge of ours in 
Massachusetts over the years and a real focus of our 
administration.
    In the same vein, I commend the Congress for insisting that 
we deliver on the goal of maximum transparency and 
accountability. In Massachusetts, we have been focused on 
creating a transparent, accessible way for both professional 
watchdogs and average citizens to track recovery spending; and 
we have taken a number of steps to protect against waste, 
fraud, and abuse.
    First, even before the Recovery Act's enactment, we 
identified the State agencies and programs through which 
recovery funds were likely to flow and directed those agencies 
to review, update, and amend their existing internal controls 
to satisfy the most rigorous compliance oversight requirements. 
We then vetted those control plans with the State Auditor, 
Inspector General and Attorney General, all independent 
officials in Massachusetts, to see if they saw any gaps that we 
had missed.
    Second, we established a centralized Recovery Act project 
management office. We call it the Office of Infrastructure 
Investment. This office coordinates projects between State 
agencies and municipalities, helping to streamline the process 
of obtaining regulatory approvals and ensuring compliance with 
Federal and State regulations. The office will include a 
compliance and monitoring manager who will oversee internal 
control processes, assess compliance risks, and conduct 
periodic compliance reviews across all State agencies receiving 
these funds.
    And, third, we've developed a State Web site, a recovery 
Web site, mass.gov/recovery, on which we publish recovery 
expending by type and by region for money that flows through 
the State. The site will contain all the information required 
by the act, including a detailed description of each Recovery 
Act funded project and activity.
    Finally, I want to mention two items that need I believe 
the continuing attention and partnership of the Congress, the 
administration, and the States.
    No. 1, we are still waiting for the bulk of the money. I 
understand that much of the funds will be released this summer, 
and that's very good, but I would be remiss if I didn't make 
the point that we, as Governors, are ready to go and want to 
work with our Federal partners to ensure projects start 
quickly. We can do this, I believe, without sacrificing the 
important goals of transparency and effective oversight. Both 
goals are possible, and both must be achieved simultaneously. 
But no funds, no projects; and no projects, no jobs. So, with 
due respect, passing the bill, as important as that was, 
creates no jobs. Spending the money creates the jobs.
    No. 2, although I commend Congress for authorizing States 
to utilize a small portion of Recovery Act funds for central 
reporting and accountability systems, the process that States 
have to go through to obtain authorization to begin spending 
these funds needs to be simplified. States have been instructed 
that in order to access Recovery Act funds to pay for 
centralized systems, including that transparency and 
accountability that I referred to, States must follow 
longstanding cost allocation procedures set forth in OMB 
administrative circular No. 87 and then submit proposed 
amendments to their existing State-wide cost allocation plans 
to Health and Human Services for review and approval.
    Now, we are currently in negotiations with HHS over the 
details of our proposed plan, because we have concerns about 
whether those procedures adequately account for the Recovery 
Act's unique issues and requirements. In the meantime, however, 
we can't access the funds until we finish those negotiations, 
and it's unclear when those negotiations will conclude. And, to 
the best of my knowledge, there is no other State that's in a 
different position. Everybody is stuck on this particular point 
right now.
    Now, our comptroller has shared these concerns with OMB. 
The issues are complicated. We have a very productive working 
relationship and discussion with OMB, but we need to conclude 
this as promptly as possible in order to allow the time to 
build those accountability and transparency systems to track 
Recovery Act spending.
    So, again, I just want to thank you for inviting me today. 
I thank you for the initial investment in the long-term effort 
to help America recover from this economic crisis, and I am 
happy to take any questions that you may have.
    [The prepared statement of Governor Patrick follows:]

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    Chairman Towns. Thank you very much, Governor.
    Let me just inform the Members that we have two other 
Governors that will be joining us, and we'll just swear them in 
at that time.
    I would like to yield 5 minutes to the gentleman from 
Massachusetts, Mr. Lynch, and the reason for it is that he 
yielded his time. Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    Governor, I appreciate you coming here and helping the 
committee with its work. I do have a copy of Gene Dodaro's--
well, the report on the Recovery Act funding and the results 
that his periodic review has done in Massachusetts; and I would 
say that, at least according to this report, you got pretty 
strong marks. There are some questions, but, for that which he 
could determine, Mr. Dodaro has I think expressed some 
confidence in the way that you're handling in Massachusetts, 
and I appreciate that.
    Governor Patrick. Thank you.
    Mr. Lynch. I do want to say that, originally, the Recovery 
Act was all about creating jobs, and that's how it was 
announced to the public, and that's how its success or lack of 
success is being measured, and I think that's fair. When you 
think about the difficulties we're having, the focus on job 
creation was the simplest way I think to address that crisis.
    But through the legislative process, it became more than a 
jobs creation bill. It became a massive health care 
supplemental and education supplemental, which were desperately 
needed in Massachusetts and around the country but not 
necessarily job creation measures, desperately needed, but the 
money that we spent on education, the money we spent on health 
care wasn't necessarily resulting in the creation of jobs, and 
I think some people forget that fact.
    The other piece that I think has confounded us all is the 
fact that it has taken so long for some of this money to get 
out on the street, get out on the job sites, create those 
transportation jobs that we were hoping for. And I want to ask 
you, it seems to me, in reading the report by Mr. Dodaro and 
the Government Accountability Office, that there was a pipeline 
for the health care money to get out there that was all set up. 
There's a pipeline for the education money to get out there. 
There are systems in place to spend that money.
    But--and one-of-a-kind projects, transportation projects, 
infrastructure projects, there was not a--these were one-of-a-
kind projects. They were basically established by the 
Governors, and so--in terms of priorities. So there's been a 
delay in getting--look, I'm a former iron worker. Nothing makes 
me happier than when I see the iron workers and the building 
trades people go to work.
    Governor Patrick. Right.
    Mr. Lynch. And I just want to ask you about the difficulty 
that we're seeing that you expressed in your own comments about 
getting that money out on the job sites and creating these 
jobs. What do you think is--where do you think is the holdup? 
What is the key component here that we're missing in seeing 
this very long delay in getting that money out to create the 
jobs?
    Governor Patrick. Congressman, thank you for your comments 
and questions, and let me respond to both of them.
    First, the job creation versus job retention, both are 
important because if the--and to your point, I agree with you. 
The bill is trying to accomplish more than one thing, and that 
those different or added goals were developed in the course of 
the legislative process, and we not only respect but we 
appreciate that. Because, frankly, if we are unable to maintain 
services, particularly those where the demand goes up because 
the economy is in stress, then that compounds some of the 
economic stresses that we are dealing with in my State and in 
others. So I think the job retention counts and being able to 
maintain our investments in education and health care are 
enormously important.
    In terms of the length of time of moving the money out, 
again I make the point--and I have made it privately to 
agencies as well--no--no--no funds, no projects; no projects, 
no jobs. That's where the job creation comes from.
    I think that everyone is trying to balance another 
objective of the act and of good policymaking, which is utterly 
thorough oversight and to make sure that we--because I think 
there is a sensitivity that a misstep could, rightly or 
wrongly, discredit the whole program.
    And so in many--in the cases you talked about, we're 
having--the agencies are having to create new guidelines, new 
frameworks for moving the money out. They have been very open 
to consultation from Governors and others about what those 
guidelines ought to be, but until those are in place we are 
told the money won't flow. Most of them are in place at this 
point, and so I think this summer is when we will see a lot of 
those funds coming our way.
    Governor Rendell. Could I jump in on that?
    Mr. Lynch. Please do, Governor.
    Chairman Towns. Governor, we didn't swear you in yet. So 
you're going to have to hold it for a second.
    Governor Rendell. I promise I'll tell the truth.
    Chairman Towns. You're going to have to hold it a second. I 
tell you, let me swear you in. If you'll stand now, we'll swear 
both of you in.
    [Witnesses sworn.]
    Chairman Towns. You may be seated. Now you can participate.
    Governor Rendell. I think the point that Governor Patrick 
made is a very good one; and I think the administration worries 
about it and we do, too. I mean, I have personally said that I 
am going to oversee every dime of the stimulus money for my 
last 18 months in office because I want it to go well.
    And I see--and I don't mean yourself because you're 
certainly not alone. But I read in the newspapers, Politico 
today, stimulus money getting out too slow, etc. If this money 
had been thrown out the door without proper planning, if this 
money had been rushed out in the streets, a compacted RFP 
process so that really the Governors could pick who the 
contractors were, etc., well, there would be hell to pay. 
Because there were two things that all of us worried about; and 
I think the administration did, too: getting it done fast but 
getting it done right. And I think the administration has 
struck the proper balance, and I think we have.
    I saw Mr. Dodaro's answer--I don't know if it was 
Congressman Issa's question--but he said, look, where there are 
existing streams like the transportation money, transportation 
money we just handled like any Federal money funds. The money 
flowed to the regional planning organizations by formula. They 
made the decisions on projects, gave them back to PennDOT.
    Where that was the case we're out--we're in the ground on 
more than a half of our 242 transportation projects. We have a 
billion plus in transportation dollars. That's incredible to do 
it in less than 4 months. The transportation plan was approved 
March 12th. It's less than 4 months. That's an incredible 
record of success.
    But for other things like the energy program or things like 
that, the Federal Government's developing their own guidelines, 
and they shouldn't rush. In fact, if you looked at my testimony 
as chairman of the NGA, one of the things the NGA asked for is 
a little bit more time, not to be quite so rushed so we can 
have a little bit more time in the planning process. Because 
it's our rear ends on the line. If something in Pennsylvania or 
Maryland or Massachusetts gets screwed up, there's waste or 
fraud or the money goes to projects that aren't worthwhile, 
we're going to get it before the administration.
    I think they've struck the proper balance. If you're 
frustrated, so am I. I believe that this program will, in fact, 
have a significant effect in not only job retention but in job 
creation. But, remember, it's just barely July. July, August, 
September, October, you will see unbelievable amounts of people 
coming back to work on the infrastructure portions of this and 
orders going into factories all over the country. So I think we 
tried, and the administration did, to do the two things: do it 
fast but do it right.
    Chairman Towns. The gentleman's time has expired.
    Mr. Lynch. Thank you. I yield back.
    Governor Rendell. Sorry.
    Chairman Towns. Mr. Issa.
    Mr. Issa. Governor Patrick, I appreciate you being here; 
and I understand you have to leave shortly. I'll be brief. This 
may not come as a surprise to you at all, but I have a concern 
specifically in your State, and correct me if anything in the 
Boston Globe is wrong.
    Governor Patrick. There isn't time.
    Mr. Issa. I do it with the LA Times whenever I can, too.
    But the Federal prevailing wage is $37.45. It was reported 
in a couple sources here. But I have the prevailing wage, if 
you will, the actual market wage in your area in the Boston 
area is $27.09. So Federal prevailing wage is higher than the 
actual prevailing wage of sort of everybody, and that's not 
uncommon. But Massachusetts has chosen a prevailing wage of 
$58.84, and it's been reported by the Boston Globe and others 
that this represents, depending upon which figure you look at, 
$141 million to--I have figures up in the $174 million range, 
but just using the Globe $141 million of wasted money.
    Now, can you explain to us why you would pay higher than 
the Federal prevailing page if the money was delivered to you 
by the Federal Government in order to maximize the, if you 
will, gain in jobs or minimize the loss of jobs?
    At the earlier testimony, the $141 million would be at 
least 1,500 jobs that would have been saved had you used the 
Federal prevailing wage and, of course, even more had market 
forces allowed for, if you will, in a tough time the lowest 
wage, the highest return to Massachusetts and, of course, the 
greatest amount of people not laid off.
    Governor Patrick. Congressman, thank you for the question. 
If you give me the cite of whatever article it is you were 
referring to, I'd be happy to check on and followup.
    I think you know that we have different prevailing wages 
for different--for different trades----
    Mr. Issa. Right.
    Governor Patrick [continuing]. And different jobs. And, as 
you said, the average prevailing wage in Massachusetts is lower 
than the Federal average on prevailing wage, but I'd be happy 
to check on those facts.
    Mr. Issa. Right, and the actual $141 million total was from 
the Beacon Hill Institute; and, as I say, I will give you a 
copy of this.
    But this goes to, you know, this--the Congress passed this 
with a Davis-Bacon provision. So there's no question that you 
were required to use a Federal prevailing wage. You were not 
allowed to use, if you will, what I might have considered, 
which was get the maximum amount of people working.
    My grandfather worked in WPA; and, trust me, that was not a 
Federal prevailing wage as we understand it today. They were 
paid very little, but they were paid every day, and it really 
made a difference in knocking down unemployment.
    And to a certain extent this is fashioned after WPA. We're 
asking you to find projects, in this case shovel ready, but 
find projects, get them out, get the maximum amount of people. 
You've been, to a certain extent, incentivized to do it based 
on number of jobs, not necessarily dollars spent. So wouldn't 
it be--as Governors, chief executive, wouldn't it be reasonable 
for you to have tried to maximize the number of jobs it created 
rather than the maximum dollars to those who were fortunate 
enough to get those jobs?
    Governor Patrick. Well, Congressman, I appreciate the 
question, but in my original line of work as a lawyer that 
would be called a question that presumes a fact not in 
evidence. You've told me what you have read in the newspaper. I 
don't know. I haven't seen this article. I would not--it's----
    Mr. Issa. I understand the Boston Globe is not as widely 
read.
    Governor Patrick. It's not a dig at the Globe. It's just 
that I don't know what you're referring to. I do know that we 
have, in the view of our own oversight and the Inspector 
General's oversight, complied fully with the--with the 
expectation of that.
    Mr. Issa. There's no prohibition to you paying more than 
Davis-Bacon. I understand you have that right. But as chief 
executive, would you say--and this is not based on facts not in 
evidence--but would you say that your obligation is to get the 
maximum work done, the maximum number of employment and, 
therefore, the least expensive cost of each production? 
Meaning, if you will, if you can pay less or mandate a lower 
figure than you currently might mandate for a particular job, 
wouldn't it be consistent with the intent of Congress and with 
the best interests of the people of your State that you in fact 
do that?
    Governor Patrick. Well, not only would it be consistent but 
I think it's what we do. We have our own State laws that 
require an open and transparent bidding process and that--and 
that decisions be made based on the most effective and least--
least expensive.
    Mr. Issa. OK. I thank you, and we'll provide you a copy of 
this, and perhaps you can give me your response to that.
    Governor Patrick. Great. Thank you.
    Chairman Towns. Governor Patrick, thank you very much for 
your participation. According to the agreement, it's now 1:02, 
and I'm 2 minutes behind my schedule with you. Thank you so 
much for coming. Thank you.
    At this time, I would like to yield to Congressman Van 
Hollen to introduce the Governor of Maryland.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    I want to thank all the Governors here but a special 
greeting to our Governor from the great State of Maryland, 
Governor Martin O'Malley.
    We have two other Marylanders on this committee. This has 
been--as you know, schedules got moved around, but on behalf of 
Elijah Cummings and John Sarbanes as well, we welcome you, and 
just, Mr. Chairman, to say that we are very proud of the fact 
that our Governor was ready to go as soon as the economic 
recovery money hit the street.
    I know a number of States have vied for this position, but 
I think we--the record will show that we, when it came to 
transportation money, had the first project to hit the street 
shovel ready; and he's combined that with an accountability 
system that he's carried over from his days as Mayor of 
Baltimore and now as Governor, that this money is being well-
spent in our State of Maryland.
    So I want to thank you for having this hearing and thank 
Governor O'Malley for being here.

                  STATEMENT OF MARTIN O'MALLEY

    Governor O'Malley. Congressman, thank you very much for 
your introduction.
    Chairman Towns, thank you. Ranking Member Issa, members of 
the committee, it's an honor to be here with all of you today.
    Mr. Chairman, I'm encouraged and congratulate you on the 
passage, in the House, anyway, of your legislation on enhanced 
oversight of State and local economic Recovery Act which 
provides some additional guidance and some greater flexibility 
and clarity for us at the State.
    And, again, I want to thank Congressman Chris Van Hollen 
for his leadership on these issues--we were together when we 
were breaking ground on some of these recovery projects in 
Montgomery County--and also Congressman Elijah Cummings, who 
was here earlier, and Congressman John Sarbanes.
    For those of us working for our citizens in State 
government, the American Recovery and Reinvestment Act has 
really been a lifeline. It is helping us to create and save 
jobs in Maryland. It is allowing us to position our State's 
economy to bounce from this recession; and in these tough times 
it's helping us to protect some of our most important 
priorities, namely, the health of our people and the education 
of our children.
    In Maryland, we share President Obama's commitment to 
investing our American Recovery and Reinvestment Act funds with 
maximum efficiency, maximum openness, maximum transparency; and 
to guide us in this process, we're using an initiative and a 
system of management that we call StateStat. StateStat is born 
out of CitiStat, which in turn was born out of ComStat, the 
system that the NYPD used to dramatically reduce crime in New 
York City.
    Its first tenet of all of those stats is timely, accurate 
information shared by all. Timely, accurate information shared 
by all. We took CitiStat with us to State government in 2007, 
so that when the recovery and reinvestment dollars were 
appropriated and passed, we already had a tracking system in 
place; and we used StateStat and our first-in-the-Nation IMAP--
which, by the way, was developed in cooperation with ESRI, I 
believe a San Diego-based company that's terrific on GIS--to 
strategically target our Recovery and Reinvestment Act 
investments.
    We routinely and relentlessly meet with key agency 
officials. We collect and analyze benchmark data in order to 
change tactics and strategies where necessary to achieve our 
goals. We use GIS technology to map and track our progress, 
connecting these important dollars not only to the programs 
from which they're coming but to the places, the towns, the 
municipalities, the counties, the neighborhoods to which 
they're going, making real differences in the lives of real 
people. And, again, we've made the data available on our Web 
site for all of our citizens to see.
    I'm going to run through a brief slides here as I wrap up.
    This is our StateStat Web site. If we click here on this 
recovery tab, we call up a special page dedicated to the 
Recovery and Reinvestment Act. We tried to make sure that 
stylistically, design-wise this flowed from the Federal site. 
If you look on the left, we have tabs which lead to two GIS 
maps which are part of our IMAP. One is an overview; the other 
is more detailed.
    Here on the overview map we display the overall State-wide 
breakdown of Recovery and Reinvestment Act funding areas. We 
also allow citizens to click on their own county to retrieve 
local information. For example, if we click on Prince Georges 
County, you can see the county is receiving $319.9 million in 
stimulus funds; and, again, you see the breakdown and the 
dollar amounts by category of education, health, 
transportation, and so on.
    If we click on the individual slices of the investment pie, 
we learn that of these investments $117.9 million are targeted 
toward protecting educational achievement this year. That is 
the largest piece of the recovery dollars that are going to 
Prince Georges County. We're very proud in Maryland to have the 
No. 1 school system in America, according to Education Week 
magazine. It's a top priority. It is our economic competitive 
strength, and we want to make sure that we protect the future 
of our kids in these troubled times.
    If you want more information on how we are investing 
education resources in Prince Georges, again, you can click on 
the map. You can see a breakdown of what amount of this is 
Title I, what amount is special education, what amount is State 
adequacy and equity funding and other aid.
    Now, let's move to the physical capital investments, those 
job-creating rather than job-saving investments. On the left, 
we can click to access again the more detailed map. If you look 
toward the top of the screen, we give citizens the option of 
putting their own address and ZIP code in Maryland.
    For the sake of this demonstration, we haven't inserted 
Congressman Van Hollen's address but rather the Rockville 
Volunteer Fire Co. at 380 Hungerford Drive, 20850. By clicking 
the ``show individual projects'' on the map button, you can see 
every Recovery and Reinvestment Act-related project in 
proximity to this address highlighted on the map.
    Then we can click on, for example, this highway project; 
and, as you can see from the information again posted on the 
map for all to see, it's a $1.7 million project on Maryland 
Route 28. We're expecting bids on July 16th, and we aim to have 
a contract to begin work in September. And, again, all of that 
information is on the map.
    We're also mapping our water quality and drinking water 
upgrades projects. You can see this is a WWSC project in Prince 
Georges County.
    We can also click on the weatherization data to see how 
many units each county is expected to--expects to weatherize. 
Prior to the Recovery and Reinvestment Act, we were 
weatherizing approximately 400 houses a year. With these 
important investment dollars, we've set a goal of 3,000 houses 
in 18 months.
    The Web site allows citizens to track our progress, again, 
in Maryland county and State-wide; and, through StateStat, we 
are looking at the same data to ensure that we're meeting our 
goals and to hold relevant agencies accountable for changing 
course, if necessary.
    Only two more slides, Mr. Chairman.
    StateStat also updates the map on a weekly basis to reflect 
the fast pace of the implementation of our transportation 
projects.
    Let's click on transportation, Beth, if you will and zoom 
in.
    For each county, we have a level of specificity available 
that allows any citizen to easily view things such as who has 
been awarded the contract for specific transportation projects; 
also, the bid and award date of these projects, the amount; 
also, the degree of minority business participation as part of 
this contract. As I mentioned, for every awarded contract, 
we're also tracking that minority business enterprise 
participation. Once the contract is awarded, we're able to show 
the level of minority business participation, and Congressman 
Cummings has been a national leader in these efforts, and we 
appreciate his leadership and partnership.
    In conclusion, Mr. Chairman, these are just a few examples, 
but all of the information's available. Most of these programs 
are already in existence. We've made all of this available to 
see on our recovery Web site, broadly sharing information 
instead of hoarding it, providing for maximum degree of 
openness and maximum transparency, giving our public the tools 
that they need to monitor the progress of their own government.
    For those who are rightfully concerned about the integrity 
of these Recovery and Reinvestment Act dollars, we agree with 
the words of the great Louis Brandeis who said that sunlight is 
the best of disinfectants. And by measuring performance, by 
promoting openness and transparency, by using tools like 
mapping and the Internet, we believe that our efforts can go a 
long way in conjunction with other States toward guarding 
against waste, fraud, or abuse and, perhaps more importantly, 
strengthening the connection between citizens and their 
government and the results that all of us want to see from 
these recovery and reinvestment dollars, namely, an economy 
that's expanding, an American economy that's creating more 
opportunity and more jobs.
    Thank you very much.
    [The prepared statement of Governor O'Malley follows:]

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    Chairman Towns. Thank you very much, Governor O'Malley.
    I'd like to ask unanimous consent that Congressman Dent 
from Pennsylvania be allowed to sit and that Congressman Robert 
Brady of Pennsylvania be allowed to sit. They're not on the 
committee but be allowed to sit.
    And I would like to yield at this time for Congressman 
Brady to introduce the Governor of Pennsylvania, Governor 
Rendell.
    Mr. Brady. Thank you, Mr. Chairman, and also thank the 
ranking member and the members of the committee for allowing me 
to participate. It's my honor to introduce to you my Governor, 
our Governor, from the State of Pennsylvania.
    When we first passed the stimulus package and we heard it 
wasn't going through congressional districts, there was a 
little bit of concern out there with all of us. But when I 
heard it was going through the State, through our executive 
director or executive officeholder or Governor through the 
State of Pennsylvania, I was really relieved.
    Because I've known the Governor for 8 years as a District 
Attorney, 8 years as our Mayor and now 6 years as our Governor. 
He's extremely fair. He's extremely knowledgeable. He's doing 
the right things with the money, putting them in the right 
places where it needs to be. He's venting them out 
transparently throughout the whole State. And I do appreciate 
it, and I do appreciate what he does. And we're--our funding 
and money that we do get into the State of Pennsylvania is 
going to the best use possible.
    Also, and I do appreciate you letting me sit up here, 
because it may help him to take another little look at the 
First Congressional District in the State of Pennsylvania, to 
be a little more helpful than he has, and I do appreciate his 
helpfulness.
    Again, my honor and my pleasure to introduce to you our 
Governor, Governor Rendell.
    Chairman Towns. I think you're introducing and lobbying at 
the same time.
    Governor.

                 STATEMENT OF EDWARD G. RENDELL

    Governor Rendell. It's an honor to be here, Chairman Towns. 
Of course, Congressman Brady is, to me, my chairman. Because, 
as you all know, he's been chairman of the Philadelphia 
Democratic Party for a long time, most all of the time I've 
been an elected official; and he will always be Chairman Brady 
to me.
    Let me begin by thanking you for the opportunity to come 
down here, and I know Governor O'Malley and I will welcome 
questions. So I will try to be brief.
    Let me also point out that the State of Pennsylvania, in 
this time of fiscal challenge to all of us, is much more 
fiscally conservative than the State of Maryland. I don't have 
a fancy power point to demonstrate to you what we're doing, but 
I do have attached to my testimony a one-page printout of what 
our Web site looks like.
    This is a contract for a road resurfacing which shows you 
exactly what the citizen can find out about it, and the citizen 
can find out just about everything: start date, projected 
completion date, how many jobs it's creating, who are the major 
contractors that got the awards, and how much money each 
contractor is getting, what the goal of the project is in terms 
of road resurfacing or bridge rehabilitation. And we're 
committed; and I'll talk very briefly in a minute about our 
oversight, our transparency, and our fiscal responsibility.
    But I do want to say one thing. Because I had a chance to 
listen on TV to the prior panel. I want to say one thing about 
the stimulus. And I had a chance--the Congressman and I had a 
chance to discuss a little bit about this idea that the 
stimulus isn't moving as fast as it could.
    Governors--and Governor O'Malley and Governor Patrick will 
remember that--we met with President-elect Obama in 
Philadelphia in very early December. And the purpose of our 
meeting was to ask the President for help in three ways: one, 
to help our citizens who are in need and struggling with the 
stimulus; two, to help States that were just--because of the 
down--the downturn in revenue were up against it; and, three, 
to create jobs through infrastructure.
    The stimulus program I think took great steps to achieve 
all three goals. Pennsylvania gets $9.9 billion of stimulus 
money through formulas for Medicaid, for transportation and 
infrastructure, for energy, for education, 9.9. Our citizens 
get about $8 billion directly from the stimulus, and our 
citizens--3.7 million Pennsylvanians are enjoying the tax cut 
that has already appeared in their paycheck.
    Almost a million Pennsylvanians are enjoying the additional 
money in the SNAP program in food--what used to be referred to 
as food stamps. Over a hundred thousand Pennsylvanians are 
getting extended and increased workmen's unemployment 
compensation benefits.
    So the point of giving direct aid to the citizens, that 
sometimes is overlooked when we talk about stimulus. It's not 
what's written up. It's not a question of oversight, because 
that money goes directly to citizens. But Pennsylvania citizens 
are infinitely better off because of the stimulus, and a lot of 
that money, like the $32 increase in food stamps a month, that 
has pumped a significant amount of money into the economy. And 
food stamps get spent. They get spent immediately, and they get 
spent at usually corner grocery stores, and it goes all the way 
through the distribution chain, that type of spending.
    So, No. 1, I think the stimulus has achieved its goal early 
on in helping individual citizens. I'm sure the same thing is 
true in Maryland and Massachusetts.
    No. 2, providing essential aid to the States. Thirty of our 
States have raised taxes this year. Almost all of our States 
have made significant cuts in services. The increase in taxes, 
the cuts in services would be infinitely greater were it not 
for the aid that the stimulus program has given to the States. 
Without the money that we receive in this coming fiscal year--
we'll receive close to $2 billion in stimulus aid that helps us 
defray costs in our budget. Without that, there would be 
thousands of additional layoffs, not just of State workers, 
State police, caseworkers in our system, but teachers, local 
law enforcement officers, municipal and county workers and 
employees. All across the State we would have seen thousands 
upon thousands of additional layoffs.
    And when you do this computation--and I know it's very, 
very difficult to put your finger on it, how many jobs in 
stimulus retained or how many jobs created--well, I can tell 
you because of the direct aid to States it helped retain an 
awful high number of government jobs, and that not only helps 
job retention but it helps keep those people out there serving 
the people in need at a time when obviously need is increased 
because of the economic recession.
    The third goal of the stimulus was to jump-start ready-to-
go projects, and I think most of us have done it right. Most of 
us took the transportation money, working with our regional 
planning organizations, and did fix it first. Why did we do fix 
it first? Because if you're fixing a bridge, you don't have to 
do an environmental assessment. You don't have to do an 
environmental impact statement. You've got the right of way 
acquired, and you can get to work on that bridge in less than 4 
months and, in Maryland's case, even faster. So we did fix it 
first, and we're spending the money.
    Pennsylvania originally had 242 projects--by the way, the 
good news is, because construction costs are lower than 
anticipated, 17 percent lower in Pennsylvania, we've been able 
to add more projects to the ARRA list, but we have--work has 
begun on 131 of our 242 bridge and road projects in less than 4 
months. We had an expedited bidding system. We gave contractors 
60-day limit when they could begin work, and things are 
happening.
    I told a story. I was in Beaver County, a distressed county 
north of Pittsburgh, and we were embarking on an $11 million 
project to repair a bridge that went from the city of Beaver 
into the city of Rochester, 38 workers and 5 vendors. The 
contractor and four vendors, all Pennsylvania companies--steel, 
asphalt, timber, concrete--all Pennsylvania companies, all of 
whom bring back people into their factories as they get new 
contracts.
    If you look at the job loss in Pennsylvania--and we're a 
little bit better than most States. Our unemployment rate is a 
point and a quarter below the national average. But if you look 
at the job loss in Pennsylvania, the two big sectors, 
construction and manufacturing. What infrastructure stimulus 
does? Construction and manufacturing. It's working. And the 
good news is it's only going to get better. Most of our 
projects are going to roll out and kick into high gear the rest 
of July, August, September, October, November. You're going to 
see a huge impact.
    So I think the stimulus is going to work. I think any 
judgment on it is premature, and I think we should all--not 
make this a partisan issue. We should all take a deep breath 
and let's see how it works.
    I personally think we should have more infrastructure. So I 
would like to see a second stimulus devoted solely to 
infrastructure. It's the one that produces jobs and produces 
orders for factories, American factories.
    But I also agree that let's see how this rolls out. Let's 
see how this rolls out before making a decision on anything 
else. But I think it is going to be successful, and I think it 
is working, and I urge everyone to be patient.
    Last, controls. We're much like Governor O'Malley, and 
Governor O'Malley has done a fine job in controls. Our 
transparency is just that. We even take input before we issue 
RFPs like on weatherization, for example. Pennsylvania spends 
$30 million a year on weatherization. Most of that is Federal. 
We're now in receipt of $253 million of weatherization funds, 
30,000 homes.
    We don't have--initially, we didn't have a clue how to ramp 
up because most of the $30 million is done through nonprofits. 
So we went online and got suggestions from people and providers 
and the nonprofit community themselves, and we had discourse 
online. It's really exciting to see the discourse.
    We have oversight. We hired a CEO, a retired CEO of a 
company, a real tough former West Pointer. He is our 
accountability officer; and he has wide, sweeping powers.
    We put together an oversight committee, as Congressman 
Brady knows. The two senators were allowed to put one person on 
the committee. The Republican House Caucus put one person on 
the committee. The Democratic House Caucus put one person on 
the committee. Same thing with four caucuses in Harrisburg. So 
we have eight Members that came from Republican and Democratic 
Members of various legislatures. Then we have the head of the 
Chamber of Commerce, the head of United Way, and the head of 
the AFL-CIO; and that's our 11-member oversight panel.
    In terms of fiscal controls, Pennsylvania every year, State 
and Federal and other fund money, we spend about $61 billion; 
and we're fortunate that we have all sorts of controls, pre-
audits, post audits by the Auditor General. We have 
comptrollers in every department. We've got a very, very good, 
sound system.
    But we didn't rely on just our system and just the Federal 
controls. We worked with the GAO, and the GAO has been tough. I 
don't know if Governor O'Malley would agree with that, but the 
GAO holds us to a very tough standard. They wanted us to do 
risk assessment. We have 90 different stimulus projects. We did 
a risk assessment with the GAO and came up with 15 of the ones 
with the highest risk, including, for example, the 
weatherization project; and GAO in its report says Pennsylvania 
has taken steps to track recovery funds and assess risks.
    So we've gotten high marks. We're going to continue to get 
high marks because it's important to us.
    The Congress and the administration took a leap of faith 
with stimulus. And we know, as Governors, that a lot of the 
implementation is on our hands; and, ladies and gentlemen of 
the Congress, we don't intend to let you down.
    [The prepared statement of Governor Rendell follows:]

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    Chairman Towns. Thank you very much, Governor.
    I yield 5 minutes to the gentleman from Massachusetts, Mr. 
Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    Governors, thank you for your testimony on that.
    A couple of questions. One is with the weatherization. A 
lot of that money is yet to be implemented. I think, Governor 
Rendell, you mentioned that the infrastructure is a bit of an 
issue. Could each of you tell us what you're doing to make sure 
that we have that infrastructure ramped up? I know we have 
money in the Green Jobs Act which could train people for that, 
as well as other resources. And then what structures you're 
going to use to actually get it done and when do you think in 
your respective States that money will start to show an impact 
in terms of hiring people and getting the work done.
    Governor Rendell, if I can ask you to start.
    Governor Rendell. Sure. As I said, it's one of our biggest 
challenges because our infrastructure spends $30 million a 
year. All of a sudden, we have $253 million to spend in 18 
months. Our infrastructure on the $30 million is that we go 
through nonprofit organizations in different regions and they 
pick the contractors. We're not certain--I mean, we are 
actually fairly certain that the current infrastructure cannot 
deal with $253 million. So we're in the process of--as I said, 
we've taken input from these groups. We're in the process of 
trying to build an infrastructure that can do this, and it may 
mean getting some private firms involved in doing the 
weatherization.
    So we've been talking to a lot of the ESCOs, the companies 
that do energy controls on buildings and whatever; and we have 
ESCOs working on every public building in the Commonwealth. 
We're looking at the ESCOs and seeing if we can talk them into 
whether it's financially remunerative enough for them to do 
some of the work. We've hired two people with experience in 
this to help us flesh out our weatherization program. But it is 
a difficult program.
    But I just want to give you a quote. In my testimony, I 
quoted a weatherization leader from Lycoming County, nonprofit, 
who says: In my opinion, this really is a good way to make 
stimulus dollars work. There will be job creation, 
subcontracting, and materials purchase. The beauty of it, too, 
is that we will be helping a lot of people reduce their energy 
costs.
    So I think the weatherization program is a great program. 
Once we can gear it up, I think you will see a tremendous 
amount of job creation and, again, tremendous amount of 
subcontracting and material purchase.
    Mr. Tierney. I agree with your last point wholly. That's 
why I asked the question.
    Governor O'Malley.
    Governor O'Malley. We commenced work on our first 
weatherization project approximately 2 weeks ago in a home of a 
very nice family in Montgomery County, and what we have found 
is that the capacity for accommodating weatherization work was 
better in some counties than in other counties, and so we're--
we've created partnerships much like the ones Governor Rendell 
talked about. We found that our community colleges are also 
tremendous sources for us in terms of providing the training, 
and the companies themselves are helpful in that as well.
    It has been a bit of a ramp-up. Some of our counties are 
partnering with neighboring counties in order to get them up to 
steam, but we've already begun that work, and we anticipate 
that we're going to be able to fill the demand and get it in 
done in a timely fashion.
    Governor Rendell. To add to what Governor O'Malley said, 
it's a great program for taking displaced workers, 
cabinetmakers whose factory closed because they made cabinets 
for homes--for new homes, taking them and giving them not jobs 
that necessarily are going to pay at the income level they were 
getting before but jobs that will get them an income flow 
again.
    And we're spending--the stimulus gave us almost $700,000 to 
do job--excuse me, $700 million to do retraining, and we have a 
lot of retraining programs through the Department of Labor for 
the weatherization program because 30,000 homes you can imagine 
in 18 months, it's very labor intensive.
    Mr. Tierney. Thank you. I know a lot of Members here are 
having some discussion about whether the jobs are being created 
fast enough, but I note that our minority leader, John Boehner, 
was quoted on June 15th as saying he's pleased that the Federal 
officials stepped in in order for Ohio to use all of its 
construction dollars for shovel-ready projects that will create 
much-needed jobs. And I think that's what most people expected. 
This will happen on that.
    Do you agree with Mr. Boehner, that once we get this money 
out of the Federal agencies and to the States that, in fact, we 
should see some jobs created in both your States?
    Governor Rendell. At every level. I mean, the 
transportation money--again, Maryland was ahead of a lot of us, 
but you're going to see in Pennsylvania, July, August, 
September, October, November, tremendous amount of construction 
work, I mean a tremendous amount of construction work.
    Mr. Tierney. Do you agree, Governor O'Malley?
    Governor O'Malley. Congressman, I do. We anticipate some 
17,000 jobs being created in the course of the life of the 
stimulus on transportation. I support it because of these 
transportation dollars, not to mention the water and the 
wastewater projects. I mean, we'll have a ramp-up trajectory.
    Mr. Tierney. Is there any doubt in either of your minds 
that the money from the Recovery and Reinvestment Act given to 
States so far has at least stopped or enabled you not to lay 
off additional people? I know it's been tough on everybody's 
State and some people have been laid off, but what would be the 
situation in your State in terms of your losing your job and 
things not happening, services for citizens if the Federal 
moneys had not been out there?
    Governor O'Malley. I can tell you that there were 700 jobs 
that were about to be eliminated within our State government on 
the eve of the passage of the Recovery and Reinvestment Act. So 
that's 700 right off the top. But the ripple effect of that, 
the cascading effect of that, if we had to close $2 billion, $3 
billion holes in our budget in the current year, that would 
have affected all of our schoolteachers. That would have been 
teachers being laid off. That would have been other layoffs at 
the local level as well. We would have exacerbated what is 
already a very daunting and challenging problem. So there is 
not a doubt in my mind that these dollars have actually been 
very, very effective in keeping this unemployment rate from 
being worse than it otherwise would be.
    Governor Rendell. I agree, and I related that in my earlier 
testimony. But I also think it is creating new jobs. The 38 
jobs on that bridge in Beaver County that I talked about, every 
one of them were building trades, men and women, who hadn't 
worked in 6 months, hadn't worked in 6 months. The vendors told 
me that they were bringing back people that they had previously 
laid off. We had a big ceremony. So we're actually--in addition 
to retaining, we're creating new jobs.
    And I also want to say that I think most States--and I know 
Maryland's doing this--we're not using this stimulus money as 
supplanting money we've been spending before. For example--and 
Congressman Brady knows this--Pennsylvania is engaged in its 
own accelerated bridge program. I got the legislature to commit 
an additional $350 million last fiscal year to do bridge work.
    All told, Pennsylvania there is $1 billion of road 
resurfacing and bridge in AARA. All told, Pennsylvania is 
spending $3 billion on this.
    So we are trying to add to the stimulus program with our 
own stimulus, and I think that's true in a lot of States.
    Chairman Towns. I now yield 5 minutes to Mr. Chaffetz of 
Utah.
    Mr. Chaffetz. Thank you both for being here. I appreciate 
your service and your commitment to our country and your 
States. I appreciate the opportunity to ask you a few 
questions.
    Governor Rendell, how many jobs have been created in 
Pennsylvania with the stimulus?
    Governor Rendell. Well, so far, the $17 billion that's come 
into Pennsylvania, about $1 billion has been spent. Now, when I 
told you that 131 of our 242 projects are underway, we pay as 
you go. We reimburse for work done by the contractor. So that 
number is going to ramp up very, very fast.
    I would say on creation of jobs, there are probably a 
couple of thousand at this point; on retention of jobs, 
probably 5,000 to 10,000.
    Mr. Chaffetz. One of the things we struggle with is 
everybody estimating and guessing. The real number we look at 
is the unemployment rate, and it's skyrocketed.
    Governor Rendell. For us, though, our unemployment rate is 
about a point and a quarter below the national average. Still 
horrible. Horrific. But a point and a quarter below the 
national average. I think the stimulus has helped us to some 
degree. And again, the State stimulus adding to the Federal 
stimulus I think has been very effective for us. Whereas we are 
just starting work on the bridges and roads with the Federal 
stimulus, our accelerated bridge program, we had targeted 470 
bridges, and we are working on 420 now. So that is having an 
effect. I know each of us want definitiveness.
    Mr. Chaffetz. When you say $1 billion, and you talk about 
2,000 jobs, and yet we hear through the testimony from the 
Office of Management and Budget that one of the important 
things you can do is get money back into people's pockets. We 
are going to create--70 percent of the jobs created in this 
country are created from small businesses. And when I hear 
Governor O'Malley talk about 700 jobs, those are 700 government 
jobs.
    Governor Rendell. But first and foremost, the retention of 
jobs initially--.
    Mr. Chaffetz. Pardon me, Governor, my time is so short. I 
know I'm interrupting.
    Your numbers directly coincide from what we heard from the 
Office of Management and Budget. The Federal Government has 
spent some $75 billion and can only point to 150,000 jobs.
    Governor Rendell. I think I can explain that, though, 
Congressman. A lot of that billion dollars has gone to 
individuals. It's gone to the worker who has lost his job and 
is getting unemployment comp, he----
    Mr. Chaffetz. But that's not creating jobs.
    Governor Rendell. I understand. But what I'm saying is, 
remember, the stimulus had a number of different goals, and I 
hope----
    Mr. Chaffetz. My understanding it was jobs, jobs, jobs.
    Governor Rendell. It was, but it was also relief for people 
in need. So when you consider giving an unemployed worker a 
longer period of unemployment compensation and a higher 
stipend, that's not going to create a job. Maybe he will have 
more money to spend. But do you think that was an appropriate 
thing to do under stimulus?
    Mr. Chaffetz. When you go out and you spend hundreds of 
billions of dollars, there are going to be jobs created and 
there is going to be relief given to the people. I understand 
that.
    I think what I disagree with is the notion that where 
government is creating jobs, they're creating government jobs. 
Let's empower people.
    Governor, I will give you a chance to answer.
    We heard in earlier testimony that 28 States have raised 
taxes, which you say deepens the impact of the downturn. And is 
that your perspective as well? If you raise taxes within the 
State, would that, quote, deepen the taxes?
    Governor Rendell. It depends on the scope of the increase, 
No. 1. But No. 2, without the stimulus, those 28 States would 
have had to raise taxes infinitely greater. I mean, you've got 
to understand that. Right now, this year that concluded----
    Mr. Chaffetz. I guess the question is, who should pay for 
it?
    I want to give Governor O'Malley a chance here, too. But 
that's what is offensive, I think, to a lot of people is that 
people will have to end up paying the tab for--States like 
Utah, we balance our budget. We don't have--we had a $400-plus 
million rainy day fund. We didn't have to tap into that.
    Governor Rendell. I would submit to you, if you look at the 
demographic of Utah, it's totally different than the 
demographic of Pennsylvania and Maryland when it comes to 
people living below the poverty line, the number of disabled 
people, the number of specialized students. You can't compare 
apples to oranges.
    But the one thing that I wanted to say is look, I think the 
stimulus bill was misnamed. Part of it was stimulus, part of it 
was job creation, but a lot of it was relief. It was----
    Mr. Chaffetz. Part of the semantics that we are struggling 
with is what the jobs are.
    Governor Rendell. That's why I would like to see--and 
again, my guess is you are not in favor of an additional 
stimulus, but if you do it just do infrastructure, I guarantee 
you----
    Mr. Chaffetz. 3.5 percent of the stimulus was 
infrastructure, as I understand it, roads and bridges. That's a 
scam. Wow, you know? Come on.
    Governor Rendell. Infrastructure, because I can bring you 
to every infrastructure project we've got going and you will 
see people working who weren't working before. You will see 
Pennsylvania factories getting orders that didn't have orders 
before, and that's what it's all about.
    Governor O'Malley. And they work for private companies.
    Governor Rendell. And they work for private companies. They 
don't work for us.
    Chairman Towns. The gentleman's time has long expired.
    Mr. Issa. When the Governor was saying ``jobs, jobs, jobs, 
give us public works jobs, road jobs,'' it was just too good to 
cutoff, wasn't it?
    Chairman Towns. But I think that the gentleman needs to 
understand, though, that when you look at the whole situation 
in terms of job creation, you cannot look past retention. I 
think about the 14,000 teaching jobs that were saved in New 
York City as a result of the stimulus package; which means that 
affects our educational system, because if they had been laid 
off, then the classrooms, in terms of the amount of students 
there, would have been much larger, the learning process would 
have slowed down and all of these kinds of things.
    Anyway. Let me yield to the gentleman from Virginia by way 
of Massachusetts.
    Mr. Connolly. I thank the chairman and I would ask, without 
objection, that my opening statement be entered into the 
record.
    Chairman Towns. Without objection.
    [The prepared statement of Hon. Gerald E. Connolly 
follows:]

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    Mr. Connolly. It's fascinating to me to hear my friends on 
the other side of the aisle express so much concern about jobs, 
since every one of them voted against this recovery package. 
And had, in fact, their view prevailed, there would be zero 
jobs. Zero. And, in fact, it was because of their importunings, 
there was less infrastructure investment, Governor Rendell; 
isn't that true?
    Governor Rendell. There was a movement in the House to 
dramatically raise the infrastructure investment and it got 
voted down.
    Mr. Connolly. Precisely. The AMT may be a good thing to do, 
but it was because of three Members of the other side of the 
aisle in the other body who insisted that had to replace 
infrastructure money that this went into the stimulus bill.
    Having said that, one of the things that concerns me is 
we've seen some linear thinking in this hearing today that 
literally takes the amount of money and divides it by the 
amount of jobs and then says that's what it costs per job. Is 
that how it works?
    For example, when you build, Governor O'Malley, a metro 
system such as we have here in the Nation's Capital, the only 
benefit from that investment was the actual number of jobs 
created at the time of construction. Isn't that true?
    Governor O'Malley. No. There would be a cascading benefit 
because of the demand created within the economy for all sorts 
of things.
    Mr. Connolly. So there's been a return on that investment?
    Governor O'Malley. There is a return that's much greater 
than the initial investment, which is why in the past, this 
great country always made big investments like that.
    Mr. Connolly. So, for example, Governor Rendell, when 
Dwight Eisenhower, a Republican President, had the vision to 
make an investment in the interstate highway system, which 
today I think probably would have been opposed by some of my 
friends on the other sides of the aisle--and by the way, that 
water was carried by none other than a Senator from Connecticut 
named Prescott Bush--that interstate highway system created 50 
years ago had a drop-dead cost to it, but 50 years later has it 
had other positive benefits since the construction?
    Governor Rendell. Sure, in terms of competitiveness, 
quality of life, public safety. But it was also a great jobs 
and orders-for-American-factory bill as well.
    Look, Congressman, if we are really concerned about jobs, I 
have a suggestion: Change the way you score the Federal budget. 
And it's not just my suggestion and the organization I had, 
Building America's Future. I had Speaker Gingrich and former 
leader Gephart together, and they both say let's change the way 
we score the Federal budget, go off line, do a capital budget 
like every other political entity in this country has, put a 
trillion dollars into an infrastructure repair program. Let's 
get it done in the next 5 years and you will see this economy 
humming. Not just construction jobs but steel plants.
    Mr. Connolly. Good point. But I guess I want to still 
return to the point that you and Mr. O'Malley have clarified 
for us that you can't just count the exact jobs created by 
activity X today; you've actually got to look at whether it's 
an investment that has a return on it or is it just a sunk cost 
that has no other----
    Governor Rendell. You do the jobs on the constructionsite, 
then go back to every vendor, interview the CEO, and find out 
how many people they brought back or how many new people he 
hired. That's the only way to accurately do it.
    Governor O'Malley. But then when you look at the lasting 
nature of the infrastructure, we also have future generations 
that benefit from the upgrades to the roads, the bridges, and 
also the water and infrastructure and its impact on the 
environment.
    Mr. Connolly. It enhances mobility, transshipment, movement 
of goods and services, helps the economy in creating aggregate 
demand; is that true?
    Governor O'Malley. That's true.
    Mr. Connolly. So we can't just look at it in a linear way.
    I also heard earlier this morning from our friends on the 
other side the idea--actually, the idea that wouldn't have tax 
cuts been better than direct spending. Did we not try tax cuts 
like the largest tax cut in history in 2001 in this economy, 
Governor Rendell?
    Governor Rendell. We did.
    Mr. Connolly. And Governor Rendell, what was the net effect 
of job creation from those historic tax cuts in 2001 by 2009?
    Governor Rendell. We actually lost jobs in the country and 
not all to blame on the tax cuts, but tax cuts clearly by 
themselves don't work.
    Mr. Connolly. Do you know how many jobs have been lost, as 
a matter of fact, in that recession that began in 2007, not 
January 2009?
    Governor Rendell. Several million.
    Mr. Connolly. 6\1/2\ million jobs lost. So we've tried 
that; is that true?
    Governor Rendell. Agreed. And remember, just to be fair, it 
was President Obama who suggested the $800 family tax cut, 
which I believe went to pay off bills--which was a good thing 
from the family standpoint, didn't create any jobs. I would 
love to have seen some of that tax cut money traded for 
infrastructure, because we know infrastructure creates jobs. 
There is no doubt about it. There is no quarrel. There is no 
debate.
    And by the way, infrastructure is not a Republican or 
Democratic issue. I testified before in the Senate Committee 
and Senator Inhofe, I guess considered to be one of the more 
conservative Members of the Senate, said that aside from 
keeping the peace, he thinks building the infrastructure is the 
second most important thing we can do as a Nation, and we ought 
to get to it.
    Governor O'Malley. And I might add that President Obama 
also had to labor under the burden, as any chief executive of a 
Republic does, of fashioning a consensus to get his package 
through Congress. And to have done nothing was certainly--I 
don't think is an option that anybody in these halls would say 
was available to him.
    Chairman Towns. I yield 30 seconds to the ranking member. 
Then at that point, I will yield 5 minutes to Mr. Dent who has 
been yielded unanimous consent to be able to participate.
    Mr. Issa. Thank you, Mr. Chairman. And I will use just a 
small part of it to recognize the senior Senator Gore for his 
contribution in that superhighway system under Eisenhower.
    Mr. Chairman, pursuant to rule 6, clause 2, I request to 
call witnesses selected by the minority on 1 day of hearing 
concerning the tracking of Federal Recovery Act dollars 
funding. And we request the hearing take place before the 
summer district work period at a mutually agreeable date.
    And, Mr. Chairman, briefly, the only reason for this, as we 
discussed, is that we weren't able to have a third panel. That 
panel was dismissed and it was found to be inappropriate to put 
them on either of the first two panels. So we do not have a 
witness, but we believe it will be productive to have witnesses 
at a future time to be decided.
    And I thank the chairman.
    Chairman Towns. Congressman Dent, Pennsylvania.
    Mr. Dent. Thank you. And I know you are all going through a 
tortuous process and I'm so delighted you could be here with 
us.
    One thing on the stimulus. It seems that much of the 
funding is being used to fill holes: budget holes, potholes. 
One thing I noticed, too, is that you are a great advocate for 
infrastructure, as am I. A lot of us are. But one of the 
frustrations--this is not a criticism of you or PennDOT. It's 
just a statement of reality that, according to what I'm reading 
from PennDOT, there is $307 billion of commitments for roads, 
bridges, highway projects, and we've spent, up to this point, 
about $9.3 million.
    Governor Rendell. There's a big difference between spending 
and obligated.
    Mr. Dent. I know. This is what's spent, not obligated.
    Governor Rendell. Again, it's less than 4 months and most 
of the projects, the 131 I talked about, are just starting up. 
And PennDOT is pay-as-you-go.
    Mr. Dent. I just want to be clear that you are not able to 
do a whole lot of new capacity construction with this money 
because of the rules. You get a dollar, you're mostly doing 
resurfacing and bridge repairs.
    Governor Rendell. Because we wanted to do it fast and 
create jobs. And we built a new road. We would have had to do 
right away an environmental assessment or environmental impact 
statement. It would have been 2 years before we ever took a 
shovel to that.
    Mr. Dent. That is right. The Federal process is what 
prevents you from spending money on new capacity. I think we 
agree on that point.
    It seems that much of the stimulus money in Pennsylvania, 
and I suspect around the rest of the country, is being used for 
basic services--Medicaid, Title I, IDEA--and I think that's an 
issue that we are all confronting here. It's going to basic 
services relief as opposed to jobs. I guess we can have this 
argument about relief versus jobs. But nevertheless, it's 
relief money.
    One other thing, too. In the GAO report, it says the 
Pennsylvania Department of Education officials expressed 
concerns about assessing jobs created and retained, and they 
are telling districts not to use the recovery funds to create 
new positions that will need to be sustained beyond the 2-year 
period but, instead, to use the funds for one-time costs such 
as teacher retention, bonuses, and even some recruitment 
issues.
    So I guess really a question is: Will the teachers who 
receive the so-called retention bonuses be counted as jobs 
retained? And is there a way to quantify how many teachers 
would have left work without the recovery fund retention bonus?
    Governor Rendell. I think the Department of Education can 
do that for you. But let me amend what you said.
    The Department of Education properly recommended to the 
school districts that, under the stabilization money that they 
receive, not to do any new hires because you lose that money in 
2 years and you have to, obviously, get rid of the people they 
hired. But they urged them to do it on things that had a 
legacy, like keeping teachers or teacher training or school 
modernization. I would have loved to have seen the stimulus 
allow school construction and school rehabilitation. But 
somewhere along in this process, and I don't know----
    Governor O'Malley. It was on the Senate side.
    Governor Rendell. They knocked it out, and you can only use 
it for school modernization. That would have been the best use 
of these funds because they're 2-year funds.
    Mr. Dent. Understood. But that same fund of money that is 
being used for retention and recruitment--I'm not sure why we 
need to spend money for recruiting during an economic downturn 
like we are experiencing--but that's the same money that could 
be used for a State-related institution like a Penn State, 
Temple/Pitt. And I know you have to make a lot of hard 
decisions, you and the general assembly. Penn State is getting 
cut significantly, but instead of funds being used for 
retention or recruitment, could those not be used for, say, 
higher ed?
    Governor Rendell. Understand, the four State-related 
schools, Penn State, Pitt Temple, etc., are getting 
stabilization money. The cuts they are receiving would be much 
worse without the stimulus. Much, much worse.
    Mr. Dent. I guess finally, I appreciate the fact that you 
came here. I think we all have to recognize that so much of 
this money is being used for restoration of basic services 
where most of it has been sent. I understand the frustration on 
the infrastructure. I feel it, too. Alan Bieler does a great 
job for everybody in Pennsylvania, and I've had these 
conversations with him many times about the inability to spend 
this Federal money quickly because of our rules that constrain 
your ability to build new capacity.
    Mr. Issa. Would the gentleman yield?
    Mr. Dent. I would be happy to yield.
    Mr. Issa. Following up on the question that I asked 
Governor Patrick earlier. Would both of you comment on how you 
feel you should spend the money when you do spend it on public 
works projects. Should you be spending it at the lowest 
allowable wage under the act, or would you support what has 
been reported--and the Governor is going to confirm--that 
Massachusetts is about $17 above the Federal prevailing wage. 
As such, they're getting less bang for their buck.
    Would you both comment on how you feel that should be done 
in your States?
    Governor Rendell. Well, I would say, very succinctly, we 
followed the Federal rules. So the money that's being spent is 
being spent at a wage rate similar to money we get from ISTEA. 
No difference.
    In Pennsylvania, it's interesting. We have regional 
assessments of what the prevailing wage is. So the prevailing 
wage in Philadelphia for a sheet metal worker is significantly 
higher than the prevailing wage in Altoona. So Altoona road 
projects get paid at their prevailing wage, Philadelphia at 
their prevailing wage. But it's the same as the money that you 
give us that's joined with State money every year. And that 
should stay that way.
    Governor O'Malley. And I believe that's the same way that 
we do it.
    Mr. Connolly. Mr. Chairman, would you yield me just 10 
seconds?
    Chairman Towns. I will yield you 10 seconds, yes.
    To Mr. Issa's point. But irrespective of prevailing wages, 
is it not true that the cost of construction has gone down so 
much that as a matter of fact, these dollars are creating more 
jobs and allowing for more construction?
    Governor O'Malley. We are seeing more competitive bids 
coming in. They are coming in much more competitively. In other 
words, a better bang for the buck for our Federal tax.
    Governor Rendell. Our bids are coming in about 17 percent 
lower than expected, which will enable us to not only do 242 
projects, we are going to take the money again and spread it 
through the regional planning organizations and do some 
additional projects.
    Governor O'Malley. The people that are competing for these 
jobs, these are small business people. These are people whose 
families have at some time put their neck on the line keeping 
food on the table. We all know it's the private sector that 
creates these jobs. But when it comes to big things like our 
bridges, like our infrastructure, these are things that we can 
only do together. So these are real private sector jobs.
    I might also add, the safety net, the so-called filling of 
the gap for the budget, in this great recession there is a much 
greater demand from hardworking people, who through no fault of 
their own find themselves unemployed. And being able to provide 
health care while they transition, being able to allow them to 
go and put food on their table, creates demand in the economy.
    And I might also add that the dollars invested in public 
education are most definitely saving teaching jobs. And 
teachers are Americans, too, and they are part of this economy 
as well.
    Governor Rendell. The $32 increase in the food stamp 
program in Pennsylvania translates to, in a year, almost $600 
million of more spending. Think about that. That's how many 
people we have on food stamps. Six hundred million dollars' 
more spending, and it is the direct and the most quick spending 
of all.
    Chairman Towns. Let me yield myself 5 minutes.
    OMB's failure to issue timely guidance. In your opinion, if 
OMB has not provided States with the necessary guidance in a 
timely manner, is it possible to expect or is it feasible to 
expect States to report all required data by October 10th? Is 
that possible?
    Governor O'Malley. From our standpoint, Mr. Chairman, we 
certainly respect the hard work at OMB, and the clearer they 
can be, the better. And at the same time with regard to the 
dollars that we have already allocated and the dollars we are 
spending, we don't have a problem being able to report those in 
a timely manner in Maryland, where we believe we can account 
for those and we can fulfill those reporting requirements.
    The difficulty comes in those things that go directly to 
local education boards or the things that go directly to 
municipalities. It creates a bigger challenge because we have 
to depend on getting the feedback back from those 
municipalities and counties. So your efforts to force OMB to 
give us clear guidelines to put the responsibility where the 
dollars are being spent, I think is wise and proper.
    Governor Rendell. I agree.
    Chairman Towns. Another concern I have. The communities 
that desperately need Recovery Act funding are, in essence, 
being bypassed in many instances. Could you comment on this? I 
guess Governor Rendell, as chairman of the National Governors 
Association, are you seeing this occurring in other States?
    Governor Rendell. Let me just refer to page 3 of my 
testimony where I talk about transportation funds. We've 
obligated $720 million of the $1 billion Federal funds we've 
gotten. And Mr. Chairman, $315 million of that is obligated in 
what are federally classified economically distressed areas. So 
that's not quite half, but about 45 percent of our 
transportation dollars are being spent in economically 
distressed areas. We are trying, and I think we are doing a 
pretty good job on it.
    Governor O'Malley. Mr. Chairman, for our part, we map all 
of the dollars that we distribute. And I have no doubt that if 
we were not distributing these dollars in an equitable way, I 
would certainly be hearing from the community leaders and 
mayors and other people.
    So I think the map, the openness, the transparency showing 
where the dollars land is critically important, and all of us 
need to be able to do that, as indeed Governor Rendell has done 
on so many of the things he mentioned, the tax cuts, the SNAP 
dollars, extended unemployment benefits.
    Chairman Towns. Would you talk about how the oversight 
committee works?
    Governor Rendell. The oversight committee meets twice a 
month. And they're given by the chief accountability officer 
all of the material that had been done in the past and all of 
the decisions that are coming up. Now, they can't direct us to 
do anything per se, but we do listen to their advice and listen 
to their suggestions. And it's been a valuable process. One, we 
get some very valuable suggestions, but two, it really--because 
I'm from Philadelphia--I was the mayor of Philadelphia before I 
was Governor.
    Congressman Brady can tell you, there's a belief out in the 
State that Philadelphia gets all of the money. It's not true, 
but nothing I can do will disprove it. Since I've been 
Governor, I've given Allegheny County, which is greater 
Pittsburgh area, about $800 million overall more than 
Philadelphia. No one in Allegheny County would believe that.
    So there was a thought--and Congressman Dent can probably 
tell you this--that some of his colleagues were going to direct 
all of the money to the big cities in Democratic areas, etc. 
And that's just not the case.
    First of all, so much of the money is driven by existing 
Federal formulas. So for our transportation dollars, every 
county and the State has transportation projects. And they made 
the decisions. They're involved in the regional planning 
organizations, they made the decision.
    The metropolitan Philadelphia area gets X dollars of 
percentage out of our Federal dollars; they got the same 
percentage out of stimulus they get every year. But people sort 
of had the feeling that we would direct these dollars in a 
political or in a geographically sensitive way. And having this 
sort of oversight is good. I like it, actually. I like it.
    Chairman Towns. I yield 5 minutes to the gentleman from 
California, Mr. Issa.
    Mr. Issa. I thank both of you Governors for remaining. We 
are going to have votes in a few minutes.
    I would like to expand on a couple of things.
    Governor Rendell, I can't resist. The last time we were 
together we were talking A-10 aircraft, if you recall. In light 
of the wind-down of Iraq, in light of, if you will, the 
changing external forces versus your National Guard and every 
Governor's National Guard, do you believe this administration 
should begin right-sizing both the Active Duty and Reserve 
components, including the Guard, to be lighter, quicker, 
perhaps less expensive to operate, once you get past the highly 
trained personnel, and start shedding themselves of legacy 
costs which, sadly, would probably include tank killers for a 
battle we are not likely to have?
    Governor Rendell. Right. I believe the answer to that is 
yes, Congressman, but I also think that should have happened in 
the prior administration several years ago.
    Mr. Issa. I have no doubt it should have happened many 
administrations ago.
    But Governor, would you echo the same answer that this 
administration now inherits this need to right-size both Active 
and Reserves more appropriate to the likely wars we are going 
to fight and make them lighter, quicker, and, candidly, perhaps 
provide you some further relief for the high tempo they've been 
experiencing?
    Governor O'Malley. It's an interesting question. I mean, at 
the heart of the question is the constant need for military 
reform, not to allow ourselves to be lulled into fighting or 
paying or investing in fighting the last war. But I think you 
will never find another time since 1814 when people have been 
more in danger here in the United States. So I think that there 
is a changing mission for the Guard, but I don't know if that 
will necessarily be one that is less expensive. More likely, it 
will probably be more expensive, given the vulnerabilities that 
assymetrical warfare poses to population centers, to ports, to 
critical infrastructure, telecommunications mode, cybersecurity 
and the like.
    Governor Rendell. We do need to replenish the Guard in 
every State. We lost equipment that hasn't been replaced. That 
was a constant refrain that Governors, Republican and 
Democratic alike, had with the prior administration. We would 
get our Guard units back, but with 40 percent of the equipment 
we sent over.
    Mr. Issa. And then Governor, that's the reason I asked the 
question for both of you. I'm not asking for going on the 
cheap. But many of you have legacy equipment, heavy tanks, all 
kinds of equipment that although if you replenish them, you're 
back where you started. Isn't this an opportunity for the 
administration to go ground-up and begin rebuilding the Guard 
perhaps with different equipment, different missions, rather 
than ordering just replacements?
    Governor Rendell. I don't know if you are familiar, 
Congressman, with the Stryker brigade. I know Congressman Dent 
is. The Stryker brigade is a very, very mobile quick unit----
    Mr. Issa. I visited them both in theater and the West 
Coast. My question is, wouldn't you prefer that over M-1 tanks?
    Governor Rendell. And not only for foreign encounters.
    Mr. Issa. But for your domestic mission.
    Governor Rendell. No question.
    Mr. Issa. Because there is talk of a potential next round. 
But even if there isn't, this is still continuous.
    Let me ask one more question which is unique to Governors 
and not covered in the stimulus, but perhaps should have been, 
besides infrastructure.
    One of the greatest burdens that you have beyond Medicaid, 
and obviously your Medicare recipients, is the unemployment 
burden. And both the last administration and this 
administration tried to address some of that growing 
unemployment with the Federal extensions. But the other burden 
you have, which often is called Medicaid and some of the other 
programs, is that when people become unemployed they lose their 
health care, or they lose the ability to pay their COBRA is 
probably more often.
    Do you believe that this committee or the Congress in 
general should begin looking separate from--we don't know 
whether we'll get comprehensive health care reform or not--but 
should we consider modernizing unemployment, or at least the 
Federal match, to ensure that it anticipates paying for health 
care costs during the period of unemployment? Isn't that 
inherently the modernization of unemployment that has not been 
addressed?
    Governor O'Malley. I would say yes.
    Governor Rendell. I think we both agree. But, Congressman, 
if I could tell you anything other than my constant refrain 
about infrastructure, I would tell you we ought to find a way--
and I think it should be done in a bipartisan fashion--we 
should find a way to do health care. The time has come for 
America to take care of its people like every other modern 
country in the world does. And if we found a way to do that, we 
wouldn't have to do it. You are absolutely right. In the 
absence of a bill, that would be a great idea. Great idea. But 
I think we should get together and pass something.
    Mr. Issa. Thank you, Governor.
    Now that you are no longer mayor of Philadelphia, perhaps 
the appropriate legend of your ability to get Philadelphia 
their fair share will fade in time.
    Governor Rendell. I don't have much time.
    Mr. Cummings. I'm glad to hear Mr. Issa talk about health 
care and the unemployed, because I'm going to hold him to that; 
because we may get to a point where we have to do something 
like that, because we've got to make sure that our people are 
taken care of.
    This country, I've said it many times, we get our authority 
in the world by moral authority and how we treat each other.
    But on that note, Governor O'Malley, let me ask you, you--
both of you--before you all--earlier in your testimony there 
were a number of people that raised the issue that this is 
temporary help and how do we hold the Governors accountable 
after this and how does--are we setting ourselves up for taking 
people up, and then a drop when stimulus money runs out?
    Now, you may have answered that when I was out of the room. 
How do you look at that, Governor O'Malley?
    Governor O'Malley. It's an interesting question. It's one 
that's often asked of us by citizens and small business owners. 
The fact of the matter is I think we all hope, regardless of 
our differences in governing philosophy, we all hope that this 
recession will be of a temporary nature, and that's why this 
aid is of a temporary nature. But, fortunately, it does span a 
2-year period of time.
    And as I said in my earlier testimony--and I think Governor 
Rendell echoed this--this recession and unemployment would be 
so much worse were it not for the investments that came from 
the Recovery and Reinvestment Act dollars.
    So we hope that with this greater demand created in the 
economy through a number of different vehicles, including these 
important investments, that we start pulling our economy out of 
the ditch where it's expanding and supporting jobs. And I might 
add, while it's certainly nothing that we can call a trend, for 
the last month that we have complete data in Maryland, we have 
actually seen our State create 2,500 more jobs than we lost. 
Now it was the first month that we had done that in a long 
time. Might be a blip. But all hope and progress starts with 
the first steps.
    Governor Rendell. I agree with everything Governor O'Malley 
said and particularly the last thing. Because the answer to the 
question and the answer to the citizens' question, 2 years from 
now, 2 fiscal years from now, our stimulus money goes away, but 
Pennsylvania this year had negative 8 percent growth. Believe 
it or not, for the mid-Atlantic that was good. The average mid-
Atlantic State had negative 14 percent growth. I'm predicting, 
in this up-and-coming budget, zero growth.
    For my first 6 years as Governor, Congressman, I had 
between 5 and 6 percent growth. Every point of growth in 
Pennsylvania is worth $260 million. So let's assume by the year 
3 when stimulus drops off, we are back to 5\1/2\ percent 
growth; 5\1/2\ percent growth means the Governor will have 
another $1.4 billion to cushion the blow of losing those 
stimulus dollars. It's all about growth.
    That's why the economy--first and foremost, the economy is 
important to people who need jobs. But second, it's important 
for us to be able to do all of the things that we do as a 
government, and some that we do very well and some not so well 
and we need to improve. But it's all about growth, and that's 
why it's so important to get that economy back.
    We'll take care of this stimulus gap if we have growth 
again.
    Chairman Towns. Let me say I thank the Members and the 
staff, I thank the Governors and all of the witnesses that have 
participated today.
    I'm encouraged that since the enactment of the Recovery 
Act, we have made some strides toward putting our economy back 
on track. But I am disappointed in the overall results so far. 
Unemployment is at a high and the full force of stimulus 
spending has yet to be felt. Moreover, I remain concerned with 
several issues related to the Recovery Act implementation. One 
issue that I intend to address immediately is the Department of 
Transportation's failure to define what qualifies as an 
economically distressed area for allocating Recovery Act funds. 
The point of this requirement is to direct stimulus spending to 
communities that need Recovery Act investments the most, like 
disadvantaged areas of my home district in Brooklyn.
    I will be sending a letter to the Secretary of 
Transportation, Ray LaHood, to explain my concerns and request 
a meeting with the Secretary to discuss this issue.
    Another problem that needs to be corrected is OMB's failure 
to issue all necessary guidelines. OMB's inconsistency in 
providing adequate and comprehensive guidance creates greater 
challenges for States to provide timely and reliable data by 
the October 10th reporting deadline.
    This is another obstacle in terms of the majority of States 
that are already short-staffed due to severe budgetary cuts. In 
my home State of New York, State government agencies have been 
forced to function with a 10 percent reduction in their budgets 
for the fiscal year. The Office of the State Controller is 
particularly concerned that it will not be able to meet the 
escalating demands of auditing Recovery Act programs.
    The issues we discussed today are many of the same issues 
that we identified at our field hearing on the stimulus that 
led me to introduce H.R. 2182, the Enhanced Oversight of State 
and Local Economic Recovery Act. The House has passed this 
bill, and I hope we can continue moving forward until it is 
signed into law.
    We recognize that there are still important issues to be 
resolved before Recovery Act spending and accountability works 
as intended.
    Be assured that we intend to continue our detailed 
oversight of the programs until we finally see our recovery, 
economic recovery.
    Please let the record demonstrate by submission of a binder 
with documents relating to this hearing--without objection, I 
enter the binder into the committee's records, of course.
    And now the committee stands adjourned, and let me again 
thank the Governors for coming and staying. I apologize to you 
for the way that we had to do this because there is a thing 
called votes around here, and we have to make it over there. 
They complain if we are not over there.
    So thank you, Governor Rendell, and thank you, Governor 
O'Malley.
    The committee stands adjourned.
    [Whereupon, at 2:12 p.m., the committee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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