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What Obama and DOE need to do to ensure the green stimulus funds are well spent

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"What Obama and DOE need to do to ensure the green stimulus funds are well spent"

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[Bill Becker brings his many years of experience working in government to bear on the key question of what the Obama administration, including key federal agencies like the Department of Energy, needs to do to ensure that the green parts of the stimulus are well spent.]

aging infrastructure

In the next week or two, Congress will pass a massive stimulus package that includes many investments we should have made a long time ago.

Of most concern to the readers of this blog will be a rapid and unprecedented investment in a new energy economy that features higher levels of efficiency, lower levels of emissions and a spark that may reignite the boom in renewable energy development.

If it takes a village to fix the economy — and it does — it took a crisis to unleash these investments. If the stimulus package works, it will be as though a capital dam has burst for states, localities, science labs, families, construction workers and many others. But before it’s too late, we should make sure the gush of money results in the mix of short and long-term investments the Obama Administration intends. They key question is whether the recipients of the funds have the capacity to manage the flow.

The $819 billion stimulus bill approved by the House on Jan. 28 contains several provisions to keep President Barack Obama’s promise of unprecedented accountability and transparency — a big change from last year’s bailout money, which seems to have disappeared without trace or appreciable public benefit.

Twenty of the House bill’s 647 pages are dedicated to accountability measures. There’s a new watchdog agency called the Accountability and Transparency Board. There is more funding for inspectors general, a new web site that will allow taxpayers to track the money, and new protection for whistleblowers. There’s even a provision that would have prevented former Gov. Rod Blagojevich from getting his hands on the money going to Illinois.

To improve the chances the money will be spent quickly and competently, much of it will be delivered through proven government programs that already have their own accountability safeguards.

But a good track record doesn’t mean a program is equipped to handle a sudden deluge of funds. Some of the programs that stand to gain major new resources are the same programs that were weakened by the Bush Administration or that are accustomed to much smaller sums.

For example, the House package contains $6.2 billion to weatherize the homes of lower-income families, an excellent objective. But that’s an order of magnitude above what states have recently requested. The National Governors Association (NGA) advocated funding of only $275 million for the federal Weatherization Assistance Program last year.

[JR: Of course, part of the reasons for those lowball requests is that conservatives in general, and the Bush administration in particular, hates the idea of weatherizing low-income households and have long tried to kill the program -- most recently last year (see "Bush, the uncompassionate, anti-technology President" and Bodman as Orwell: DOE erases "most successful" weatherization program from website).]

The NGA proposed $74 million for the State Energy Program (SEP) last year — the principal program the federal government has used to send money to state governments for renewable energy and energy efficiency programs. The states have used the money to create an impressive array of clean energy programs .

The House stimulus bill allocates 46 times that amount — $3.4 billion — for SEP, plus billions dollars more in state and local energy investments including block grants for state and local governments; grants and loans to improve the energy efficiency of schools, local governments and municipal utilities; and grants to help state and local governments buy alternatively fueled buses and trucks.

A key challenge in the stimulus package is how to make haste without making waste.
In the interest of pumping adrenalin into the economy before it goes belly-up for good, the House package requires speed that’s uncharacteristic for government bureaucracy. Under a “use it or lose it” rule, recipients of the money have to send it back to the federal government if don’t spend half of it within one year, and all of it within two years.

Formula grants have to be awarded within 30 days of the stimulus bill’s passage. Grants awarded competitively must be out the door within 90 days. For infrastructure projects, the goal is to spend $100 billion on projects that can be started within six months.

The House bill says that unless otherwise stipulated, only one-half of one percent of each appropriation can be used for management and oversight. And, as I noted earlier, some of green programs that might manage the new federal money were crippled or killed by the Bush Administration.

A case in point is the six regional offices that used to oversee some of the big beneficiaries of the stimulus bill, including the State Energy Program and the Weatherization Assistance Program. The same offices operated many of DOE’s programs to get clean energy technologies into the economy. In fact, the regional offices were the federal government’s only field network dedicated to helping move clean energy technologies to market. The Bush Administration closed down the offices in 2006 — a very untimely loss of a critical federal capability.

So, the danger in the deluge is that money will be poorly managed; that recipients will rush to spend it to avoid losing it, even if it means funding less than optimal projects; that we’ll build highways that are shovel ready, but which encourage more carbon pollution and gasoline consumption; that the full potential of these investments will not be met; and the Democratic Congress and new President will be blamed for burdening our children with more bad debt.

Here are three suggestions:

  • Despite Republican protests against bigger government, it may be necessary to increase the ability of federal agencies to manage the money, even if that means temporarily hiring or reassigning federal employees. It may also mean that a higher percentage of the funds will have to be dedicated to oversight.
  • The Obama Administration should huddle with the organizations slated to receive large infusions of stimulus dollars to gather their on-the-ground intelligence about how to spend the money quickly and well. They, too, have an interest in success.

Among them are the National Association of State Energy Officials, the U.S.

Conference of Mayors and the National Association of State Community Services Programs. Do they need more funds for management? Should states be allowed to contract with for-profit businesses as well as non-profit agencies to weatherize low-income homes? Should more money be set aside for technical assistance and training for weatherization crews?

  • The Administration should promote “best practices” — the most successful ways that have been demonstrated to invest in clean energy in the past.

For example, states received a similar windfall of cash years ago as a result of fines against oil companies that overcharged for petroleum. Most states have spent all of that money. But the Texas State Office of Energy Conservation took a different route, creating a revolving loan program called LoneSTAR.

The program helps finance energy efficiency improvements to public buildings. It has been operating for 20 years as a self-replenishing pool of capital sustained as recipients pay back their loans from energy savings. Since its inception, the program has saved more than $250 million in energy costs for state agencies, schools and local governments and has become so popular that at last report, there was a backlog of nearly $30 million in retrofit projects waiting for loans. That’s a model worth replicating.

There is no lack of investment opportunities for the new energy economy. But we must make sure that everyone involved has the capacity, the resources and the time to do the job well.

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8 Responses to What Obama and DOE need to do to ensure the green stimulus funds are well spent

  1. Philip says:

    These are good points and for people concerned with the environment these nitty-gritty details, at this scale, are as important as photogenic weather events.

    Also, a typo observation in JR’s note of ‘whether rising’ for weatherizing.

    [JR: Darn that voice dictation software!]

  2. During the last days of the Bush administration, DOE awarded $80 billion in water contracts to a few companies.

    http://www1.eere.energy.gov/femp/

    So even though there will be money for this important infrastructure project in the stimulus package, who will get it has already been decided.

  3. The correct web cite for the last-minute $80 billion Bush DOE grant to the 16 favored firms is

    http://www2.eere.energy.gov/femp/news/news_detail.html?news_id=12150

    And this pre-emptive strike against the Obama team absorbed the available money for renewable energy as well as water.

  4. Rick C says:

    Joe,

    Part of the problem with this stimulus bill is that it provides far more to tax cuts then to renewable energy investments like the national electrical grid or investments in research for building more efficient photovoltaic panels for starters. Even on Chris Matthew’s show Jim Cramer just ripped the bill to pieces over how the investments in infrastructure were 1% of GDP when China is spending 20% of GDP in their stimulus budget. Why should this version of the stimulus package be supported?

  5. Rick C says:

    Joe,

    Part of the problem with this stimulus bill is that it provides far more to tax cuts then to renewable energy investments like the national electrical grid or investments in research for building more efficient photovoltaic panels for starters. Even on Chris Matthew’s show Jim Cramer just ripped the bill to pieces over how the investments in infrastructure were 1% of GDP when China is spending 20% of GDP in their stimulus budget. Why should this version of the stimulus package be supported?

    Sorry Joe I forgot to insert the video link at youtube:

    http://www.youtube.com/watch?v=q7kSt-CzZ-E

  6. Joe says:

    Well, the Senate just rejected $25 billion more for infrastructure.

    The Bush Administration and the Republicans Had no interest whatsoever in undoing they are economic mass. This stimulus bill is close to the one we’re going to end up with. Two thirds of its spend out in two years, and that is fine with me.

    Should it be larger? Maybe. But Republicans have enough votes to block what they want to and they want to block a larger bill.

  7. Rick C says:

    So when the Republican say “Country First” who’s country did they have in mind? It sure isn’t ours that’s for sure. They’d rather invest it in Iraq in what Joseph Stiglitz has calculated will cost the US taxpayer $3 trillion dollars. I guess there weren’t enough bridges to nowhere in the package to fund particularly if it is on a rarely travelled thoroughfare in Alaska.

  8. LHahn says:

    These are very important issues that the American Institute of Architects, one of my clients, have recently addressed with their recommendations for President Obama’s recovery plan and with the AIA’s Rebuild and Renew plan, learn more on the AIA’s blog, the Angle (http://blog.aia.org/angle/).