California – July 8, 2009
Use of Funds
GAO's work focused on nine federal programs, selected primarily because they have begun disbursing funds to states, include new programs, or include existing programs receiving significant amounts of Recovery Act funds. Program funds are being directed to help California stabilize its budget and support local governments, particularly school districts, and several are being used to expand existing programs. Funds from some of these programs are intended for disbursement through states or directly to localities. The funds include the following
Funds Made Available as a Result of Increased Medicaid Federal Medical Assistance Percentage (FMAP)
As of June 29, 2009, California has received about $3.3 billion in increased FMAP grant awards, of which it has drawn down almost $2.8 billion, or about 83 percent of its awards to date. California is planning on using funds made available as a result of the increased FMAP to help offset the state budget deficit. 
Highway Infrastructure Investment Funds
The U.S. Department of Transportation's Federal Highway Administration (FHWA) apportioned $2.570 billion in Recovery Act funds to California for highway infrastructure and other eligible projects. As of June 25, 2009, $1.558 billion of the $2.570 billion had been obligated and $1.21 million had been reimbursed to California. As of June 11, California had awarded 23 contracts totaling $134 million, 2 of which—totaling $71 million—are under construction: a highway rehabilitation project on Interstate 80 and construction of 3 miles of six-lane freeway on State Route 905 in San Diego County.
U.S. Department of Education State Fiscal Stabilization Fund (SFSF)
Education has awarded California about $3.99 billion for SFSF, and as of June 30, 2009, California state officials reported that about $2.14 billion in education stabilization funds had been expended.California is using most of the education stabilization funds—81.8 percent of total SFSF—to restore state aid to school districts (75 percent) and institutes of higher education (25 percent). The two school districts (Los Angeles and San Bernardino Unified) and university systems (University of California and California State University) we visited are generally using the funds to help avert layoffs. The other 18.2 percent of SFSF, government services funds, must be spent on public safety and other government services at the Governor’s discretion and is expected to be directed to public safety, specifically, corrections. As of June 30, 2009, California state officials reported that $727 million in government services funds had been expended.
Title I, Part A, of the Elementary and Secondary Education Act (ESEA) of 1965
Education has awarded California $565 million in Recovery Act ESEA Title I, Part A, funds or 50 percent of its total allocation of $1.1 billion. California's Department of Education is urging local districts to use these funds in ways that will build their long-term capacity to serve disadvantaged youth. The two school districts we visited told us that their preliminary plans for these funds include investment in additional training and coaching for teachers, class size reduction, support for learning centers, and the purchase of reading intervention curriculum materials.
Individuals with Disabilities Education Act (IDEA), Parts B and C
Education has awarded California $661 million in Recovery Act IDEA, Part B and C, funds, or 50 percent of its total allocation of $1.32 billion. The state plans to make these funds available to local education agencies to support special education and related services for infants, toddlers, children, and youth with disabilities through, among other things, saving jobs and investing in additional training and coaching for teachers. The two school districts we visited told us that they plan to use the funds to hire coaches or other specialists who will help teachers and assistants increase their skills in meeting the special needs of children with disabilities.
Weatherization Assistance Program
The U.S. Department of Energy (DOE) allocated about $186 million in total Recovery Act weatherization funding to California for a 3-year period. On April 1, 2009, DOE provided $18.6 million to California. Based on information available on June 30, 2009, California has obligated none of these funds. On June 18, DOE announced that California received an additional 40 percent of the Recovery Act weatherization money, or $74.3 million. California plans to begin disbursing its funds in July 2009 for weatherizing over 50,000 low-income family homes.
Workforce Investment Act Youth Program
The U.S. Department of Labor allotted about $187 million to California in Workforce Investment Act Youth Recovery Act funds. California has allocated about $159 million to local areas, based on information available as of June 30, 2009. California's 49 local areas are free to determine how much of their Recovery Act Workforce Investment Act Youth funding will be spent on summer activities, although in April the Governor issued a letter to local elected officials across the state encouraging them to ensure that most of the funding be expended on summer activities. The California Workforce Association estimates that over 47,000 California youth will participate in Recovery Act-funded summer employment activities in 2009.
Edward Byrne Memorial Justice Assistance Grants
The Department of Justice's Bureau of Justice Assistance has awarded $135 million directly to California in Recovery Act funding. Based on information available as of June 30, 2009, none of these funds have been obligated by the California Emergency Management Agency (CalEMA), which administers these grants for the state. About 90 percent is to be allocated by the state to local law enforcement agencies to support local drug reduction efforts. These funds will allow California law enforcement to concentrate efforts on the widespread apprehension, prosecution, adjudication, detention, and rehabilitation of offenders by enabling law enforcement agencies to create and retain from 275 to 300 positions over the next 4 years.
Public Housing Capital Fund
The U.S. Department of Housing and Urban Development has allocated approximately $117 million in Recovery Act formula grant awards from the Public Housing Capital Fund to 55 public housing agencies in California. Based on information available as of June 20, 2009, about $12.55 million had been obligated by those agencies. At the three housing agencies we visited—Area Housing Authority of the County of Ventura, Sacramento Housing and Redevelopment Agency, and San Francisco Housing Authority—this money, which flows directly to public housing agencies, will be used for various capital improvements, including replacing windows and roofs and rehabilitating vacant units.
Safeguarding & TransparencyBack to top
California's Recovery Act Task Force (the Task Force) has overarching responsibility for ensuring that the state's Recovery Act funds are spent efficiently and effectively and are tracked and reported in a transparent manner. The Task Force is relying on the state's existing internal control structure, enhanced to include internal readiness reviews and activities of the state's Recovery Act Inspector General, to fulfill this responsibility. The State Auditor will also be expanding the scope of her work to include specific focus on state programs receiving Recovery Act funds. The Task Force will continually report on the use and status of Recovery Act funds using the state's Web site (www.recovery.ca.gov). The Task Force has notified state agencies of their responsibility to separately track and account for Recovery Act funds that both they and their subrecipients receive. State agency and subrecipient officials we interviewed told us that they will establish separate accounting codes within their existing accounting systems that will enable them to effectively track Recovery Act funds. However, accumulating this information at the statewide level will be difficult using existing mechanisms, which currently consist of lengthy, manually updated spreadsheets. The state has issued a request for proposal for a system to effectively track and report all state-level Recovery Act funds to the federal government. State agency and subrecipient officials we spoke with also told us that they will use their existing internal control and oversight processes to maintain accountability for Recovery Act funds at the program level.
Assessing the Effects of SpendingBack to top
California state officials and local recipients continue to express concern about the lack of clear federal guidance on assessing the results of Recovery Act spending. Additionally, officials expressed concerns about the potential for inconsistent reporting among subrecipients or contractors. For example, California's Department of Transportation (Caltrans) is planning to rely on job reports and payroll information submitted by contractors, while education programs are planning to estimate the number of employees who would have been otherwise laid off. Aside from job creation, several recipient agencies we spoke with are also developing and implementing plans to evaluate other effects of Recovery Act spending. For example, CalEMA officials told us that they have been given new draft performance measures by the Department of Justice that include Justice Assistance Grant funds. These 71 separate measures are to be assessed each quarter by local law enforcement agencies and submitted to CalEMA for reporting to the department's Bureau of Justice Assistance 30 days after the end of each quarter.
Full July ReportBack to top
- Recovery Act: States' and Localities' Current and Planned Uses of Funds While Facing Fiscal Stresses
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 167 pages) Accessible Text
- Recovery Act: States' and Localities' Current and Planned Uses of Funds While Facing Fiscal Stresses (Appendixes)
- Summary (HTML) Full Report (PDF, 736 pages) Accessible Text
-  Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
-  The increased FMAP available under the Recovery Act is for state expenditures for Medicaid services. However, the receipt of this increased FMAP may reduce the funds that states would otherwise have to use for their Medicaid programs, and states have reported using these available funds for a variety of purposes
-  We did not review Edward Byrne Memorial Justice Assistance grants awarded directly to local governments in this report because the Bureau of Justice Assistance's solicitation for local governments closed on June 17; therefore, not all of these funds have been awarded.