Under the American Recovery and Reinvestment Act of 2009 (ARRA), also known as the economic stimulus package, certain recipients of funds appropriated in ARRA (most grant and loan recipients, contractors, and subcontractors) are required to report the number of jobs they created or retained with ARRA funding after the end of each calendar quarter. The law also requires CBO to comment on those reported numbers. Today CBO released a reportto satisfy that requirement.
CBO’s Estimates of ARRA’s Impact on Employment and Economic Output
Looking at recorded spending to date as well as estimates of the other effects of ARRA on spending and revenues, CBO has estimated the law’s impact on employment and economic output using evidence about how previous similar policies have affected the economy and various mathematical models that represent the workings of the economy. On that basis, CBO estimates that in the fourth quarter of calendar year 2009, ARRA added between 1.0 million and 2.1 million to the number of workers employed in the United States, and it increased the number of full-time-equivalent (FTE) jobs by between 1.4 million and 3.0 million. Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers. CBO also estimates that real (inflation-adjusted) gross domestic product (GDP) was 1.5 percent to 3.5 percent higher in the fourth quarter than would have been the case in the absence of ARRA.
Data on actual output and employment during the period since ARRA’s enactment are not as helpful in determining ARRA’s economic effects as might be supposed, because isolating the effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, the new data add only limited information about ARRA’s impact. Economic output and employment in 2009 were lower than CBO had projected at the time of enactment. But in CBO’s judgment, that outcome reflects greater-than-projected weakness in the underlying economy rather than lower-than-expected effects of ARRA.
Limitations of Recipients’ Estimates
CBO’s estimates differ substantially from the reports filed by recipients of ARRA funding. Those recipients reported that ARRA funded nearly 600,000 fulltime-equivalent (FTE) jobs during the fourth quarter of 2009. Such reports, however, do not provide a comprehensive estimate of the law’s impact on employment in the United States. That impact may be higher or lower than the reported number for several reasons (in addition to any issues about the quality of the data in the reports):
Some of the reported jobs might have existed in the absence of the stimulus package, with employees working on the same activities or other activities.
The reports filed by recipients measure only the jobs created by employers who received ARRA funding directly or by their immediate subcontractors (so-called primary and secondary recipients), not by lower-level subcontractors.
The reports do not attempt to measure the number of jobs that may have been created or retained indirectly as greater income for recipients and their employees boosted demand for products and services.
The recipients’ reports cover only certain appropriations made in ARRA, which encompass about one-fifth of the total amount spent by the government or conveyed through tax reductions in ARRA during the fourth quarter; the reports do not measure the effects of other provisions of the stimulus package, such as tax cuts and transfer payments (including unemployment insurance payments) to individuals.
Consequently, estimating the law’s overall effects on employment requires a more comprehensive analysis than the recipients’ reports provide.
The American Recovery and Reinvestment Act of 2009 (Recovery Act) specifies several roles for GAO, including conducting bimonthly reviews of selected states' and localities' use of funds made available under the act. This testimony is based on GAO's bimonthly work in California, where the Recovery Act provided more than $85 billion--or about 10 percent of the funds available nationally--for program funding and tax relief. This testimony provides a general overview of: (1) California's use of Recovery Act funds for selected programs, (2) the approaches taken by California agencies to ensure accountability for Recovery Act funds, and (3) the impacts of these funds. This testimony focuses on selected programs that GAO has covered in previous work including the use of Recovery Act funds by the state and two localities' --City of Los Angeles and County of Sacramento, Highway Infrastructure Investment, and the Weatherization Assistance Program. GAO also updated information on three education programs with significant Recovery Act funds being disbursed--the State Fiscal Stabilization Fund (SFSF), and Recovery Act funds for Title I, Part A, of the Elementary and Secondary Education Act of 1965 (ESEA), as amended, and Part B of the Individuals with Disabilities Education Act (IDEA),. GAO provided a draft of this statement to California state and local officials and incorporated their comments where appropriate. (1) State and Local Budgets: Despite the influx of Recovery Act funds, California continues to face severe budgetary pressures and estimates a current shortfall of as much as $21billion --roughly one-quarter of the state's annual budget expenditures. California's cities and counties are also struggling with budget problems. According to officials from the City of Los Angeles and County of Sacramento, Recovery Act funds are helping to preserve essential services and repair infrastructure but have generally not helped stabilize their base budgets. (2) Transportation Infrastructure: According to California officials, 100 percent of California's $2.570 billion highway infrastructure Recovery Act apportionment has been obligated. The state has dedicated most of these funds for pavement improvements--including resurfacing and rehabilitating roadways. (3) Weatherization Assistance: As of January 25, 2010, California had awarded about $66 million to 35 local service providers throughout the state for weatherization activities. State and federal requirements, such as prevailing wage rates, as well as the implementation of these requirements, have delayed weatherization and, as of February 26, 2010, the state had weatherized only 849 homes--less than 2 percent of the 43,000 homes that are estimated to be weatherized with Recovery Act funds. (4) Education: As of February 19, 2010, California had distributed approximately $4.7 billion for three education programs, including the SFSF. Local education agencies plan to use more than half of these funds to retain jobs; however, a majority reported that they still expect job losses. Also, cash management issues, related to federal cash balances and the calculation and remittance of interest, remain, but the California Department of Education has taken preliminary steps to resolve them.(5) Accountability: California oversight entities and state agencies have taken various actions to oversee Recovery Act funds, including training, risk assessments, on-site monitoring, and audits. The Governor established the Recovery Task Force to ensure funds are spent efficiently and effectively, and the State Auditor and Inspector General also have key oversight roles. (6) Jobs Reporting: Recipients reported that 70,745 jobs were funded in California during the last quarter of 2009. However, about 70 percent of these jobs were in education and were not reported using the Office of Management and Budget's (OMB) latest guidance, and therefore were not calculated consistently with other jobs reported.
The American Recovery and Reinvestment Act of 2009 (Recovery Act)--initially estimated to cost $787 billion in spending and tax provisions--aims to promote economic recovery, make investments, and minimize or avoid reductions in state and local government services. The Recovery Act provided the Department of Energy (DOE) more than $43.2 billion, including $36.7 billion for projects and activities and $6.5 billion in borrowing authority, in areas such as energy efficiency and renewable energy, nuclear waste clean-up, and electric grid modernization. This testimony discusses (1) the extent to which DOE has obligated and spent its Recovery Act funds, and (2) the factors that have affected DOE's ability to select and start Recovery Act projects. In addition, GAO includes information on ongoing work related to DOE Recovery Act programs. This testimony is based on prior work and updated with data from DOE. As of February 28, 2010, DOE reported it had obligated $25.7 billion (70 percent) and reported expenditures of $2.5 billion (7 percent) of the $36.7 billion it received under the Recovery Act for projects and activities. For context, as of December 31, 2009, DOE reported that it had obligated $23.2 billion (54 percent) and reported expenditures of $1.8 billion (4 percent). The percentage of Recovery Act funds obligated varied widely across DOE program offices and ranged from a high of 98 percent in the Energy Information Administration to a low of 1 percent for the Loan Guarantee Program Office. None of DOE's program offices reported expenditures of more than a third of their Recovery Act funds as of February 28, 2010. Officials from DOE and states that received Recovery Act funding from DOE cited certain federal requirements that had affected their ability to implement some Recovery Act projects. For example: (1) Davis Bacon Requirements. Officials reported that Davis-Bacon requirements had affected the start of projects in the Weatherization Assistance Program because the program had previously been exempt from these requirements. (2) National Environmental Policy Act (NEPA). DOE officials told us that NEPA may affect certain projects that are likely to significantly impact the environment, thereby requiring environmental assessments or environmental impact statements. (3) National Historic Preservation Act (NHPA). Officials from the Michigan Department of Human Services told us that about 90 percent of the homes scheduled to be weatherized under the Weatherization Assistance Program would need a historic review. Additionally, DOE and state officials told us that (4) Newness of programs. In some cases, because some Recovery Act programs were newly created, officials needed time to establish procedures and provide guidance before implementing projects. (5) Staff capacity. DOE officials also told us that they experienced challenges in hiring new staff to carry out Recovery Act work. Also, District of Columbia officials told us they needed to hire 6 new staff members to oversee and manage the weatherization program. (6) State, local, or tribal issues. The economic recession affected some states' budgets, which also affected states' ability to use some Recovery Act funds, such as difficulty providing matching funds.
This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the fifth in a series of reports since passage of the Recovery Act on the uses of and accountability for Recovery Act funds in 16 selected states, certain localities in those jurisdictions, and the District of Columbia (District). These jurisdictions are estimated to receive about two-thirds of the intergovernmental assistance available through the Recovery Act. It is also the second report in which GAO is required to comment on the jobs created or retained as reported by recipients of Recovery Act funds. GAO collected and analyzed documents and interviewed state and local officials and other Recovery Act award recipients. GAO also analyzed federal agency guidance and spoke with officials at federal agencies overseeing Recovery Act programs. As of February 12, 2010, $88.7 billion, or a little more than 30 percent, of the approximately $282 billion of total Recovery Act funds for programs administered by states and localities had been paid out by the federal government. Of that amount, approximately $36 billion has been paid out since the start of federal fiscal year 2010. As of January 29, 2010, the 16 states and the District have drawn down about $30 billion in increased Federal Medical Assistance Percentage (FMAP) funds, representing nearly 100 percent of these states' grant awards for federal fiscal year 2009 and about 57 percent for the first and second quarters of federal fiscal year 2010. Most states reported that, without the increased FMAP funds, they could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children. Most states reported that the increased FMAP funds were integral to maintaining current eligibility levels, benefits, and services and to avoiding further program reductions. As of February 16, 2010, the Federal Highway Administration (FHWA) had obligated $25.1 billion and the Federal Transit Administration (FTA) had obligated about $7.5 billion--combined about $32.6 billion (over 93 percent) of the $35 billion that the Recovery Act provided for highway infrastructure projects and public transportation. Nationwide, Recovery Act funding has been obligated for over 11,000 eligible highway projects. However, some requirements, such as the Recovery Act's maintenance-of-effort requirement--which is designed to prevent states from substituting federal funds for state funds--have proven challenging. Many states have yet to complete a maintenance-of-effort certification that DOT finds fully acceptable, and this, coupled with states' fiscal challenges, raises questions as to whether this requirement will achieve its intended purpose. As of January 22, 2010, the 16 states and the District had drawn down, in total, about $13.3 billion (56 percent) from the State Fiscal Stabilization Fund (SFSF); $1.1 billion (17 percent) of Elementary and Secondary Education Act (ESEA) Title I, Part A funds; and $1.2 billion (17 percent) of Individuals with Disabilities Education Act (IDEA), Part B, Recovery Act funds available to them. Much of the Recovery Act education funds have been used to pay education staff, including teachers. Housing agencies are to obligate the $3 billion in Public Housing Capital Fund formula grant Recovery Act funds they received by March 17, 2010. As of January 30, 2010, about 31 percent of these funds had not been obligated. Over 200 agencies reported obligating no funds. Housing and Urban Development (HUD) has worked hard to implement the Recovery Act but has faced challenges in simultaneously carrying out public housing programs mandated by the Recovery Act, including designing and carrying out a $1 billion grant competition, while meeting its continuing responsibilities for the ongoing Public Housing Capital Fund program. As a result, HUD delayed obligating its fiscal year 2009 funds by 3 months. With regard to the Weatherization Assistance Program, as of December 31, 2009, the Department of Energy (DOE) had obligated about $4.73 billion to states for weatherization activities. On February 24, 2010, DOE reported that about 5 percent of the approximately 593,000 homes DOE originally planned to weatherize using Recovery Act funds had been weatherized as of December 31, 2009. Progress was achieved in addressing some data quality and reporting issues identified in the first round; however data errors, reporting inconsistencies, and decisions by some recipients not to use the new job reporting guidance for this round compromise data quality and the ability to aggregate the data.
Under the American Recovery and Reinvestment Act of 2009 (ARRA), also known as the economic stimulus package, certain recipients of funds appropriated in ARRA (most grant and loan recipients, contractors, and subcontractors) are required to report the number of jobs they created or retained with ARRA funding after the end of each calendar quarter. The law also requires CBO to comment on those reported numbers. Today CBO released a report to satisfy that requirement.
The American Recovery and Reinvestment Act of 2009 (Recovery Act) has the broad purpose of stimulating the economy. It includes substantial appropriations for construction projects that, under the act's prevailing wage provision, are subject to Davis-Bacon Act requirements. That is, contractors must pay laborers and mechanics who work on those projects at least the prevailing wage rates set for their local area by the Secretary of Labor. In addition, contractors must submit certified payrolls and pay their workers weekly. Prior to the Recovery Act, some federal programs with construction projects were already subject to Davis-Bacon Act requirements. Others, however, are subject to the requirements for the first time because the Recovery Act extended the requirements to all construction projects supported by the act. GAO was asked to (1) identify the programs that are newly affected by the Recovery Act's prevailing wage provision and (2) examine the extent to which that provision is expected to affect each of those newly affected programs. GAO obtained data from 27 agencies and spoke with federal, state, and local officials as well as contractors involved with the newly affected programs. Although GAO is not making recommendations in this report, these findings may be helpful in considering and designing legislation with similar objectives. Fortyprograms are newly subject to Davis-Bacon requirements as a result of the Recovery Act's prevailing wage provision, according to federal agency officials. Of these, 33 programs existed prior to the Recovery Act and are subject to Davis-Bacon requirements for the first time under the act, while 7 are newly created programs. Together, the 40 programs account for about $102 billion of the $309 billion that was appropriated by the Recovery Act for projects and activities. However, a smaller amount of these funds will be subject to Davis-Bacon requirements because not all of the funds will be used for construction activities and only a portion of those funds will be used to pay labor wages. For those programs that are newly subject to Davis-Bacon requirements, officials had mixed views on the impact of these requirements on program costs and goal achievement. In some cases, officials said Davis-Bacon requirements would have little or no impact on program costs for a few reasons, such as (1) the program having a small amount of construction activities, (2) prevailing wage rates that were in line with expectations, and (3) companies' previous experience with weekly payrolls. In other cases, officials said the requirements would have a moderate to large impact on program costs and/or goals. For example, officials from the Department of Energy's (DOE) Energy Efficiency and Conservation Block Grants program anticipated a potentially large cost impact as a result of the significant amount of funds to be spent on construction labor wages. Officials from DOE's Weatherization Assistance Program reported that weatherization projects in buildings taller than four stories will require workers to be paid a commercial prevailing wage rate under the Davis-Bacon Act that is higher than what would otherwise be used and could potentially reduce the number of homes weatherized. Additionally, weatherization officials said that Davis-Bacon requirements affected the program's timing because prevailing wage rates for weatherization workers were not fully available until September 2009. Further, officials from the Department of Housing and Urban Development's Lead Hazard Reduction Program noted that Davis-Bacon requirements would require a more detailed payroll tracking system that could be particularly burdensome for small companies. Those officials also explained that because administrative costs are likely to increase, the department is in the process of increasing the cap on how much recipients can spend on administrative costs.
The American Recovery and Reinvestment Act of 2009 (Recovery Act), was enacted to bolster the struggling U.S. economy at an estimated cost of $787 billion, of which more than a third was in the form of tax relief to the public. This report (1) describes the status of the Internal Revenue Service's (IRS) implementation of Recovery Act tax provisions; (2) examines whether IRS captured or planned to capture data on the use of the provisions; (3) assesses IRS's efforts to determine potential abuse of the provisions; and (4) discusses possible lessons learned for future tax administration. GAO analyzed IRS's implementation and data-collection plans for each provision; reviewed IRS and Department of the Treasury (Treasury) risk-management documents; interviewed federal and industry officials; and focused on five provisions implemented in 2009: Build America Bonds (BAB), Consolidated Omnibus Budget Reconciliation Act (COBRA), First-Time Homebuyer Credit (FTHBC), Making Work Pay Credit, and Net Operating Loss carrybacks. The Recovery Act posed significant implementation challenges for IRS because it had more than 50 provisions, many of which were immediately or retroactively available and had to be implemented during the tax filing season--IRS's busiest time. Some provisions affected the 2009 filing season (2008 tax year), while others mainly will affect the 2010 and 2011 filing seasons. IRS responded quickly to its challenges. IRS went beyond its typical data-collection efforts and plans to collect some data to track many Recovery Act provisions. Specifically, IRS currently has detailed data-collection plans for 17 or about 31 percent of the provisions and 63 percent of the total estimated cost of the tax provisions. Initial collections did not fully or accurately capture the use of some provisions. In addition, very little of the data that IRS has collected on the tax provisions has been released publicly. Similar to what GAO has found about the act's spending projects, the tax provisions' economic stimulus effect cannot be precisely isolated. Economists use evidence from macroeconomic forecasting models and models that extrapolate from historical data to assess stimulus effects. These approaches, however, are imprecise because historical experience may not apply well given the magnitude of the Recovery Act. The effect of some provisions on specific aspects of the economy may be described in general terms. For example, the Council of Economic Advisers noted that in addition to other policy actions affecting residential real estate, the FTHBC may have moderated construction-industry job losses. As a result of IRS's FTHBC prerefund compliance reviews, as of February 1, 2010, IRS had frozen about 140,000 refunds pending civil or criminal examination, and, as of December 2, 2009, had identified 175 criminal schemes and had 123 criminal investigations open. Although IRS addressed some challenges with the FTHBC in these ways, it still needs to finalize a way to identify individuals who fail to report home sales and might be required to repay part of the credit because their homes ceased to be their principal places of residence within 3 years of purchase. A form already exists that could be used for this purpose--Form 1099-S, "Proceeds from Real Estate Transactions," but it is not clear IRS could use the form for this purpose under current legislative authority. As GAO's review ended, IRS identified third-party data that it expected to use and then evaluate the results. Issues IRS encountered in its Recovery Act experience could provide useful guidance for the future. Officials intend to do a lessons-learned study after the 2010 filing season but have yet to develop plans for doing so.
The American Recovery and Reinvestment Act of 2009 (Recovery Act) aims to stimulate the economy. It provided $787 billion in spending and tax provisions; more than a third of the money was slated for projects and activities, including construction and certain research projects. To implement a project using federal funds, agencies and funding recipients must comply with federal laws and regulations. GAO was asked to identify key federal requirements that apply to Recovery Act projects and to assess the extent to which (1) selected agencies have obligated and spent funds for Recovery Act projects and (2) federal requirements and other factors have affected, or are expected to affect, project selection and start dates. GAO requested data from 27 agencies that received appropriations under the act. We also spoke with officials responsible for implementing Recovery Act projects in 16 states and the District of Columbia, which together are estimated to receive about two-thirds of the intergovernmental federal assistance available under the act. We also spoke with organizations representing state and local officials and the private sector, as well as private sector contractors. Although GAO is not making recommendations in this report, these findings may be helpful in considering and designing legislation with similar objectives. As of December 31, 2009, the 27 federal agencies GAO reviewed had obligated a total of $194 billion (63 percent) of the approximately $309 billion that was appropriated by the Recovery Act for projects and activities, according to data provided by agency officials. By this date, the percentage of funds obligated ranged from nearly 100 percent for the National Endowment for the Arts ($50 million) to 18 percent for the Social Security Administration ($183 million). As of that same date, the agencies reported they had spent 20 percent ($61 billion) of their appropriated funds. However, according to agency officials, the amount reported as spent may not accurately reflect the amount of work done on a given project because payment for federal projects generally occurs after work is completed, and the recipient may not yet have submitted an invoice for payment. Some federal agency officials reported that certain federal requirements and other factors affected their ability to select and start Recovery Act projects. These include the following: (1) Davis-Bacon requirements. Four federal agencies--the Departments of Commerce, Energy, and Housing and Urban Development, and the Environmental Protection Agency--told us that Davis-Bacon requirements affected the timing of some of their Recovery Act projects. For example, the Department of Energy's Weatherization Assistance Program became subject to the Davis-Bacon requirements for the first time after having been previously exempt from those requirements. Thus, the Department of Labor had to determine the prevailing wages for weatherization workers in each county in the United States, a task it completed on September 3, 2009. Seven out of 16 states and the District of Columbia that GAO has been reviewing said that they had waited to begin weatherizing homes until the Department of Labor had determined county-by-county prevailing wage rates for their state. States used only a small percentage of their available funds in 2009, mostly because state and local agencies needed time to develop the infrastructures required for managing the significant increase in weatherization funding and for ensuring compliance with Recovery Act requirements, including Davis-Bacon requirements. (2) Buy American requirements. Five federal agencies--the Departments of Commerce, Education, Homeland Security, and Housing and Urban Development, as well as the Environmental Protection Agency--told us that Buy American provisions had affected their ability, or their grantees' ability, to select or start some Recovery Act projects. (3) The National Historic Preservation Act. Two federal agencies--the Departments of Commerce and Transportation--told us that this act affected the selection and start of projects. Federal agency officials also stated that factors other than federal requirements affected their ability to quickly select or start projects. These include (1) challenges associated with starting entirely new programs, (2) states' budgeting issues, such as difficulties in providing matching funds, (3) higher staff workloads because of the act, (4) seasonal issues or weather, and (5) lack of clarity on the meaning of "shovel-ready."
Due to recent turmoil in U.S. credit markets, many lenders have been reluctant to offer conventional loans--that is, loans not guaranteed by the federal government--to small businesses so that they can finance their operations and capital needs. While the Small Business Administration's (SBA) principal loan guarantee programs, the 7(a) and 504 programs, are intended to help small businesses raise critical financing that they may have difficulty obtaining from other sources, the availability of such loans has also declined. Under the 7(a) program, SBA traditionally has provided lenders guarantees on up to 85 percent of the value of loans to qualifying small businesses in exchange for fees to help offset the costs of the program. Under the 504 program, which generally applies to small business real estate and other fixed assets, SBA provides certified development companies with a guarantee on up to 40 percent of the financing of the projects' costs in exchange for fees--the small business borrowers and other lenders provide the remaining 60 percent of the financing on an unguaranteed basis. Traditionally, lenders, such as banks, that participate in the 7(a) or 504 programs often sell qualifying small business loans on the 7(a) and 504 secondary markets to raise funds necessary for additional lending. However, from mid-2008 to early-2009, investors that had typically purchased securities collateralized by the pools of 7(a) guaranteed small business loans and certain 504 loans largely withdrew from the secondary markets due to potential losses, and as a result, many such loans remained on the balance sheets of the broker-dealers that package the securities or on the balance sheets of the original lenders. According to SBA, the dollar volume of 7(a) loans sold as securities on the secondary market dropped from $425.4 million to $85.9 million, or 79.8 percent, from the end of the third quarter of 2008 to the end of the first quarter of 2009. Under the American Recovery and Reinvestment Act (ARRA), enacted on February 17, 2009, SBA was required to implement eight new authorities--referred to throughout this report, and by ARRA, as administrative provisions--to help facilitate small business lending and enhance liquidity in the secondary markets. The provisions included requirements for, among other things, (1) temporarily lowering or eliminating certain fees on 7(a) and 504 loans, as well as increasing the maximum guarantee on the former; (2) establishing new programs to facilitate secondary market activity; and (3) establishing a new, temporary guaranteed loan program for viable small businesses experiencing financial hardship, which SBA refers to as the America's Recovery Capital (ARC) Loan Program. The administrative provisions took effect when ARRA was enacted, with certain provisions granting SBA emergency rulemaking authority to hasten their implementation. While SBA did not meet its internal June 2009 deadline for implementing all of the ARRA administrative provisions, all such provisions were implemented by November 2009. Of the three provisions that required the issuance of regulations using SBA's emergency rulemaking authority, SBA implemented Section 506 (ARC Loan Program) on June 15, 2009, but did not implement the Section 503 secondary market provision (504 first-lien guarantee) until October 30, 2009, and the Section 509 (loans to systemically important broker-dealers) until November 19, 2009. Consistent with the findings in our April 2009 report, we identified several factors that may have contributed to SBA's delay in implementing these administrative provisions, including: (1) challenges related to the creation of new and complex programs, including new systems and processes, regulations, policies, and procedures; (2) SBA's reduced staffing levels and loss of expertise through retirements and turnover in key positions; and (3) challenges associated with resolving key policy issues and addressing statutory language that, while designed to protect taxpayer interests, could limit acceptance of market participants. For example, implementation of Section 509 was delayed until SBA officials could determine the extent to which broker-dealers, and perhaps small business lenders, would be required to share in the potential losses associated with extending the guarantee in the 504 loan program. While requiring broker-dealers and lenders to share in potential losses could help ensure sound loan underwriting and thereby limit SBA's potential exposure, it could also lessen their willingness to participate, in turn limiting the expansion of secondary market activity as ARRA intended. Under the interim final rule, which SBA published on October 30, 2009, broker-dealers retain 5 percent of the potential losses on 504 first-lien loans, lenders 15 percent, and SBA 80 percent. SBA data suggest that liquidity in 7(a) and 504 loan markets appears to have largely recovered. Specifically, SBA data show that lenders' origination of 7(a) loans in the primary market doubled from an average of about $650 million per month in the fourth quarter of 2008 to an average of about $1.4 billion per month in the third quarter of 2009, which is higher than second and third quarter 2008 average monthly originations of $1.1 billion and $1 billion, respectively. In addition, SBA 7(a) secondary market sales more than tripled between the fourth quarter of 2008 and the third quarter of 2009, from a monthly average of about $108.8 million to a monthly average of about $336.9 million. Furthermore, data indicate that the secondary market for the SBA-guaranteed, or debenture, portion of 504 loans has also improved. SBA officials and market participants we interviewed said there has been a significant recovery in the markets for 7(a) and 504 loans throughout 2009, although they also said that the secondary market for 504 first-lien loans remains limited.
The American Recovery and Reinvestment Act of 2009 (Recovery Act) included more than $48 billion for the Department of Transportation's (DOT) investment in transportation infrastructure, including highways, rail, and transit. This testimony--based on Government Accountability Office (GAO) report GAO-10-231, issued on December 10, 2009, in response to a mandate under the Recovery Act--addresses (1) the uses of Recovery Act highway funding, including the types of projects states have funded and efforts by DOT and the states to meet the requirements of the act, and (2) the uses of Recovery Act transit funding and how recipients of Recovery Act funds are reporting information on the number of jobs created and retained under section 1512. In GAO-10-231, GAO continues to examine the use of Recovery Act funds by 16 states and the District of Columbia (District), representing about 65 percent of the U.S. population and two-thirds of the federal assistance available through the act. GAO also obtained data from DOT on obligations and reimbursements for the Recovery Act's highway infrastructure and public transportation funds. GAO updates the status of agencies' efforts to implement previous GAO recommendations to help address a range of accountability issues as well as a matter for congressional consideration. No new recommendations are being made at this time. The report draft was discussed with federal and state officials, who generally agreed with its contents. Three-quarters of Recovery Act highway funds have been obligated, and reimbursements from the Federal Highway Administration (FHWA) are increasing. As of November 16, 2009, $20.4 billion had been obligated for just over 8,800 highway projects nationwide and $4.2 billion had been reimbursed nationwide by FHWA. States continue to dedicate most Recovery Act highway funds for pavement projects, but use of funds may vary depending on state transportation goals. Almost half of Recovery Act highway obligations nationally have been for pavement improvements--including resurfacing, rehabilitating, and reconstructing roadways. About 10 percent of funds has been obligated to replace and improve bridges, while 9 percent has been obligated to construct new roads and bridges. States are taking steps to meet Recovery Act highway requirements; for example, both state and federal officials believe the states are on track to obligate all highway funds by the March 2010 1-year deadline. However, two factors may affect some states' ability to meet the requirement. First, many states are awarding contracts for less than the original cost estimates; this allows states to have funds deobligated and use the savings for other projects, but additional projects must be identified quickly. Second, obligations for projects in suballocated areas, while increasing, are generally lagging behind obligations for statewide projects in most states and lagging considerably behind in a few states. In the weeks ahead, FHWA and the states have the opportunity to exercise diligence to both promptly seek deobligation of known savings and to identify projects that make sound use of Recovery Act funding. The Federal Transit Administration reports that the majority of transit funds have been obligated. As of November 5, 2009, almost $6 billion of the $6.9 billion appropriated for the Transit Capital Assistance Program had been obligated nationwide. Almost 88 percent of these obligations are being used for transit facilities, bus fleets, and preventive maintenance. The remaining funds are being used for rail car purchases, leases, and training, among other things--all of which are eligible expenses. Through our ongoing audit work, GAO continued to find confusion among recipients about how to calculate the numbers of jobs created and saved that is required by Recovery Act reporting requirements. First, a number of transit agencies continue to express confusion about calculating the number of jobs resulting from Recovery Act funding, especially with regard to using Recovery Act funds for purchasing equipment, such as new buses. The second area of confusion GAO found involved the methodology recipients were using to calculate full-time equivalents for the recipient reporting requirements. For example, in one state, four transit entities used a different denominator to calculate the number of full-time equivalent jobs they reported on their recipient reports for the period ending September 30, 2009. In its September 2009 report, GAO recommended that DOT continue its outreach to transit agencies regarding reporting requirements and provide additional guidance, as appropriate. DOT officials stated that they are continuing outreach to transit agencies and will continue to assess the need to provide additional information.