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Education Stimulus

State Progress on Race to the Top

February 22, 2011

Late last August, U.S. Secretary of Education Arne Duncan announced ten winners of the second round of the Race to the Top grant competition. Race to the Top—a program enacted in the American Recovery and Reinvestment Act—provided $4.0 billion in three-year competitive grants to states to implement education reform strategies. A total of 11 states and the District of Columbia received Race to the Top (RttT) grants in that initial round of funding. This means that states have had between 6 and 11 months to implement their grant proposals thus far. What is their progress?

Based on reports from the U.S. Department of Education, states have been slow to spend their RttT funds. In total, only $38.6 million, or 1.0 percent, of the RttT grants have been drawn down. Unsurprisingly, Tennessee and Delaware, the two states to receive funds in March 2010 from the first round of grants, have drawn down the highest percentage of their funds. As of February 11th, Delaware had drawn down $8.7 million, or 7.3 percent, of its $119.1 million grant and Tennessee had drawn down $26.9 million, or 5.4 percent of its $500.7 million grant. However, these states are nearly one year into their three-year grants, meaning that they will have to spend their funds much more quickly over the next two years to spend down their grants entirely.

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The other nine states and the District of Columbia have drawn down very small amounts of their funds so far. Of this group, Massachusetts has drawn the most $1.6 million, or 0.7 percent, of its $250 million grant. Ohio and Florida have both drawn down about half of a million, or roughly 0.1 percent of their grants. And Georgia, Hawaii, Rhode Island, and the District of Columbia have not drawn down any funds. This does not necessarily mean that they have not begun spending RttT funds, but it does mean that they have not yet submitted a request for reimbursement to the federal government for any RttT related expenses.

In all, it seems reasonable that many states are just beginning to draw down funds for their RttT grants. In most cases, states had a lengthy planning period before major activities began which included hiring staff and project managers to implement their grant proposals, finding vendors for the new data and support services required in the grants, and confirming district participation in the plan. Similarly, newly elected governors in some states have pushed back on their RttT plans, slowing progress. And the worsening economic situation in some states has further affected that planning.

Where will states go from here? The majority of states have about two and a half years to spend down the remainder of their grants – 99 percent or more of their original awards in most cases. Spending will likely ramp up in the coming months, especially as vendors begin work and participating school districts begin more aggressive implementation during the start of the 2011-12 school year.

Check back with Ed Money Watch for more updates.

What is Happening with the Education Jobs Fund?

February 8, 2011

Almost six months ago to the day, President Obama signed into law the Education Jobs Fund, a $10 billion program that provides funding to states to support employment related expenses for K-12 education. Congress and the president believed that the $10 billion program would be necessary to keep public schools afloat as states confronted the end of the State Fiscal Stabilization Fund, a similar program created by the American Recovery and Reinvestment Act of 2009. So what has happened with the new money provided by the Education Jobs Fund over the last six months?

As could be expected, some states spent the funds quickly to make up for shortages in state funding for education. According to Department of Education data, Kansas has drawn down 99.9 percent of its funds and Georgia has drawn down 99.7 percent. South Dakota has drawn down its entire $26.3 million obligation. This finding is somewhat surprising given that South Dakota is one of the few states that did not face a particularly large budget shortfall in fiscal year 2010 (4.3 percent of the state’s general fund according to the Center for Budget and Policy Priorities).

Other states, conversely, have drawn down literally none of the federal funds that have been obligated to them. Colorado, Delaware, Hawaii, Louisiana, Missouri, Montana, Nebraska, New York, North Dakota, Pennsylvania, Vermont, West Virginia, and the District of Columbia have not accessed any of their federal Ed Jobs Funds. This could mean that these states are still working through funding they were allocated under the 2009 State Fiscal Stabilization Fund and do not need to tap into their Education Jobs Funds to make up for state funding gaps in K-12 education. Or, it is possible that some of these states have yet to request reimbursement from the federal government for expenditures they have already made with Education Jobs Fund monies. Similarly, it is possible that some of these states have yet to determine how they will use the funds. Regardless, the funds expire September 30, 2012, giving these states a little over a year and a half to draw down all of their funds.

Finally, two states have not participated in the program at all thus far. South Carolina has apparently chosen not to apply for the funds at all, despite encouragement from the Department of Education. Texas, on the other hand, has yet to submit a successful application for the funds. ED rejected Texas’ initial application in early September of 2010 because it contained conditional assurances of education funding. In other words, Texas’ application only guaranteed a certain level of education funding if tax revenues remained stable. ED would not accept these assurances, saying that Texas had to unconditionally guarantee a certain level of education spending regardless of tax revenues. Texas actually is required to submit a different application from the rest of the states because of a provision in the law that places a stricter maintenance of effort requirement on the state. It does not appear that Texas has submitted a revised application.

To date, states have drawn down $2.3 billion of the $9.0 billion (25.9 percent) in funds that have been obligated. California accounts for nearly half of this amount because it has drawn down almost $1.1 billion of its $1.2 billion allocation (89.5 percent). States have until September 30th, 2012 to drawn down the remaining three-quarters of the funds. Though it is possible that some states will not use all of the funds that have been allocated to them, others will likely hold off on releasing the funds until the 2011-12 school year, giving them the summer of 2011 to plan for how they will use the funds.

Check back with Ed Money Watch for more updates on the Education Jobs Fund and how the states are distributing them.

For a full table of obligations and outlaid funds under the Education Jobs Fund, click here.

Recovery.gov Releases Newest ARRA Jobs Numbers

February 1, 2011

It has been nearly two years since the President signed the American Recovery and Reinvestment Act of 2009 (ARRA). As part of the law, states and other recipients of these federal funds were required to submit data to the federal government on funds received and expended under each program. For education programs, this included Title I and Individuals with Disabilities Education Act grants and the State Fiscal Stabilization Fund, among other programs. Additionally, recipients had to report how many jobs had been saved or created by those expenditures in each fiscal quarter. This information is meant to estimate the degree to which spending from the ARRA has actually stimulated the economy and created jobs. Though recipient data is often flawed, it has become an important resource for tracking the progress of ARRA. Most recently, Recovery.gov released data on expenditures and jobs from the first quarter of fiscal year 2011 (October 1, 2010 through December 31, 2011).

According to these data, spending under ARRA-funded Department of Education programs saved or created 311,102 jobs during this time. This is a little more than half of the total jobs saved or created by ARRA – as reported by recipients – over the same time period – 585,654 jobs total. This is about 25,000 fewer jobs than were saved or created with ARRA spending in the previous fiscal quarter. This makes sense, however, because many of the education programs under the ARRA provided funding for fiscal years 2009 and 2010, but not 2011. As a result, we expect these numbers will continue to fall as fiscal year 2011 continues.

Unsurprisingly, State Fiscal Stabilization Funds (SFSF) under the Education Stabilization grants saved or created the most jobs of any program under the ARRA, education or otherwise – 184,876 jobs in the 1st fiscal quarter. The Education Stabilization grants provided $39.8 billion to states to fill gaps in K-12 and higher education funding, comprising one of the largest singe programs in the ARRA. Individuals with Disabilities Education Act grants (IDEA) saved the third most jobs out of any program at 49,899 in the 1st quarter. These funds can be used to support special education services for students including curricular materials and teacher salaries.

 In the fourth quarter of fiscal year 2010, however, SFSF Government Services Grants saved more jobs than IDEA grants. This variation can be attributed to the school year calendar, which mostly falls during the 1st, 2nd, and 3rd fiscal quarters, but not the 4th. Because Government Services grants go to other expenditures besides education, they are more likely to be used during the summer than IDEA grants, which are mostly used during the school year.

As one would expect, the most populated states saved or created the most jobs using ARRA education funds. Florida reported saving or creating the most jobs using education ARRA funds in the 1st quarter – 47,172 of the total 58,891 jobs saved or created in the state. Texas came in second with 39,591 jobs and New York in third with 19,476 jobs. This is far fewer jobs than New York saved with ARRA education funds in the 4th quarter of 2010 - 30,978 – likely because the state has begun to run out of these funds. Though one would expect California to have the highest job numbers because it is the largest state, California spent most of its ARRA education funds prior to the 4th fiscal quarter. As a result, it reports saving or creating 17,382 jobs.

In total, the Department of Education has paid out $70.5 billion of the nearly $100 billion available for education programs under the ARRA. According to recipient data, these funds saved or create between 300,000 and 400,000 jobs each fiscal quarter. Though these funds are beginning to run out, school districts will be able to rely on Education Jobs Funds to continue to save education jobs through the end of fiscal year 2012. Hopefully by then state and local revenues will have rebounded enough to fill the budget gaps currently plugged with federal funds.

Exploring the Rural Competitive Preference in the Investing in Innovation Program

January 25, 2011

In the Blueprint for Reform, the Obama administration set support for rural schools as one of its “cross-cutting priorities” for education reform. In that document, the administration pledged to include rural schools in new competitive grant programs, ensuring that they are not at a disadvantage compared with other schools, consortia, nonprofits, and institutions in these grant programs. Toward that end, the administration included a rural competitive preference in the recent Investing in Innovation (i3) grant program created by the American Recovery and Reinvestment Act of 2009. This meant that projects focusing on rural education would be awarded two bonus points on the competition’s 100-point scale. Nineteen of the 49 grant final recipients claimed that their grants were eligible for the Rural Competitive Preference. But it looks like the administration didn’t do enough to ensure that this competitive preference benefited the rural school districts it tried to target.

The Rural School and Community Trust this week released Taking Advantage: The Rural Competitive Preference in the Investing in Innovation Program, a policy paper analyzing whether the grant recipients who claimed the Rural Competitive Preference had adequately addressed the unique needs of rural school districts in their grant proposals. They found that very few of those applicants who claimed the Rural Competitive Preference had submitted proposals that focused on serving the needs of rural districts. Instead, most of these applicants appear to have included rural school districts as an afterthought in an effort to claim the two bonus points.

The Rural Competitive Preference in the i3 grant competition was one of several competitive preferences that applicants could claim to beef up their applications. While the other competitive preferences were each worth one bonus point, the Rural Competitive Preference was worth up to two. Applications that received two bonus points “would implement innovative practices, strategies, or programs that are designed to focus on the unique challenges of high-need students in schools within a rural LEA…”

The report concludes that only three of the 19 grant recipients who claimed the Rural Competitive Preference actually focused on rural challenges. It was both easy and attractive for applicants not focusing on rural school districts to include a token reference to these populations in order to claim the competitive priority. Additionally, application reviewers did not have a specific rubric by which to measure whether proposals met the requirements of the competitive priority, which may have led them to be overly willing to award these points.

Rural school districts also face particular challenges that made it nearly impossible for rural school districts to compete as lead applicants for i3 grants to begin with. They often lack the capacity to complete applications or hire and retain consultants to help them. The i3 competition’s 20 percent matching requirement was also outside the grasp of many rural school districts.

The Rural Competitive Preference was not an adequate way to give rural school districts a leg up over larger institutions and nonprofits in the i3 grant competition. More must be done if the Obama administration intends to stay true to its commitment to support rural school districts. In future competitive grant competitions, the administration must do more to account for the specific challenges facing rural school districts.

The Rural School and Community Trust suggests that future grant competitions set aside a separate pool of funding that is only available to applicants whose proposals address the needs of rural schools and districts. Within that pool, preference should be given to proposals where the lead applicant is a rural district or collaboration of rural districts rather than a non-profit or institution of higher education.

But setting aside money specifically for rural school districts does not address the quality of the applications these districts put forth. Rural school districts often lack the capacity for extensive grant writing campaigns, particularly those that require rigorous research and evaluation plans. Without the funds to do such research and evaluation, however, these districts will continue to face a dearth of quality research on innovations targeted at solving their specific challenges. Given this, the U.S. Department of Education should provide technical assistance to rural school districts before and during the grant application process to help applicants design quality research plans.

Given the Obama administration’s stated goal of addressing the needs of students in rural areas, future grant competitions must do more to make rural school districts competitive with larger districts, nonprofit organizations, and institutions of higher education. In the Blueprint for Reform, the administration encourages the U.S. Secretary of Education to set aside funds for technical assistance and research on innovations that will help rural school districts overcome capacity constraints. This is an admirable goal, and has yet to be accomplished by the i3 grant competition’s Rural Competitive Preference or otherwise. We’ll be interested to see if future competitive grant competitions include better methods of keeping rural school districts competitive.

OIG Concerned about the Maintenance of Effort Provision of the SFSF

January 6, 2011

At the end of every year, the Office of the Inspector General (OIG) at the U.S. Department of Education releases a publication that details expected management challenges for the coming year. For fiscal year 2011, the OIG anticipated several challenges for the Department of Education (ED), many of which focused on the continued implementation and oversight of the American Recovery and Reinvestment Act of 2009 (ARRA). Of particular interest to Ed Money Watch were the OIG’s concerns over the maintenance of effort provision of the State Fiscal Stabilization Fund, a new program to help stabilize state education funding created by the ARRA.

The maintenance of effort provision requires states to maintain 2006 levels of state funding for both K-12 and higher education in fiscal years 2009, 2010 and 2011. States can then use State Fiscal Stabilization Funds to fill the gaps between 2006 funding levels and the greater of 2008 or 2009 funding levels. Theoretically, the maintenance of effort provision ensures a stable level of funding for K-12 and higher education during the economic downturn by preventing states from cutting their funding too significantly. However, the OIG has concluded in past reports that flexibility in the maintenance of effort provision has allowed some states to reduce overall funding for public education.

The OIG’s management challenges report suggests that ED has done little to address this issue since OIG released the alert memorandum about the maintenance of effort provision several months ago. Additionally, the report states that ED did not do much due diligence to ensure that the maintenance of effort data each state provided in its application was reliable. To correct these problems, the OIG recommends that ED track actual state funding for public education to ensure that each state complies with the maintenance of effort provision.

But tracking state spending on K-12 and higher education is easier said than done. Currently, the reporting provision of the ARRA requires states to report to the federal government on how sub-recipients (like school districts and institutions of higher education) are using the federal funds. This new process has placed significant strain on state agencies that have not had to track and report on the expenditure of federal funds as closely in the past. By asking the federal government to track the expenditure of state funds, the OIG adds another layer to an already complicated reporting system.

According to the OIG report, ED officials believe that current staffing levels are insufficient to properly track and verify state maintenance of effort data. As a result, ED has contracted with an outside organization to assist in monitoring states as they implement the maintenance of effort provision.

It is unclear what this increased monitoring means for education funding moving forward. The Education Jobs Fund of 2010 provides an additional $10 billion in funding for K-12 education and comes with a slightly tweaked maintenance of effort provision. While this new provision is stronger, it will still likely allow some states to reduce overall funding levels for public education. The real question is whether ED will penalize these states for doing so.

Counting Pell Grant Chickens Before They Hatch

December 22, 2010

It started out as a precarious year for the Pell Grant program and it looks like the year will end that way too. Despite media reports to the contrary, Congress just left town without providing any funding for the program in the 2011-12 school year. Congressional staff and the news media have done a major disservice to students and parents by claiming that the program is now in the clear. Here’s why:

Pell Grants are funded mostly through the annual appropriations process, which is supposed to be completed by the time the fiscal year starts on October 1st. This deadline is rarely met, so Congress funds programs subject to appropriations a few weeks or months at a time at the prior year’s levels until it can pass a year-long funding bill. Congress still has not passed a year-long funding bill for fiscal year 2011, which started months ago. The “continuing resolution” lawmakers passed last night temporarily funds programs through March 4th, 2011, and the new Congress that arrives in Washington in January will get the final say on fiscal year 2011 funding.

It’s a mistake to assume that the new Congress won’t cut funding for any number of programs – including Pell Grants – when it finalizes 2011 spending. Consider that House Majority Leader John Boehner (R-OH) has vowed to take appropriations funding back to 2008 levels – about 15 percent below this year’s levels.

But what about the media reports and congressional press releases claiming 2011 Pell Grant funding and a $5,550 grant is in the bag? The timing just doesn’t add up. The fiscal year 2011 appropriations bill will finance the Pell Grants that students get in the 2011-12 school year. But the temporary continuing resolution now in place expires on March 4th, 2011, five months before the first Pell Grant will be awarded for the 2011-12 school year. To be sure, the temporary appropriations bill does provide funding for a maximum Pell Grant of $5,550 for the 2011-12 school year. But it doesn’t matter. Every cent of that funding expires before the school year even starts and before any of it can be spent.

Parents, schools, and students needn’t worry about the Pell Grants awarded for the current school year though. Grants for the 2010-11 school year are overfunded by $7 billion dollars thanks to a one-time infusion of cash from the Health Care and Education Reconciliation Act that Congress passed back in March.

Now all eyes are on the new Congress and how it will fund the Pell Grant program for the 2011-12 academic year. If House Republicans are serious about cutting spending when they finalize fiscal year 2011 appropriations early next year, Pell Grants certainly aren’t the place to start.

Senate Uses Omnibus to Sneak in Change to School Improvement Grants

December 21, 2010

Last week Democratic leaders in the Senate proposed and then retracted an omnibus appropriations bill that would have funded all federal education programs subject to the annual appropriations process through fiscal year 2011 (which began on October 1st). Though the bill was never brought to a vote, and Congress looks set to put a decision on fiscal year 2011 funding off until early next year, it does give us some insight into things to come for education policy. For example, Congress buried language in the bill that would overturn a key Obama Administration rule affecting the School Improvement Grant program.

The School Improvement Grant program provides funds to school districts to help turn around schools that have repeatedly failed to meet Adequate Yearly Progress according to No Child Left Behind. The Obama Administration released new regulations governing the program in 2009 because of the dramatic increase in funding available for the program through the American Recovery and Reinvestment Act of 2009. These regulations created four models school districts can use in their turn around efforts. These models include turnaround, restart, closure, and transformation.

The proposed omnibus bill would have overturned a requirement set out by the Department of Education in late October to limit the number of schools that employ the transformation model for their school improvement efforts. The transformation model is considered the least intrusive of the four strategies defined by the Department of Education for school improvement efforts. According to Ed Week, school districts overwhelmingly chose the transformation model over the other models available, likely because it was the least disruptive.

While the transformation model does require that school districts replace the principal, it does not require them to fire any teachers. In comparison, the turnaround model requires school districts to fire at least 50 percent of existing teachers, the restart model requires districts to reopen the school as a charter, and the closure model requires them to shut down the school entirely. In drafting the regulations, Secretary Duncan likely chose to limit the number of schools for which districts could use the transformation model to ensure a certain level of rigor in the school improvement process.

But the Senate Omnibus bill attempted to reverse this regulation. After specifying that 2011 funding for the School Improvement Grant program would be $545.6 million, the same spending level as 2010, the bill states:

Provided further, That the grants provided in accordance with the previous proviso shall not be subject to the requirement published by the Secretary in the Federal Register on October 28, 2010 (75 Fed. Reg. 66368) that a local educational agency that has 9 or more tier I and tier II schools not implement the transformation model in more than 50 percent of those schools.

The Obama Administration has significantly strengthened the School Improvement Grant program with its rules, much to the chagrin of many members of Congress and many local stakeholders. By specifying four specific models that districts can use to improve their schools, the Obama Administration has made the program much more prescriptive and rigid. Members of Congress on both sides of the aisle have decried these changes as favoring federal control over local control of schools. Similarly, the models that require firing existing teachers or turning schools over to charter operators are wildly unpopular with teachers unions.

Though it’s impossible to determine the origin of the language in the fiscal year 2011 omnibus bill that would have overturned the Obama Administration rule, it’s pretty clear that its inclusion was intended to make the School Improvement Grant program less offensive to the teachers unions and appease members of Congress who believe the program is a federal intrusion into local education policy. Such political wrangling is not unheard of in appropriations bills, though it is disappointing to find such a policy shift buried in this last-minute appropriations bill. We hope this isn’t a sign of what’s to come with the reauthorization of the Elementary and Secondary Education Act.

The State Fiscal Stabilization Fund and Higher Education Spending

December 9, 2010

While many policy researchers and the media have focused their attention on K-12 education in their reporting on the American Recovery and Reinvestment Act of 2009 (ARRA), few have focused on the law's effect on higher education funding. Today, the New America Foundation's Federal Education Budget Project released an issue brief titled The State Fiscal Stabilization Fund and Higher Education Spending in the States that explores how state funding for higher education fluctuated as a proportion of total state spending during the implementation of the ARRA.

The ARRA was intended to stimulate the economy with $862 billion in new spending and tax cuts. The law included nearly $100 billion in one-time funding for new and existing education programs, a historic sum given that annual appropriations for federal education programs were approximately $60 billion in fiscal year 2009. The largest single education program included in the law was the State Fiscal Stabilization Fund (SFSF), a new $48.6 billion program that provided direct grant aid to state governments in 2009 and 2010. The program was designed to help states maintain support for both K-12 and higher education that they might have otherwise cut in response to budget shortfalls brought on by the economic downturn.

The SFSF was designed under the assumption that states would not be able to maintain then-current levels of spending due to the economic recession and would need federal assistance to maintain their education programs. As a result, the law includes a maintenance of effort provision that gives states flexibility to cut their spending on education to 2006 levels in 2009, 2010, and 2011, and use the SFSF monies to fill any gaps up to the higher of 2008 or 2009 levels.

But many stakeholders have expressed concern that some states would lower state expenditures on education by more than necessary to balance their budgets to take advantage of the federal funds. This issue brief draws general conclusions about how the ARRA may have affected state spending on higher education and whether policymakers’ concerns about the law were valid.

FEBP Releases Issue Brief on the State Fiscal Stabilization Fund and Higher Education Spending

December 9, 2010

CORRECTED

While many policy researchers and the media have focused their attention on K-12 education in their reporting on the American Recovery and Reinvestment Act of 2009 (ARRA), few have focused on the law's effect on higher education funding. Today, the Federal Education Budget Project, Ed Money Watch’s parent initiative, released an issue brief titled The State Fiscal Stabilization Fund and Higher Education Spending in the States that explores how state funding for higher education fluctuated as a proportion of total state spending during the implementation of the ARRA.

The ARRA was intended to stimulate the economy with $862 billion in new spending and tax cuts. The law included nearly $100 billion in one-time funding for new and existing education programs, a historic sum given that annual appropriations for federal education programs were approximately $60 billion in fiscal year 2009. The largest single education program included in the law was the State Fiscal Stabilization Fund (SFSF), a new $48.6 billion program that provided direct grant aid to state governments in 2009 and 2010. The program was designed to help states maintain support for both K-12 and higher education that they might have otherwise cut in response to budget shortfalls brought on by the economic downturn.

The SFSF was designed under the assumption that states would not be able to maintain then-current levels of spending due to the economic recession and would need federal assistance to maintain their education programs. As a result, the law includes a maintenance of effort provision that gives states flexibility to cut their spending on education to 2006 levels in 2009, 2010, and 2011, and use the SFSF monies to fill any gaps up to the higher of 2008 or 2009 levels.

But many stakeholders have expressed concern that some states would lower state expenditures on education by more than necessary to balance their budgets to take advantage of the federal funds. This issue brief draws general conclusions about how the ARRA may have affected state spending on higher education and whether policymakers’ concerns about the law were valid.

Using state budget data collected directly from the states, the issue brief concludes that 42 states and the District of Columbia chose to use SFSF funds to support higher education spending in 2009 or 2010. Of those, 23 cut the proportion of state spending dedicated to higher education in the first year they used the funds. While most of these 23 states made cuts to both higher education spending and total state spending, six appear to have cut their higher education spending while actually increasing total state spending. These states confirm the concern that the SFSF would lead some states – particularly those states with relatively stable tax revenue – to cut higher education spending during the economic downturn and use those funds for other purposes. Seventeen of the 42 states that chose to use Education Stabilization funds for higher education, on the other hand, actually increased the proportion of state spending on higher education.

The State Fiscal Stabilization Fund played an important role in maintaining higher education spending in many states. However, the program’s maintenance of effort provision appears to have allowed some states to cut funding for higher education by more than necessary to balance their budgets.

Now that Congress has passed the Education Jobs Fund, a program similar to the SFSF that provides funding only for K-12 education, states will be held to a new and stricter version of the maintenance of effort provision that also takes higher education spending into account. While the new provision is an improvement over the maintenance of effort provision in the SFSF, some states will likely continue to manipulate their higher education budgets to take advantage of the federal funds.

To download the issue brief, click here.

The State Fiscal Stabilization Fund and Higher Education Spending in the States

  • By
  • Jennifer Cohen Kabaker,
  • New America Foundation
December 9, 2010

UPDATED TO REFLECT NEW INFORMATION ON IDAHO.

By late 2008, the United States was in the midst of its most severe economic recession since the 1930s, brought on by a collapse in real estate prices and exacerbated by the failure of many large banks and financial institutions. Heeding calls from economists, Congress and the Obama administration passed a historic law in early 2009 to stimulate the economy with $862 billion in new spending and tax cuts.

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