The goal is to use federal dollars to create jobs and boost business. But Connecticut’s execution is lagging and criticism is mounting.
Those in Connecticut hoping the American Recovery & Reinvestment Act would stimulate an economy that was in immediate dire need 18 months ago are left asking what’s gone wrong. Poor execution of the ARRA initiatives — particularly those relating to energy programs — leaves the state far behind the pace to meet its 2012 deadlines.
But state officials predict better performance — and more measurable impacts — over the next two quarters.
If the pace doesn’t pick up, Connecticut may not get to keep all its stimulus dollars.
“The whole thing has been a nightmare,” said Charles LeConche, business manager for the Connecticut Laborers’ District Council. “It hasn’t created jobs in Connecticut, so to me the whole thing is just a sham.”
As the midpoint nears for the stimulus programs to expend all their funds, Connecticut has spent less than 12 percent of the nearly $170 million ARRA funds dedicated to the energy industry. This mirrors the national experience where less than 12 percent of the $27 billion of obligated energy stimulus funds have been expended. The reasons are many: lack of preparedness, endless bureaucracy, tough conditions, and unprecedented amounts of money moving through newly established channels.
Michael Trahan, executive director of the industry group Solar Connecticut, said many of the stimulus energy programs will pan out over the long term and ultimately improve the state energy industry, but an immediate impact job creation — the stated ARRA goal — hasn’t happened.
For example, Trahan said, Connecticut used stimulus funds for an excellent worker retraining programs that has created a larger workforce ready to install solar photovoltaic systems, which convert sunlight into electricity. The problem is Connecticut doesn’t have a robust photovoltaic industry, so those trainees don’t have any jobs yet.
The state energy industry has plenty of jobs for installations of solar thermal devices, which use sunlight to heat water and buildings. Yet, the three-month ARRA training programs haven’t started yet, so there aren’t enough workers for those available jobs, Trahan said.
“The training and the market are not in sync,” Trahan said.
A month after ARRA passed in February 2009, the U.S. Department of Energy inspector general, Gregory Friedman, warned Congress that the agency wasn’t yet up to the task of doling out its allotted $36 billion in stimulus funds with the goal of jumpstarting the economy as quickly as possible. That massive amount of money — along with the goals of accountability, transparency and oversight — would require a rapid transformation of the Department of Energy.
In an Aug. 11 audit of the Department of Energy’s stimulus performance, Friedman examined the Energy Efficiency & Conservation Block Grant Program, which received $3.2 billion in ARRA funds, and found less than 9 percent of the money was spent. Nationally, the block grants created 2,265 jobs, or about one job for every $1.4 million allocated for the program.
Connecticut received $24.6 million under the block grant program, and 11.4 percent of the money has been spent with less than two years until the program’s deadline.
“Not all the projects are going lickedly split,” said Raymond Wilson, director of energy research and policy department in the Connecticut Office of Policy and Management. “There’s a lot of layers of bureaucracy in this.”
Congress awarded the block grant funding out of the federal budget to the Department of Energy, which then awarded funding to individual cities, towns, Native American tribes, or to the state government that had the Office of Policy and Management turn it over to individual cities and towns. The local governments then line up contractors for their projects; and when the money is spent, it stimulates the economy.
Block grant projects include replacing equipment in government buildings, rebate and recycling programs, and bicycle paths. Each layer of government has its own laws on how the work should be performed, who should get the job, how they are paid, and how the work is monitored.
Some of the federal requirements include conditions that contractors weren’t accustomed to, such as getting environmental reviews on projects and providing documents proving parts were made in America.
The biggest obstacle was the federal Davis Bacon Act prevailing wage requirements, which upped the cost of most projects. The Department of Energy kept changing the wage requirements — including changing the classification of workers needed on certain jobs, thus altering the size and scope of the projects — that made governments hesitant to proceed until terms were finalized, Wilson said.
These problems are not exclusive to the block grant program either, Wilson said, as the bureaucracy and requirement issues plagued nearly all of the 14 Connecticut energy programs funded by ARRA. Of those 14 programs, all but two have spent less than 15 percent of their funds.
Unlike the Connecticut Department of Transportation — which has expended 27 percent of its $459 million in ARRA funds — the state energy industry just didn’t have the infrastructure in place to get rolling, Wilson said.
Now with most of the administration out of the way, Wilson said spending in the energy programs will pick up. He predicts the next two quarters will utilize the majority of the project funding.
And in programs that are spending money, the stimulus is working, Wilson said.
One source of pride for the Office of Policy and Management has been the State Energy Program, which usually receives $300,000 in federal funding but got $38.5 million from ARRA. Because Connecticut already had programs in place — such as the Connecticut Clean Energy Fund and the Home Energy Solutions program — it spent the money faster than with other stimulus energy programs.
Connecticut’s 23-percent expenditure rate in the State Energy Program leads the nation in an initiative where 46 states have yet to cross the 10-percent expenditure mark.
Connecticut obligated $20 million of that money to the Clean Energy Fund, to provide rebates for geothermal, solar thermal, fuel cell and solar photovoltaic programs.
“The money has definitely helped us,” said Stephen Wierzbicki, owner of Manchester geothermal and solar thermal system installer Nutmeg Mechanical Services Inc. “If we didn’t have stimulus money last year, who knows how big of a company we would be … or even if we would be a company right now.”
Nutmeg workers were already trained in geothermal installations, giving the company an advantage over other energy contractors who had to learn the new initiatives. In the past six months, Nutmeg performed 15 geothermal installations, on top of 10 solar thermal installations in the past 12 months.
Geothermal installations cost $40,000 and solar thermal costs $10,000, but with the federal and state incentives and tax credits created through ARRA, a customer will receive 30-50 percent break.
Thanks to the stimulus assisted projects, Wierzbicki grew Nutmeg’s workforce by two to 25 employees. Before ARRA, these installations were non-existent, he said.
With the initial growing pains in the rear view mirror, ARRA’s true economic stimulus should flourish, Wilson said.
“ARRA as a concept is unprecedented,” Wilson said. “We didn’t know most of the specifics until the law had already been passed.”
