The stimulus challenge

Should money from President Obama’s economic stimulus bill be used to pay down an operating deficit in the metro area transit system? Or should it be used to expand that system along with whatever jobs that theoretically could provide?

The answer from the Met Council today? Pay off the bills.

Peter Bell, the head of the Met Council, told a legislative committee on Thursday that he’d favor using the $87 million targeted for transit, to pay off his agency’s operating deficit.

Says Finance & Commerce


Bell conceded Thursday that “at present,” those dollars aren’t intended for covering deficits in regular operational expenses. But he suggested a workaround — some federal block grant dollars currently targeted for Met Council capital costs could be moved to cover operating costs, while stimulus dollars could go toward “what we originally intended those capital dollars be used for.”

Bell’s suggestion for how the money could be used for something it isn’t intended for, illustrates a dilemma facing stimulus supporters — that money will be moved from account to account to keep everything legal, but in the end nothing gets done that wasn’t going to get done anyway.

Bell said he’d be reluctant to use stimulus money to expand transit programs while the agency is running a deficit. On Wednesday, he indicated he’s reluctant to raise fares or reduce service.

  • Alison

    Would paying off the deficit keep current employees from getting the ax? It seems to me that preventing people from losing their jobs is as valuable as creating new jobs. I’m not sure that’s the case here, but it may be.

  • Carolynn

    It’s called a STIMULUS package – not a pay off your debts that you racked up through poor planning, management or whatever reason package. This is one of the key reasons some people hate this stimulus package soultion – as citizens we are expected to live within our means and pay our bills, but if you are a business or a governing body or seemingly anyone else, we’ll just give you the money. That’s part of what’s wrong with our economy.

  • Bob Collins

    Alison, I think that’s part of the theory that states and cities (and counties) are using. But, of course, that doesn’t really stimulate anything, that just keeps it from getting worse.

    And this is the danger, it seems to me, of stimulus money going to local governments (and state and county govermments) with an eye toward expansion. As with Clinton Cops, eventually you have to keep it going after the stimulus money is gone, right?

    On Marketplace last night, one of the commentators said that the most efficient way to get stimulus money into the economy is to speed up spending by local governments. Businesses get government contracts and people get employed etc. etc. etc. But eventually whatever was purchased has to actually be useful and sustainable in the long run.

  • http://iwuzthinking.blogspot.com/ Bruce

    //It’s called a STIMULUS package – not a pay off your debts that you racked up through poor planning, management or whatever reason package. . .//

    If two years ago metro transit planners budgeted for a +100% increase in gasoline prices (for an indefinite period) they would have lost their jobs. The spike in commodity prices could not have been reasonably predicted. Laying off employees or adjusting services to match the vicissitudes of the market is impractical.

    Keeping people in their jobs and keeping vital services consistently operating will have a positive economic impact. Because some services suffered more than others is a poor justification for cutting them off. If you get sick and can’t pay your medical bills, is it a good idea for me to take your house?

  • Bob Collins

    Does it have a POSITIVE economic impact keeping existing services and employees in place? Or a NEUTRAL economic impact?

  • JSmith

    Bob, I think that if the reduction of services/workforce could be considered to have a negative impact in the current climate (and in some cases in any climate) then you could say that sustaining those would be a net positive.

  • http://www.wcco.com/jasonblog Jason DeRusha

    Also remember that a huge chunk of the transit budget comes from the sales tax on new cars. That’s not working out so well for the Met Council right now… and that’s why with more bus riders, the system is still in bad financial shape.

  • Alison

    “And this is the danger, it seems to me, of stimulus money going to local governments (and state and county govermments) with an eye toward expansion.”

    Not laying off employees isn’t exactly expansion. Many local governments are to the point where they’re not looking at getting rid of the functions that are nice to have. They’re looking at which of the necessities they could lose with the least damage. And, if the economy were going as usual, these governments could afford the essentials.

    “debts that you racked up through poor planning, management or whatever reason”

    Before I blame people in government for mis-using tax money, I like to look things over and see if that is really the case. It seems to me that there are many people who throw out charges like that but few who have actual evidence of mis-use. So Carolynn, what did the Met Council do that you would have done differently? Maybe there is something, but what is it?

  • Al

    Does this come down to a question of who we think is more important to keep employed, the construction worker or the bus driver? When it comes down to it, that sounds to me like the question that is hidden in Bob’s original post.

  • Duke Powell

    Bob’s point, I think, is that Mr Bell is proposing to use one-time monies for ongoing operations. All this does is put off the day of reckoning. Bob’s reference of the Clinton Cops is a perfect example.

    A better use of this money would be replacement of buses or a new roof on a building – things that don’t further obligate an agency whose revenues are stagnant.

  • Bob Collins

    The question of who is more important is not hidden in my original post. At least it’s not a question I’m asking.

    In the here-and-now, are we stimulating something or are we trying to prevent something from getting worse? The two are not the same. We’re talking about trying to improve things from where we are right now.

    As far as using the money for projects (as opposed to closing net deficits), former Rep. Powell has the interpretation correct: What is the long-term advantage of the stimulus if all it does is add MORE operating expenses a year or two from now, to an agency that’s already awash in red ink? There’ll be no stimulus to cover THAT deficit?

    The other question is IF you have an operating deficit, and you have a big pile of cash that you can play with (let’s face it, what Mr. Bell is talking about is a shell game to makes it officially that the stimulus money is not — legally speaking — being used to close an operating deficit but in the practical terms, it is being used for that), does it prevent you from taking steps to close that deficit on its own?

    If you’re not willing to raise fares, and you’re not willing to cut service, and your main funding mechanism (as Jason DeRusha pointed out) is totally hosed up, then what’s the strategy for fixing that situation?

    The only one that I can figure out being employed here — and I’m not saying it’s a bad choice, but I’m not saying it’s a good one — is to forestall the day of reckoning for as long as possible, and hope that funding mechanism starts pouring a lot more money into your bank account.

    This entire economic strategy comes down to “a wing and a prayer” doesn’t it?

  • Michael

    It is a mistake to accept the notion of an “operating deficit” attributable to “transit”. What is the “operating deficit” of highways and bridges? Clearly we invest every year to build, paint, sweep, salt, patrol these parts of our infrastructure. More money is allocated as is needed to maintain traditional parts of our transportation network and should be for transit as well.

    Just as they will built an extension to Hwy 610 for $100 million we should facilitate expansion of light rail and other transit projects which are increasingly used by the public. The money is meant to be spent as additional capital investment in the community.

  • Alison

    If you are following with Jason DeRusha argument that a major part of the funding deficit is because new cars aren’t selling then using one time money for operations isn’t exactly a bad thing. Car sales will rebound at some point and you will regain your funding.

    Bob – I didn’t think the question of who’s more important was intentionally hidden in your post but it has been lurking below the surface as long there has been talk of stimulus. There will be clear winners with many items in this bill, leaving the rest of the unemployed as losers.

  • Bob Collins

    //It is a mistake to accept the notion of an “operating deficit” attributable to “transit”. What is the “operating deficit” of highways and bridges? Clearly we invest every year to build, paint, sweep, salt, patrol these parts of our infrastructure. More money is allocated as is needed to maintain traditional parts of our transportation network and should be for transit as well.

    That may be true but that has nothing to do with using stimulus money — by whatever means — in a way it wasn’t intended. It’s also the argument that was used to change the funding mechanism of the Met Council. If it didn’t work, then fix it.

    Maybe one solution is to get rid of the Met Council and just put everything under MnDot so roads and bridges and transit are all under one roof.

    I know the Met Council does a lot of stuff other than transportation, but why have two agencies in charge of transportation. And if the argument is — as I think it is — that transit deserves the same respect as roads and bridges, then what better way to show that than to make the Department of Transportation include transit?

    Plus MnDot is semi swimming in dough… by comparison.

    Of course, then we’d see the old rural legislators vs. metro legislators fighting, again. But is an efficient government structure the proper antidote for an inefficient political process?

  • GregS

    So let me see if I get this right. A stimulus is when an entity that is $10 Trillion in debt borrows another Trillion to pay the bills of an entity that is not indebt.

    Sounds like good-old-fashion port barrel politics to me.