Perdue’s stimulus plan slow to help sagging economy

Gov. Sonny Perdue promised in January that his state stimulus package would create 20,000 construction jobs, but what he didn’t say was that most of those won’t come on line until well into 2010.

Few of the jobs Perdue talked about will be created in the second half of 2009 as unemployment continues to rise. By the time a lot of the construction projects get started, economists predict the recovery will be under way.

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Veteran lawmakers said they knew all along that the effort wouldn’t create an immediate shot in the arm to Georgia’s ailing economy. But they hoped the state board handling the bonds would sell them quickly so there would be at least some economic impact this year.

“For our little version of the stimulus to work, we have to have the bonds sold so people can go to work,” said House Appropriations Chairman Ben Harbin (R-Evans).

Bill Tomlinson, a former state budget director, said Georgians should not expect much from Perdue’s stimulus package this year.

“While bonds sound good, generally it’s not a way to get the economy going,” he said. “It’s not an instantaneous stimulus. Will it create jobs down the road? Yes, if you put enough money out there.”

Lawmakers included $1.2 billion in bonds for constructing schools, college buildings, roads, libraries and other facilities in the fiscal 2010 budget that takes effect Wednesday. With the state’s excellent bond rating and low interest and construction costs, Perdue and legislators figured it made sense to borrow money to spur Georgia’s weakened economy.

“This will take advantage of low construction costs and create an estimated 20,000 jobs in an industry that is ready to go to work,” Perdue said in January during his annual state of the state speech.

Perdue’s speech came as federal officials were debating their own $787 billion stimulus package. Some of the federal money has been used to plug state budget holes. Georgia is also getting $931 million from the federal government for road work, and Perdue has already approved some of the projects.

The state probably won’t sell bonds for its state stimulus plan until later this year. The global financial meltdown last fall delayed the sale of $1 billion in bonds approved by lawmakers in April 2008. The state sold those in February and May. State officials typically wait several months between bond sales so as not to flood the market.

After the stimulus bonds are sold, it will take three to six months before ground is broken on many of the projects. In some cases, it could take a year after the bonds are sold because planning and design work will need to be done first.

Kenneth Heaghney, the state’s fiscal economist, said the state stimulus program will boost the recovery, even if the impact isn’t immediate.

“Most projections of the economic growth coming out of the recovery are very tepid,” he said. “So anything that in that transition period from the (economic) bottom to long-term growth that supports the recovery is probably a good thing.”

The state plan includes money for 18 libraries, nearly $300 million for local K-12 schools, $43 million for an undergraduate learning commons at Georgia Tech, $31.2 million for an academic facility at Gainesville State College, $19 million for a science building lab addition at Kennesaw State University $26.6 million for a special collections library at UGA and $27 million to design, build and equip a dental school at the Medical College of Georgia.

Several technical colleges around the state will receive money for new buildings, $25 million was set aside to build an conference center and oceanfront park on Jekyll Island and $14 million will go for a new state park on Lake Lanier.

Part of the $1.2 billion will go for maintenance projects and equipment, and that money could be spent quickly after the bonds are sold.

For construction projects for which design and planning have already been done, work can typically begin in three to six months, after the bonds are sold and bids have been put out and contracts awarded. Projects that first must be designed can add another six months to a year to the time-line before dirt is moved.

This isn’t the first time state officials have borrowed money to help the state build its way out of a recession. It hasn’t always worked out the way lawmakers planned.

Gov. Zell Miller’s “Georgia Rebound,” a 1992 economic recovery plan to create 29,000 jobs in 18 months, provided a cautionary tale about expecting too much, too quickly, from bond-funded stimulus plans.

Miller and lawmakers approved a $752 million bond package in 1992 to help jump-start the state’s economy out of a recession through construction of schools, universities, boot camps, roads and other projects.

But bureaucratic delays hampered the program, and many of the projects didn’t get started until 1994. While Georgia’s economy rebounded in the year after the program was approved, state officials acknowledged that little of the improvement could be attributed to “Georgia Rebound.”

Steve Wrigley, head of governmental relations at the University of Georgia and a former Miller chief-of-staff, said politicians can get their “expectations maybe a little out of line about how quickly something can go from conception to actually turning dirt and hiring contractors.”

But he also said when lawmakers approved “Georgia Rebound,” agencies weren’t ready to handle a big influx of construction projects.

Wrigley said the bureaucratic process for handling projects has improved. And at $1.2 billion, the amount the state plans to borrow is only about 20 percent more than in previous years under Perdue. Miller’s plan in 1992 borrowed several times more than any previous year for agencies such as the University System.

Even though the process has improved since the 1990s, it will still take time to create Perdue’s 20,000 jobs.

“That’s one of the challenges in policy is the lag between the decision and the impact,” said Heaghney, a Georgia State economist. “We’ve seen it with the federal stimulus. Things were passed in January and dollars are just starting to roll into the economy in terms of infrastructure expenditures this summer.”

Still, Roger Tutterow, a Mercer University economist, said a construction stimulus package like the state’s will eventually help a commercial construction industry that could use some assistance in the down economy.

“These are (construction) projects that are going to have to be done anyway,” he said. “It makes sense to do them during the soft times.”