Appropriation Provisions in the Economic Stimulus Act Most Affecting State and Local Government

PUBLIC FINANCE ALERT Appropriation Provisions in the Economic Stimulus Act Most Affecting State and Local Government On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act of 2009, generally referred to as the Stimulus Act. Summarized below are the appropriation provisions of the Stimulus Act that most affect state and local government entities, with emphasis on the amount of the appropriation, the federal department, agency or other institution administering the appropriation and a summary of the purpose of the appropriation. At the end is a brief description of the accountability provisions in the Act as well as some of the general provisions that will affect the use of Act funds by a state or local government entity. Agriculture, Rural Development, and Food and Drug Administration... 2 Commerce and Justice... 6 Energy and Water Development... 10 Homeland Security... 13 Interior, Environment and Related Agencies... 15 Labor, Education and Related Agencies... 18 Transportation, Housing and Urban Development, and Related Agencies... 24 State Fiscal Stabilization Fund... 28 Accountability and Transparency Under the Act... 32 General Provisions of the Act... 35 Please check our publications page for additional Squire Sanders Alerts on the Economic Stimulus Act.

PUBLIC FINANCE ALERT Agriculture, Rural Development, and Food and Drug Administration Department of Agriculture National Resources Conservation Service Watershed and Flood Prevention Operations... 3 National Resources Conservation Service Watershed Rehabilitation Program... 3 Rural Housing Service Rural Housing Insurance Fund Program Account... 3 Rural Housing Service Rural Community Facilities Program Account... 3 Rural Business Cooperative Service Rural Business Program Account... 4 Rural Utilities Service Rural Water and Waste Disposal Program Account... 4 Rural Utilities Service Distance Learning, Telemedicine and Broadband Program... 4 Food and Drug Administration Food and Nutrition Service Child Nutrition Programs... 5 Food and Nutrition Service Child Nutrition Programs Special Supplemental Nutrition Program for Women, Infants and Children (WIC)... 5 Food and Nutrition Service Child Nutrition Programs Commodity Assistance Program... 5

Agriculture, Rural Development, and Food and Drug Administration Department of Agriculture National Resources Conservation Service Watershed and Flood Prevention Operations The Act authorizes $290 million for watershed and flood prevention operations, of which $145 million is for necessary expenses to purchase and restore floodplain easements as authorized by the Agricultural Credit Act of 1978. Not more than $30 million may be obligated for projects in any one state. Department of Agriculture National Resources Conservation Service Watershed Rehabilitation Program The Act authorizes $50 million for watershed rehabilitation programs. Department of Agriculture Rural Housing Service Rural Housing Insurance Fund Program Account The Act authorizes additional amounts for gross obligations for the principal amount of direct and guaranteed loans to be available from the Rural Housing Insurance Fund under the Housing Act of 1949: $1 billion for Section 502 direct loans and $10.472 billion for Section 502 unsubsidized guaranteed loans. The Act authorizes additional amounts for the cost of direct and guaranteed loans including the cost of modifying loans: $67 million for Section 502 direct loans and $133 million for Section 502 unsubsidized guaranteed loans. Department of Agriculture Rural Housing Service Rural Community Facilities Program Account The Act authorizes $130 million for direct loans and grants for rural community facilities programs authorized under the Consolidated Farm and Rural Development Act (CFRDA). 3

Department of Agriculture Rural Business Cooperative Service Rural Business Program Account The Act authorizes $150 million for certain additional guaranteed loans and grants authorized by CFRDA. Department of Agriculture Rural Utilities Service Rural Water and Waste Disposal Program Account The Act authorizes $1.38 billion for direct loans and grants for rural water, waste water and waste disposal programs authorized by CFRDA. Department of Agriculture Rural Utilities Service Distance Learning, Telemedicine and Broadband Program The Act authorizes $2.5 billion for broadband loans and loan guarantees as authorized by the Rural Electrification Act of 1936 (REA) and for grants (including for technical assistance). The Act makes grants, loans and loan guarantees for broadband infrastructure in any area of the United States subject to certain conditions: At least 75 percent of the area to be served by a project must be in a rural area without sufficient access to high speed broadband service to facilitate rural economic development funds. Priority is to be given to projects (i) for broadband systems that will deliver end users a choice of more than one service provider, (ii) that provide service to the highest proportion of rural residents who do not have sufficient access to broadband service and (iii) that show, if the application is approved, that all elements of the project will be fully funded. A project cannot also receive funding under the Broadband Technology Opportunities Program authorized by the Act (see the related Alert on Commerce and Justice). 4

Food and Drug Administration Food and Nutrition Service Child Nutrition Programs The Act provides $100 million to carry out a grant program for National School Lunch equipment assistance under the Richard B. Russell National School Lunch Act (Lunch Act) and the Child Nutrition Act of 1966 (Nutrition Act). Funds are to be allocated to states administering a school lunch program in a manner proportional to each state s administrative expense allocation. The states must provide competitive grants to school food authorities providing the lunches in participating schools with priority given to the schools in which not less than 50 percent of the students is eligible to receive free or reduced-price lunches under the Lunch Act. Food and Drug Administration Food and Nutrition Service Child Nutrition Programs Special Supplemental Nutrition Program for Women, Infants and Children (WIC) The Act provides an additional $500 million for the special supplemental nutrition program authorized by the Nutrition Act. Food and Drug Administration Food and Nutrition Service Child Nutrition Programs Commodity Assistance Program The Act provides an additional $150 million for the emergency food assistance program authorized by the Food and Nutrition Act of 2008 and the Emergency Food Assistance Act of 1983. The secretary may use up to $50 million of that amount for the distribution of commodities, with up to $25 million to be made available in fiscal year 2009. 5

PUBLIC FINANCE ALERT Commerce and Justice Department of Commerce Economic Development Administration Economic Development Assistance Programs... 7 National Telecommunications and Information Administration Broadband Technology Opportunities Program... 7 National Institute of Standards and Technology Construction of Research Facilities... 8 Department of Justice State and Local Law Enforcement Activities Office on Violence Against Women Violence Against Women Prevention and Prosecution Programs... 8 Office of Justice Programs State and Local Law Enforcement Assistance... 8 Office of Justice Programs Community Oriented Policing Services... 9

Commerce and Justice Department of Commerce Economic Development Administration Economic Development Assistance Programs The Act provides $150 million for Economic Development Assistance Programs. Of that amount, $50 million will be for economic adjustment assistance as authorized by the Public Works and Economic Development Act of 1965, and priority consideration will be given to areas of the United States that have experienced sudden and severe economic dislocation and job loss due to corporate restructuring. Department of Commerce National Telecommunications and Information Administration Broadband Technology Opportunities Program The Act establishes a Broadband Technology Opportunities Program, a national broadband service development and expansion program to be administered by the Assistant Secretary of Commerce for Communications and Information, in consultation with the Federal Communications Commission. To carry out this program, the Act makes available $4.7 billion. Grants made to states, their political subdivisions and other eligible entities will be awarded, on a competitive basis, to (i) acquire equipment, instrumentation, networking capability, hardware and software, digital network technology and infrastructure for broadband services, (ii) construct and deploy broadband service-related infrastructure, (iii) ensure access to broadband service by community anchor institutions, (iv) facilitate access to broadband service by low-income, unemployed, aged and otherwise vulnerable populations to provide educational and employment opportunities to members of those populations, (v) construct and deploy broadband facilities that improve public safety broadband communication services and (vi) undertake other projects consistent with the program s purposes. Not less than $200 million will be available through competitive grants to expand public computer center capacity including at community colleges and public libraries, and not less than $250 million will be available through competitive grants for innovative programs to encourage sustainable adoption of broadband service. 7

Under most circumstances, the federal share of any project authorized under this program will not exceed 80 percent. As part of the application process, eligible entities must, among other requirements, demonstrate that they will unconditionally obligate, from nonfederal sources, funds required to meet the matching requirement. Eligible entities receiving grants may be required to provide assurances that they will substantially complete projects within two years following the awarding of the grant and will be required to prepare quarterly reports. Department of Commerce National Institute of Standards and Technology Construction of Research Facilities The Act provides $260 million for construction of research facilities. Of that amount, $180 million will be for a competitive grant program for research science buildings. Department of Justice State and Local Law Enforcement Activities Office on Violence Against Women Violence Against Women Prevention and Prosecution Programs The Act makes available $225 million for grants to combat violence against women, as authorized by the Omnibus Crime Control and Safe Streets Act of 1968. Of that amount, $50 million will be used for transitional housing assistance grants for victims of domestic violence, stalking or sexual assault. Department of Justice Office of Justice Programs State and Local Law Enforcement Assistance The Act makes available: $2 billion for the Edward Byrne Memorial Justice Assistance Grant Program authorized by the Omnibus Crime Control and Safe Streets Act of 1968. $225 million for competitive grants to improve the functioning of the criminal justice system, to assist victims of crime and for youth mentoring grants. $40 million for competitive grants to provide assistance and equipment to local law enforcement along the southern US border and in high-intensity drug trafficking areas to combat criminal narcotics activity stemming from the southern US border. 8

$100 million to be distributed by the Office for Victims of Crime in accordance with the Victims of Crime Act of 1984. $125 million for assistance to law enforcement in rural states and rural areas to prevent and combat crime, especially drug-related crime. $50 million for Internet Crimes Against Children (ICAC) prevention initiatives. Department of Justice Office of Justice Programs Community Oriented Policing Services The Act makes available $1 billion for grants under the 1968 Omnibus Crime Control and Safe Streets Act for hiring and rehiring of additional career law enforcement officers. 9

PUBLIC FINANCE ALERT Energy and Water Development Department of the Interior Bureau of Reclamation Water and Related Resources... 11 Department of Energy Energy Programs Energy and Efficiency and Renewable Energy... 11 Energy Programs Electricity Delivery and Energy Reliability... 11 Energy Programs Innovative Technology Loan Guarantee Program... 12

Energy and Water Development Department of the Interior Bureau of Reclamation Water and Related Resources The Act provides $1 billion for management, development and restoration of water and related natural resources and for related activities including related grants to, and cooperative and other agreements with, state and local governments, of which $60 million is for rural water projects and to be spent primarily on water intake and treatment facilities, and $10 million is for inspection of canals programs in urbanized areas. Department of Energy Energy Programs Energy and Efficiency and Renewable Energy The Act provides $16.8 billion for energy efficiency and renewable energy including: $3.2 billion for Energy Efficiency and Conservation Block Grants under the Energy Independence and Security Act of 2007. $5 billion for the Weatherization Assistance Program under the Energy Conservation and Production Act. $3.1 billion for the State Energy Program authorized by the Energy Conservation and Production Act. $2 billion for grants for the manufacturing of advanced batteries and components. The secretary will provide facility funding awards to manufacturers of advanced battery systems and vehicle batteries that are produced in the United States including advanced lithium batteries, hybrid electrical systems, component manufacturers and software designers. Department of Energy Energy Programs Electricity Delivery and Energy Reliability The Act provides $4.5 billion for expenses for electricity delivery and energy reliability activities to modernize the electric grid to include demand responsive equipment, enhanced security and reliability 11

of the energy infrastructure, energy storage research development, demonstration and deployment, and facilities recovery from disruptions to the energy supply and for implementation of programs under the Energy Independence and Security Act of 2007, with $100 million to be available for worker training activities. Department of Energy Energy Programs Innovative Technology Loan Guarantee Program The Act provides $6 billion for the cost of guaranteed loans authorized by the Energy Policy Act of 2005. 12

PUBLIC FINANCE ALERT Homeland Security Federal Emergency Management Agency State and Local Programs... 14 Federal Emergency Management Agency Firefighter Assistance Grants... 14

Homeland Security Federal Emergency Management Agency State and Local Programs The Act provides $300 million for grants, $150 million for Public Transportation Security Assistance and Railroad Security Assistance under the Implementation of the Recommendations of the 9/11 Commission Act of 2007 and $150 million for certain Port Security Grants. Federal Emergency Management Agency Firefighter Assistance Grants The Act makes $210 million available for competitive grants for modifying, upgrading or constructing nonfederal fire stations, with no grant to exceed $15 million. 14

PUBLIC FINANCE ALERT Interior, Environment and Related Agencies Environmental Protection Agency Hazardous Substance Superfund... 16 Leaking Underground Storage Tank Trust Fund Program... 16 State and Tribal Assistance Grants... 16 Department of Agriculture Forest Service Wildlife Fire Management... 17 National Foundation on the Arts and Humanities National Endowment for the Arts Grants and Administration... 17

Interior, Environment and Related Agencies Environmental Protection Agency Hazardous Substance Superfund The Act provides $600 million for the Superfund Remedial Program. Environmental Protection Agency Leaking Underground Storage Tank Trust Fund Program The Act makes available $200 million for cleanup activities authorized by the Solid Waste Disposal Act, with none of the funds subject to cost sharing under that Act. Environmental Protection Agency State and Tribal Assistance Grants The Act makes available $6.4 billion as follows: $4 billion for capitalization grants for Clean Water State Revolving Funds under the Federal Water Pollution Control Act. $2 billion for capitalization grants under the Safe Drinking Water Act. $100 million for brownfields projects under the Comprehensive Environmental Response, Compensation and Liability Act of 1980. $300 million for Diesel Emission Reduction Act grants pursuant to the Energy Policy Act of 2005. Funds are not subject to matching or cost sharing under those Acts The administrator is to reallocate funds for the Clean and Drinking Water State Revolving Funds for projects that are not under contract or construction within 12 months of the date of enactment of the Act. Priority is given to projects on state priority lists that are ready to proceed on construction within 12 months of the date of enactment notwithstanding priority rankings. 16 Each state is to use not less than 50 percent of its capitalization grants to provide additional subsidization to eligible recipients in the form of forgiveness of principal, negative interest loans or grants.

To the extent there are sufficient eligible projects, not less than 20 percent of the funds appropriated for the Revolving Funds are to be used for projects to address green infrastructure, water or energy efficiency improvements or other environmentally innovative activities. Funds may be used to buy, refinance or restructure debt obligations of eligible recipients only if debt was incurred after October 1, 2008. Department of Agriculture Forest Service Wildlife Fire Management The Act makes available $250 million for state and private forestry activities including hazardous fuels reduction and forest health and ecosystem improvement activities on state and private land, of which up to $50 million may be used to make wood-to-energy grants to promote increased utilization of biomass from federal, state and private lands. National Foundation on the Arts and Humanities National Endowment for the Arts Grants and Administration The Act makes available $50 million for grants to be distributed in direct grants to fund arts projects and activities that preserve jobs in the nonprofit sector threatened by declines in philanthropic and other support during the current economic downturn; 40 percent of such funds is to be distributed to state arts agencies and regional arts organizations consistent with existing practices, and 60 percent is for competitively selected arts projects, with waiver of matching requirements. 17

February 2009 PUBLIC FINANCE ALERT Labor, Education and Related Agencies Department of Labor Employment Training Administration Training and Employment Services... 19 Employment Training Administration Community Service Employment for Older Americans... 19 Employment Training Administration State Unemployment Insurance and Employment Service Operations... 19 Department of Health and Human Services Administration for Children and Families Payments to States for the Child Care and Development Block Grant... 20 Administration for Children and Families Children and Families Services Programs... 20 Administration on Aging Aging Services Programs... 20 Office of the Secretary Office of the National Coordinator for Health Information Technology... 20 Office of the Secretary Prevention and Wellness Fund... 21 Department of Education Education for the Disadvantaged... 21 Impact Aid... 21 School Improvement Programs... 22 Innovation and Improvement... 22 Special Education... 22 Rehabilitation Services and Disability Research... 23

Labor, Education and Related Agencies Department of Labor Employment Training Administration Training and Employment Services The Act authorizes $3.95 billion for grants to states under the Workforce Investment Act of 1998 (WIA) including: $500 million for adult employment and training activities. $1.2 billion for youth activities including summer employment of youth. $1.25 billion for dislocated worker employment and training activities. $200 million for the dislocated worker assistance national reserve. $50 million for YouthBuild activities. $750 million for a program of competitive grants for worker training and placement in high growth and emerging industry sectors (including $500 million for research, labor exchange and job training projects that prepare workers for careers in energy efficiency and renewable energy). Funds are to remain available until June 30, 2010. Department of Labor Employment Training Administration Community Service Employment for Older Americans The Act authorizes $120 million to carry out the Older Americans Act of 1965. Funds are to remain available until June 30, 2010. Department of Labor Employment Training Administration State Unemployment Insurance and Employment Service Operations The Act authorizes $400 million for grants to states in accordance with the Wagner-Peyser Act, with $250 million to be used by states for reemployment services for unemployment insurance claimants. 19

Department of Health and Human Services Administration for Children and Families Payments to States for the Child Care and Development Block Grant The Act authorizes $2 billion to supplement and not supplant state revenues for child care assistance for low-income families. Department of Health and Human Services Administration for Children and Families Children and Families Services Programs The Act authorizes $3.15 billion including: $1 billion for Head Start. $1.1 billion for expansion of Early Head Start. $1 billion for community block grants. Department of Health and Human Services Administration on Aging Aging Services Programs The Act authorizes $100 million to carry out the Older Americans Act of 1965, of which $65 million is for congregate nutrition services, $32 million is for home-delivered nutrition services and $3 million is for nutrition services for Native Americans. Department of Health and Human Services Office of the Secretary Office of the National Coordinator for Health Information Technology The Act authorizes $2 billion to carry out the Health Information Technology for Economic and Clinical Health Act initiatives provided for under the Act. The secretary may award grants to states and state-designated entities that submit applications for the purpose of conducting activities to facilitate and expand the electronic movement and use of health information among organizations according to nationally recognized standards through certain activities as described in the Act. For purposes of this section, a Qualified State-designated entity is one that is designated by the state to receive such a grant, is a not-for-profit entity with broad stakeholder representation on its governing board, demonstrates that one of its principal goals is to use information 20

technology to improve health care quality, adopts nondiscrimination and conflict of interest policies, and conforms to other such requirements as the secretary shall establish, all as further defined in the Act. Grants are available to states that establish programs for loans to health care providers that use the funds to facilitate the purchase of certified electronic health record (EHR) technology, enhance the utilization of certified EHR technology, train personnel in the use of such technology or improve the secure electronic exchange of health information. Department of Health and Human Services Office of the Secretary Prevention and Wellness Fund The Act authorizes $1 billion for the Prevention and Wellness Fund, of which $50 million is to be provided to states to carry out activities to implement health care-associated infections reduction strategies. Department of Education Education for the Disadvantaged The Act provides $13 billion to carry out the purposes of Title I of the Elementary and Secondary Education Act of 1965 (ESEA) including: $5 billion for targeted grants to local educational agencies. $5 billion for education finance incentive grants. $3 billion for school improvement grants. Department of Education Impact Aid The Act provides $100 million to carry out the purposes of Title VIII of the ESEA. 21

Department of Education School Improvement Programs The Act provides $720 million for school improvement programs authorized by both the ESEA and the McKinney-Vento Homeless Assistance Act. $70 million is allocated for McKinney-Vento grants. Each state is awarded the amounts in proportion to the number of homeless students identified by state during the 2007-2008 academic year over the number of homeless students nationally. States subgrant their allocated funds to local education agencies on a competitive basis or according to a formula based on the number of homeless students identified by local educational agencies. The secretary will grant money to states no more than 60 days after the date of enactment of the Act. The state will subgrant its funds within 120 days of receipt of the funds. Department of Education Innovation and Improvement The Act provides $200 million to carry out the purposes of Title V of the ESEA. Department of Education Special Education The Act provides $12.2 billion for carrying out the Individuals with Disabilities Education Act (IDEA) Parts B and C. The Act provides that if every state reaches its maximum allocation under a particular provision of IDEA, any remaining funds will be proportionately allocated to each state subject to the maximum amount allowed under IDEA. The state, at its election, may allocate up to 10 percent of the funds it receives to local educational agencies pursuant to the provisions of IDEA. Any local educational agency must use at least 15 percent of any funds it receives for special education and related services for children who are three to five years of age and, at the local educational agency s option, for children two years of age who will turn three during the school year. 22

Department of Education Rehabilitation Services and Disability Research The Act provides $680 million for carrying out the Vocational Rehabilitation Services Program under the Rehabilitation Act of 1973 including $18.2 million for state grants. 23

PUBLIC FINANCE ALERT Transportation, Housing and Urban Development, and Related Agencies Department of Transportation Office of the Secretary Supplemental Discretionary Grants for a National Surface Transportation System... 25 Federal Aviation Administration Grants-in-Aid for Airports... 25 Federal Highway Administration Highway Infrastructure Investment... 25 Federal Railroad Administration Capital Assistance for High Speed Rail Corridors and Intercity Passenger Rail Service... 25 Federal Transit Administration Transit Capital Assistance... 26 Federal Transit Administration Fixed Guideway Infrastructure Investment... 26 Federal Transit Administration Capital Investment Grants... 26 Maritime Administration Supplemental Grants for Assistance to Small Shipyards... 26 Department of Housing and Urban Development Public and Indian Housing Public Housing Capital Fund... 26 Community Planning and Development Community Development Fund... 26 Community Planning and Development Home Investment Partnerships Program... 27 Community Planning and Development Homelessness Prevention Fund... 27 Housing Programs Assisted Housing Stability and Energy and Green Retrofit Investments... 27

Transportation, Housing and Urban Development, and Related Agencies Department of Transportation Office of the Secretary Supplemental Discretionary Grants for a National Surface Transportation System The Act provides $1.5 billion for capital investments in surface transportation infrastructure. These funds are to be distributed by the secretary as discretionary grants to be awarded to state and local government or transit agencies on a competitive basis for projects that will have a significant impact on the United States, a metropolitan area or a region, such grants to be not less than $20 million and not more than $300 million. Funds to remain available through September 30, 2011. Department of Transportation Federal Aviation Administration Grants-in-Aid for Airports The Act provides $1.1 billion for the secretary to make discretionary grants for the procurement, installation and commissioning of runway incursion prevention devices and systems. Department of Transportation Federal Highway Administration Highway Infrastructure Investment The Act provides $27.5 billion for highway infrastructure restoration, repair, construction and other activities and for passenger and freight rail transportation and port infrastructure projects. Department of Transportation Federal Railroad Administration Capital Assistance for High Speed Rail Corridors and Intercity Passenger Rail Service The Act provides $8 billion for discretionary grants to states to pay costs of high speed and passenger rail service projects. Funds to remain available through September 30, 2012. 25

Department of Transportation Federal Transit Administration Transit Capital Assistance The Act provides $6.9 billion for transit capital assistance grants. Department of Transportation Federal Transit Administration Fixed Guideway Infrastructure Investment The Act provides $750 million for fixed guideway infrastructure capital expenditures. Department of Transportation Federal Transit Administration Capital Investment Grants The Act provides $750 million for discretionary grants to states to pay costs for capital investments. Department of Transportation Maritime Administration Supplemental Grants for Assistance to Small Shipyards The Act provides $100 million for grants to qualified shipyards. Department of Housing and Urban Development Public and Indian Housing Public Housing Capital Fund The Act provides $4 billion for the Public Housing Capital Fund to carry out capital and management activities for public housing agencies under the United States Housing Act of 1937. Funds to remain available through September 30, 2011. Department of Housing and Urban Development Community Planning and Development Community Development Fund The Act provides $1 billion for the Community Development Fund to carry out the community development block grant program under the Housing and Community Development Act of 1974. 26

Department of Housing and Urban Development Community Planning and Development Home Investment Partnerships Program The Act provides $2.25 billion for capital investments in low-income housing tax credit projects. Funds to remain available through September 30, 2011. Department of Housing and Urban Development Community Planning and Development Homelessness Prevention Fund The Act provides $1.5 billion for homelessness prevention and rapid re-housing activities. Funds to remain available through September 30, 2011. Department of Housing and Urban Development Housing Programs Assisted Housing Stability and Energy and Green Retrofit Investments The Act provides $2.25 billion for assistance to owners of properties receiving project-based assistance pursuant to the Housing Act of 1959. 27

PUBLIC FINANCE ALERT State Fiscal Stabilization Fund Department of Education State Fiscal Stabilization Fund Allocations... 29 State Fiscal Stabilization Fund State Incentive Grants... 30 State Fiscal Stabilization Fund Innovation Fund... 31

State Fiscal Stabilization Fund Department of Education State Fiscal Stabilization Fund Allocations The Act makes available $53.6 billion for necessary expenses for a State Fiscal Stabilization Fund to be administered by the Department of Education. The secretary is first to allocate up to $268 million (0.5 percent) to the outlying areas based on need. $5 billion is allocated for State Incentive Grants and an Innovation Fund (see below). All remaining funds are to be allocated to the states as follows: 61 percent on the basis of each state s relative population of individuals aged five to 24 and 39 percent on the basis of each state s relative total population. Governors must use 81.8 percent of the respective state allocation (approximately $39.5 billion) for the support of elementary, secondary and postsecondary education and early childhood education programs and services. From that 81.8 percent, governors must use grants first to restore state support for elementary and secondary education to fiscal year 2009 levels, to allow existing state formula increases for fiscal years 2009-2011 and to restore state support for public institutions of higher education to fiscal year 2008 levels. Governors must use 18.2 percent of the respective state allocation (approximately $8.8 billion) for public safety and other governmental services, which may include assistance for elementary and secondary education and public institutions of higher education and for modernization, renovation or repair of public school facilities including modernization, renovation and repairs that are consistent with a recognized green building rating system. Local education agencies that receive funds from the governor may use the funds for any activity authorized by the Elementary and Secondary Education Act of 1965 (ESEA), the Individuals with Disabilities Education Act (IDEA), the Adult and Family Literacy Act or the Carl D. Perkins Career and Technical Education Act of 2006 or for modernization, renovation and repairs that are consistent with a recognized green building rating system. 29

Funds cannot be used for (i) maintenance costs, (ii) stadiums or other facilities primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public, (iii) purchase or upgrade of vehicles or (iv) improvement of stand-alone facilities whose purpose is not the education of children including central office administration or operations or logistical support facilities. Public institutions of higher education that receive funds from the governor must use the funds for education and general expenditures and in such a way as to mitigate the need to raise tuition and fees for in-state students or for modernization, renovation or repair of institutions of higher education facilities used primarily for instruction, research or student housing including modernization, renovation and repairs that are consistent with a recognized green building rating system. Funds cannot be used to increase an endowment or for (i) maintenance of systems, equipment or facilities, (ii) modernization, renovation or repair of stadiums or other facilities primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public or (iii) modernization, renovation or repair of facilities (A) used for sectarian instruction or religious worship or (B) in which a substantial portion of the functions of the facilities is subsumed in a religious mission. Governors desiring to receive an allocation must submit an application for funds. Department of Education State Fiscal Stabilization Fund State Incentive Grants The Act makes available $4.35 billion for states in fiscal year 2010 that have made significant progress in meeting certain objectives including achieving equity in teacher distribution, improving collection and use of data, and enhancing standards and assessments. States shall use at least 50 percent of these grants to provide subgrants to local education agencies within the state based on their relative shares of funding under Title I of ESEA. 30

Department of Education State Fiscal Stabilization Fund Innovation Fund The Act makes available up to $650 million to establish an Innovation Fund, which consists of academic achievement awards that recognize eligible entities that meet certain requirements including closing the achievement gaps between certain groups of students described in ESEA, exceeding the state s annual measurable objective consistent therewith, making significant improvement in other areas, such as graduation rates or increased recruitment and placement of high-quality teachers and school leaders, and demonstrating the entities have established certain partnerships with the private sector. For purposes of this fund, an eligible entity is a local educational agency or a partnership between a nonprofit organization and one or more local education agencies or a consortium of schools. 31

PUBLIC FINANCE ALERT Accountability and Transparency Under the Act Certifications... 33 Jobs Accountability Act Reports on Use of Funds... 33 Recovery Accountability and Transparency Board... 34 Protecting State and Local Government and Contractor Whistleblowers... 34 Special Contracting Provisions... 34

Accountability and Transparency Under the Act Certifications With respect to Act funds made available to state and local governments for infrastructure investments, the governor, mayor or other chief executive, as appropriate, is required to provide a certification that the infrastructure investment has received the full review and vetting required by law and that the chief executive accepts responsibility for the infrastructure investment being an appropriate use of taxpayer dollars. Such a certification must: Include a description of the investment, estimated total cost and amount of covered funds to be used. Be posted on a website and linked to the recovery.gov website; the making and posting of the certification is a precondition to receipt of infrastructure investment funding from covered funds. Jobs Accountability Act Reports on Use of Funds Not later than 10 days after each calendar quarter (beginning July 15, 2009, per recovery.gov), each recipient (state or any entity other than an individual) of Act funds received through grant, loan or contract from a federal agency must file a report to that agency that contains: The total amount of Act funds received from that agency. The amount of Act funds received that were expended or obligated to projects and activities. A detailed list of all projects and activities for which funds were expended including (i) the name of the project or activity, (ii) a description of the project or activity, (iii) an evaluation of completion status, (iv) an estimate of the number of jobs created and retained, and (v) for infrastructure investments made by state and local governments, the purpose, total cost and rationale of the agency for funding such investment with Act funds and the name of the person at the agency to contact if there are concerns with the infrastructure investment. Detailed information on any subcontracts or subgrants awarded by the recipient including the data required to comply with the Federal Funding Accountability and Transparency Act 33

of 2006 (allowing aggregate reporting on awards below $25,000 or to individuals, as prescribed by the director of the Office of Management and Budget). Recovery Accountability and Transparency Board The Act establishes a Recovery Accountability and Transparency Board (the Board) to coordinate and conduct oversight of covered funds (funds made available from appropriations under the Act) to prevent fraud, waste and abuse. Protecting State and Local Government and Contractor Whistleblowers The Act prohibits reprisals of nonfederal employers receiving covered funds for disclosing to the board information regarding (i) gross mismanagement of an agency contract or grant relating to covered funds, (ii) gross waste of covered funds, (iii) substantial and specific danger to public health or safety, (iv) an abuse of authority related to implementation or use of covered funds or (v) violation of law related to an agency contract or grant awarded or issued relating to covered funds. Special Contracting Provisions To the maximum extent possible, contracts funded under the Act should be awarded as fixedprice contracts through the use of competitive bidding procedures. A summary of any contract awarded with Act funds that is not fixed-price and was not awarded using competitive procedures must be posted in a special section of the recovery.gov website. 34

PUBLIC FINANCE ALERT General Provisions of the Act Relationship to Other Appropriations... 36 Preference for Quick-Start Activities... 36 Period of Availability... 36 Limit on Funds... 36 Buy American... 36 Wage Rate Requirements... 37 Prohibition on No-Bid Contracts and Earmarks... 37 Employ American Workers Act... 37

General Provisions of the Act Relationship to Other Appropriations Each appropriation in the Act is an addition to any other appropriation made for the fiscal year involved. Preference for Quick-Start Activities Preference is given to activities that can be started and completed expeditiously and, as to grant funds, in a manner that maximizes job creation and economic benefit. Period of Availability All funds appropriated remain available until September 30, 2010, unless expressly provided otherwise. Limit on Funds No funds may be used for any casino or other gambling establishment, aquarium, zoo, golf course or swimming pool. Buy American Funds provided by/under the Act may not be used for construction, maintenance or repair of a public building or public work unless all of the iron, steel and manufactured goods used in the project are produced in the United States except in cases for which the head of the federal department or agency involved finds: Application of this rule would be inconsistent with public interest. Iron, steel and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality. 36

Inclusion of US iron, steel and manufactured goods would increase the costs of the overall project by more than 25 percent. Wage Rate Requirements All laborers and mechanics employed by contractors and subcontractors on projects funded directly by or assisted in whole or in part pursuant to the Act must be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the Secretary of Labor. Prohibition on No-Bid Contracts and Earmarks Use of funds requires award of contracts using competitive bidding procedures in accordance with federal requirements, prohibiting payment of Act funds for any payment made in connection with contracts not meeting this requirement. Act funds cannot be awarded by grant or cooperative agreement unless such award process uses competitive procedures to select the grantee or recipient. Employ American Workers Act Recipients of funding under the Emergency Economic Stabilization Act of 2008 or Section 13 of the Federal Reserve Act are prohibited from hiring illegal immigrants unless the recipient is in compliance with requirements for an H-1B dependent employer, effective for the two-year period commencing February 17, 2009. 37

Contacts If you have any questions regarding the issues in this Alert, please contact any of the lawyers listed below: Cincinnati 221 E. Fourth St., Suite 2900 Cincinnati, OH 45202 Todd L. Cooper +1.513.361.1239 Cleveland 4900 Key Tower 127 Public Square Cleveland, OH 44114 Victoria Grunthaner Bowser +1.216.479.8642 Alexander G. Burlingame +1.216.479.8768 David S. Goodman +1.216.479.8649 Pamela I. Hanover +1.216.479.8763 Richard D. Manoloff +1.216.479.8331 Austin McGuan +1.216.479.8441 Timothy J. Cosgrove +1.216.479.8562 Barbara L. Hawley +1.216.479.8507 Katherine G. Petrey +1.216.479.8094 Columbus 2000 Huntington Center 41 South High Street Columbus, OH 43215 Los Angeles 555 South Flower Street, 31st Floor Los Angeles, CA 90071 Miami 200 South Biscayne Boulevard, Suite 4100 Miami, FL 33131 Michael A. Cullers +1.216.479.8477 Ernie K. Demanelis +1.216.479.8677 Robert J. Eidnier +1.216.479.8676 D. Bruce Gabriel +1.216.479.8746 Christopher J. Franzmann +1.614.365.2737 Harriet M. Welch +1.213.689.5158 Albert A. del Castillo +1.305.577.7758 Pedro H. Hernández +1.305.577.7048 John W. Hutchinson +1.216.479.8046 F. Barry Keefe +1.216.479.8535 Robert D. Labes +1.216.479.8601 John S. Larson +1.216.479.8624 Paul F. Sefcovic +1.614.365.2738 Pedro J. Miranda +1.305.577.7707 Luis Reiter +1.305.577.7710 Catherine Ziroli Romanchek +1.216.479.8393 Michael L. Sharb +1.216.479.8389 Catherine C. Tompkins +1.216.479.8470 Gregory W. Stype +1.614.365.2742 Lori Smith-Lalla +1.305.577.7725 NORTH AMERICA Cincinnati Cleveland Columbus Houston Los Angeles Miami New York Palo Alto Phoenix San Francisco Tallahassee Tampa Tysons Corner Washington DC West Palm Beach New York 1095 Avenue of the Americas, 31st Floor New York, NY 10036 Phoenix Two Renaissance Square 40 North Central Avenue, Suite 2700 Phoenix, AZ 85004 San Francisco One Maritime Plaza, Suite 300 San Francisco, CA 94111 Tampa One Tampa City Center 201 N. Franklin Street, Suite 2100 Tampa, FL 33602 Washington Suite 500 1201 Pennsylvania Avenue, N.W. Washington, DC 20004 Kenneth W. Bond +1.212.872.9817 Jackson B. Browning Jr. +1.212.872.9832 Charles E. James, Jr. +1.602.528.4061 Robert H. Olson +1.415.393.9819 Alexandra M. MacLennan +1.813.202.1353 Roger K. (J.R.) Clark +1.202.626.6884 Allison Downing +1.212.872.9805 Christopher J. Reitzel +1.212.872.9874 Robert L. Matia +1.602.528.4040 John C. Henry +1.202.626.6835 Edward S. Sinick +1.212.872.9835 Timothy E. Pickrell +1.602.528.4031 LATIN AMERICA Bogotá+ Buenos Aires+ Caracas La Paz+ Lima+ Panamá+ Rio de Janeiro Santiago+ Santo Domingo São Paulo EUROPE Bratislava Brussels Bucharest+ Budapest Dublin+ Frankfurt Kyiv London Moscow Prague Warsaw 38 All Rights Reserved ASIA Beijing Hong Kong Shanghai Tokyo +Independent network firm