Why stimulus money goes unspent

(CNNMoney.com) -- The federal government has made available more than $74 billion in stimulus funds, but the majority of that money has yet to hit the streets.

That's because states have to jump through hoops before they can claim the funds and put them to use. Some have to get approval from their legislatures before they can spend the money. Others must wait for municipalities and school districts to submit applications to state agencies before distributing the dollars.

These are some of the main reasons why states have drawn down only $15.6 billion of the $74 billion made available to them in the 11 weeks since President Obama signed the $787 billion recovery act. Nearly $14 million of that amount has gone to help states handle the crush of Medicaid expenses.

Still, many states are not waiting to get the checks in hand before putting the stimulus funds to use. They are reversing some of their deepest cuts to public services -- particularly for education and social services -- in anticipation of getting the funds.

States have a lot of money to spend. They, along with local governments, are charged with administering about $280 billion of stimulus funds over the next few years, according to the Government Accountability Office, which is tracking states' use of the money. About $49 billion will be doled out this fiscal year, which ends Sept. 30.

Of that amount, about 90% will be spent on health, transportation and education, primarily through the Medicaid, highway infrastructure and state fiscal stabilization for education programs.

Other than for Medicaid, however, the majority of the money has yet to leave Washington. States have spent only $7.9 million in highway funds, about 10% of what's been made available, according to a federal Department of Transportation report from April 24. And they haven't claimed any of the $5.4 billion in state stabilization funds for education, though eight states have had their applications approved over the past two weeks.

Of course, in some cases, federal agencies dole out the funds over time. For road projects, states request reimbursement from the federal government as they pay the bills. So spending will always lag behind the dollars committed.

"Some outlays happen over years," said Lana Hurdle, the federal Department of Transportation's acting assistant secretary for budget and programs. "It's not something that happens over weeks. There's more than just one single bill per project."

States have even more work to do before they can claim other funds. Some programs, such as energy efficiency and law enforcement, require the states to apply for dollars. For others, such as job training for youths, states have to receive proposals from companies or social service agencies before they can award the money.

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