California – April 23, 2009

Use of Funds

An estimated 90 percent of fiscal year 2009 Recovery Act funding provided to states and localities will be for health, transportation and education programs. The three largest programs in these categories are the Medicaid Federal Medical Assistance Percentage (FMAP) awards, the State Fiscal Stabilization Fund, and highways.

Medicaid Federal Medical Assistance Percentage (FMAP) Funds

  • As of April 3, 2009, Centers for Medicare & Medicaid Services (CMS) had made about $3.331 billion in increased Federal Medical Assistance Percentage (FMAP) grant awards to California.
  • As of April 1, 2009, the state has drawn down about $1.5 billion, or 45.4 percent of its initial increased FMAP grant awards.
  • Funds made available as a result of increased FMAP will help offset the state's general fund budget deficit, according to California officials.

Transportation—Highway Infrastructure Investment

  • California was apportioned about $2.570 billion for highway infrastructure investment on March 2, 2009 by the U.S. Department of Transportation.
  • Under a state law enacted in late March 2009, 62.5 percent of funds ($1.606 billion) will go to local governments for projects of their selection.
  • Of the remaining 37.5 percent ($964 million), $625 million will go to State Highway Operation and Protection Program (SHOPP) projects for highway rehabilitation, eligible maintenance and repair; $29 million will fund Transportation Enhancement projects; and $310 million will be loaned to fund stalled capacity expansion projects.
  • As of April 16, 2009, the U.S. Department of Transportation had obligated $261.4 million for 20 California projects.
  • California will request reimbursement from the U.S. Department of Transportation as the state makes payments to contractors.

U.S. Department of Education State Fiscal Stabilization Fund (Initial Release)

  • California was allocated about $3.993 billion from the initial release of these funds on April 2, 2009 by the U.S. Department of Education.
  • Before receiving the funds, states are required to submit an application that provides several assurances to the Department of Education. These include assurances that they will meet maintenance of effort requirements (or that they will be able to comply with waiver provisions) and they will implement strategies to meet certain educational requirements, including teacher effectiveness, addressing inequities in the distribution of highly qualified teachers, and improving the quality of state academic standards and assessments. California's application was approved by the U.S. Department of Education on April 17, 2009 and the state is now eligible to draw funds for local school districts and universities.
  • Approximately $3.266 billion of the $3.993 billion (81.8 percent) must be spent on education. The remaining $727 million (18.2 percent) can be spent at the Governor's discretion and is expected to be directed to public safety. Of the funds devoted to education, the majority will be spent on primary and secondary education.

California is receiving additional Recovery Act funds under other programs, such as Title I, Part A of the Elementary and Secondary Education Act of 1965 (ESEA), (commonly known as No Child Left Behind); the Individuals with Disabilities Education Act, Part B, and workforce training programs under the Workforce Investment Act (WIA).

Safeguarding & TransparencyBack to top

The Governor established the California Federal Economic Stimulus Task Force to ensure both accountability and transparency in how funds are spent, consistent with the Recovery Act and the state's own goals. The Task Force will also manage California's recovery Web site (, the state's principal vehicle for reporting on the use and status of Recovery Act funds. In addition, on April 3, 2009, California appointed a Recovery Act Inspector General to make sure Recovery Act funds are used as intended and to identify instances of waste, fraud, and abuse. California intends to use its existing accounting system to track funds flowing through the state government. Although California will publicly report its Recovery Act spending, officials have said that the state may not be aware of all federal funds sent directly to other entities, such as municipalities and independent authorities. The California State Auditor has raised concerns about internal controls at various state agencies that could affect accountability for Recovery Act funds, and will take this into account when assessing risk during her current audit planning efforts.

Assessing the Effects of SpendingBack to top

According to state officials, California has begun to develop plans to assess the effects of Recovery Act spending. However, they are waiting for further guidance from the federal government, particularly related to measuring job creation.

For More InformationBack to top

The above excerpts are taken from GAO's April 23, 2009 Bimonthly Review of the Recovery Act:

Recovery Act: As Initial Implementation Unfolds in States and Localities, Continued Attention to Accountability Issues Is Essential
GAO-09-580, April 23, 2009
For more information on California within the report, please see the following pages:
Appendix IV: California pages: 78 – 92
GAO Contact
portrait of of Linda M. Calbom

Linda M. Calbom

Director, Western Region

(206) 287- 4809

portrait of of Randall B. Williamson

Randall B. Williamson

Director, Health Care

(202) 512-7114