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When officials reject stimulus funds, sparks fly

Decisions by local officials to reject Recovery Act funds have divided a number of communities around the nation.'s Mike Stuckey reports.
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The American Recovery and Reinvestment Act was supposed to create jobs by the millions, but Debra Morgan of North Platte, Neb., says it got her fired.

Morgan, a 17-year employee and former executive director of North Platte’s housing authority, contends she’s a victim of small-town politics. She says that against her advice the authority’s commissioners rejected $588,000 in stimulus funds because of their anti-government principles, then threw her under the bus when they got caught in the glare of national publicity.

Calling the commissioners “recklessly indifferent to the truth” and claiming permanent mental anguish from an improper and illegal dismissal, she sued in federal court.

Morgan’s case is an example of the bad feelings and high emotions that have resulted when state and local officials rejected Recovery Act funds — something that has happened at least a dozen times since Congress approved the $787 billion economic stimulus legislation in February.

Some refuseniks use terms like “Obama’s filthy, stinking stimulus,” and some have ambitions for higher office, but they insist their actions to reject the money are motivated by a sense of fiscal responsibility, not partisan politics.

To opponents, however, their acts are political grandstanding and have hurt their constituents.

Governors' rejections get most attentionThe highest profile cases involved former Alaska Gov. Sarah Palin and South Carolina Gov. Mark Sanford.

Palin, the 2008 GOP vice presidential candidate now at the top of the list of 2012 Republican presidential hopefuls, initially turned down almost $300 million, citing federal “strings.” She ultimately held firm in rejecting only $28 million, and was even overturned by state legislators on that.

Sanford lost a bitter battle with fellow Republican lawmakers in trying to reject $700 million in stimulus funds. His own presidential aspirations have since been damaged by revelations of his affair with an Argentinean businesswoman and impeachment hearings over possible misuse of state funds.

While Palin, Sanford and other governors received the most attention for turning down federal money that they said would cost their states more than it would save them in the long run, similar rejections at the local level have often involved one-time grants with no requirements to match or sustain the spending when they expire. As a result, the disputes that ensued have often been more personal and bitter than those at the state level.

There’s no quick way to track all stimulus money that has been turned down. But Sen. David Vitter, R-La., sponsor of a bill that would require rejected stimulus funds be used to reduce the deficit, said state and local officials have spurned “hundreds of millions” of dollars in Recovery Act spending and tax cuts.

The cases are not hard to find in local and regional news coverage. Rejected funds would have paid for such items as extensions of unemployment benefits in Louisiana and Texas, an extra cop in Mount Desert, Maine, and a police surveillance tower in Scottsdale, Ariz.

But unless Vitter’s bill or a similar one in the House were approved, most of that money will be redirected to other jurisdictions, generally in the same state. Because of that, critics say officials who have turned down stimulus funds have merely wounded their own communities and created sharp divisions among their constituents without saving the U.S. Treasury a nickel.

Firestorm in Nebraska
Rejection of stimulus funds in April “provoked a firestorm of controversy in North Platte,” said Omaha, Neb., attorney Michael A. Nelson, who is representing Morgan in her suit against the housing authority. Reached this month on the day the suit was being settled, Nelson said neither he nor his client could comment on specifics of the case or the settlement because of a confidentiality agreement.

Ed Rieker, chairman of the housing authority board, said he felt well-supported by North Platte residents for turning down the money. “I’ve had two people tell me we did the wrong thing,” said Rieker, who also was leery of commenting on the case because of Morgan’s lawsuit.

However, he added, “The reasons that we made the decision were explained in the paper and … if the situation presented itself with the same circumstances, I would vote against it again.”

At the time, Rieker, also treasurer of a local taxpayers group, told reporters that board members believed the housing authority, which oversees 250 units for low-income and elderly residents in the city of about 25,000, had plenty of money. He said commissioners turned down Recovery Act money because it seemed a poor use of tax dollars “just to find some place to spend the money.”

A sharp division
Other North Platte residents familiar with the authority’s housing stock strongly disagreed with the decision.

“This is a poster child for bad decision-making,” said Dave Harrold, a former member of the housing authority board who owns a hardware store in North Platte. “The board voted to reject the funds really out of a political point of view.”

Harrold told that the money could have been put to good use on a host of repair and weatherization projects. “Now Grandma who lives in a house with leaky windows and 40-year-old insulation, her utility bill is up. That stimulus money, if you’d insulated her home, would have saved her 30 percent for the rest of her life.”

When a CNN news show covered the North Platte flap on May 14, Harrold faced off against Rieker. Also appearing on the show was Morgan, who repeated her belief that the stimulus funds “would have benefited the residents.” The next day, she was fired.

Rieker gave no reason for Morgan’s dismissal in the three-paragraph letter he sent her informing her of the action, but her lawsuit alleges that he and other board members first reprimanded her for trying to undermine their vote on the money by speaking to the media. Then, according to the suit, they made “false allegations” about her performance as executive director.

Harrold, who resigned after 2½ years on the board in January because he was concerned that the board was breaking the law on other issues, such as evictions and an employee drug-testing program, said, “I never had any issues with Deb’s performance,” and he claimed that her firing was clearly for political reasons.

Decisions to reject stimulus money have been just as polarizing elsewhere.

In Worland, Wyo., many residents were baffled when four of seven trustees of the 1,300-student Washakie County School District No. 1 voted this fall to turn down more than $800,000 in stimulus funds to help poor and disabled children.

While the district’s middle school and one of its three elementary schools are highly rated compared to other Wyoming schools by the Web-based service, another elementary school is ranked 104th out of 133 statewide, and the district’s high school is 46th out of 67.

“It broke our hearts,” said Wendy Wheeless, a first-grade classroom aide. “We were dumbfounded. That was a huge chunk of money. We’re here for the kids and you do this?”

Wheeless said the trustees “did not allow any public input or discussion. They were making a political statement about Obama and the federal government. … They would allow no one to stand up and speak for it. They would return no phone calls or anything.”

Trustees won't talk to
The trustees who voted against the stimulus funds — Susan Scheuerman, Jim Hefenieder, Terri Logan and Beth Voss — did not return calls from to their homes and to the school district’s office. Minutes of the meeting in which they turned the money down gave no indication of their reasoning. The only statement reported publicly was a comment by Hefenieder that he feared the money would come with “a lot of strings” and require “a lot of additional paperwork.”

But when district officials pointed out that those assumptions were incorrect and that the district already received funding through the same federal programs, the trustees refused to change their position.

The issue sparked a letters-to-the-editor spat in the local newspaper. The trustees’ biggest supporter was former school board member Tom Ball, who praised them for keeping Worland schools free of the “far-left,” “Communist” and “gay” influences of the Obama administration. Federal funds “promote perverted sexual experimentation by our kids,” he wrote. He declined to be interviewed by

“This is Dick Cheney’s Wyoming,” sighed Wheeless, referring to the state’s conservative former vice president and congressman.

She also said that some local voters see hypocrisy in the votes by Scheuerman, Hefenieder and Voss, whose family agricultural interests have received substantial federal subsidies. An check showed that Hefenieder’s operations received more than $400,000 in federal handouts from 1995 to 2006, while Scheuerman family concerns got more than $300,000 and Voss’ nearly $60,000.

"They like their federal money," Wheeless said.

In Warren County, Ohio, Commissioner Mike Kilburn most decidedly does not like federal money and is not shy about talking to reporters.

“I’ve been an outspoken critic of federal grant money for the past 10 years,” said Kilburn, who made headlines in April when he led the charge to reject $373,000 in Recovery Act funds to upgrade the county's bus fleet. He called the grant “Obama’s filthy, stinking stimulus” and stands proudly behind those words today.

“I don’t make comments for political reasons,” said Kilburn, a lifelong resident and a commissioner for 27 years who likes to point out that Warren County couldn’t make payroll when he was first elected in 1982. “Today we have $153 million in the bank earning interest. We are the only county in the state of Ohio that is solvent. When it comes to public finance and spending taxpayer money, I wrote the book on it and I know filthy, stinking money when I see it.”

Now running for Congress
Kilburn, 55, a funeral director by profession, now wants to take his fiscal prudence to the U.S. House of Representatives. He is running in the GOP primary against Rep. Jean Schmidt.

Kilburn said local officials across the nation should follow his lead. He scoffs at the notion that the money should be taken because, if not, it will simply be spent by others. “That’s their problem,” he said. “I can’t be part of this train wreck that’s going to be happening. We need to get conservatives to say, ‘Hey, if we need money, we’ll raise it here. We don’t want the federal government’s money. Leave us alone!’”

Such rejections have caught some observers of federal spending off guard.

“We were kind of surprised,” said David Williams, vice president of policy for Citizens Against Government Waste. “We always thought that free money was like an open bar. No one says no. But we see a little bit of the opposite now. There’s a certain contingent out there that is really fed up with the federal government doing so much and (being) so involved at the local level. It’s kind of a mini rebellion at the local level with people saying, ‘Take your stinking money and go home.’”

But take some of that with a grain of salt, Williams cautioned.

“Whenever there’s a politician involved, or a bureaucrat, you have to look at it with a critical eye to see what the underlying motivation is. … There’s a large part of it that’s fed up with it. … They have spending fatigue, but they’re not stupid because they know it’s going to look good to constituents when they stood up to the big, bad federal government.”