Last year's stimulus bill aimed to pump $275 billion into the economy through grants and loans-and more often than not, small local agencies and nonprofits are making the call about where that funding goes. In its April issue, SmartMoney magazine looks at the mom-and-pop operators who are handing out and spending the money.>
To pass something> as big and ambitious as last year s economic stimulus bill, you need policy-making pashas like Obama, Bernanke and Geithner. But to make it work, you need to rely on lesser-known folks like Erin Blanton of Staunton, Va., a toy-store owner who enjoys knitting, volunteering and "watching crappy TV" in her spare time.
The 30-year-old Blanton sits on Staunton's microlending committee, where she votes on which local start-ups get loans from the town's pot of federal stimulus dollars. She started her career doing sales and editing for an electronics retailer. More recently, she paired with her mom to launch Pufferbellies Toys & Books, a popular store downtown. Now she's helping her town identify entrepreneurs who deserve the funding to help them follow in her footsteps. Mulling her role over a latte at Cranberry's, her favorite coffee spot, she takes a deep breath: "It's a big responsibility!"
Well, not that big. Her committee's share of the stimulus pie is $200,000, a drop in the ocean of money $275 billion that the bill set aside for job-creating grants and loans. But she does represent a significant if overlooked force in the stimulus effort, now just over a year old. Across the nation, there are thousands of Erin Blantons-minor gatekeepers working at the local level who collectively control a vast fortune. In fact, more than half the 66,000 projects now under way as part of the American Reinvestment and Recovery Act of 2009 have budgets under $500,000, and most are administered by tiny agencies, small businesses and nonprofits.
The fact that history's biggest spending splurge is being executed by an army of unknowns worries some policy wonks. While it's intuitively obvious that neighborhood folks can make better decisions for their communities than distant bureaucrats, the trade-off can be a loss of accountability, says Ann Bowman, a professor at the Bush School of Government at Texas A&M: "The money is more diffused." The process can be rough on the gatekeepers as well, and not just because of the conflicts that can arise when folks make decisions affecting friends and neighbors. In truth, they often have less discretion than you'd expect. In the rush to speed spending, the feds pushed most of the money through existing programs using old formulas. The process has discouraged communities from creating innovative new programs, says Mark Muro, a policy director with the Brookings Institution.
Even experts who like the decentralized approach acknowledge that they'll only know in retrospect whether the process has worked. But it's not too early to find out how it's playing out in communities across the country. SmartMoney traveled from Virginia to Louisiana and up to Kansas to see what kind of results the local gatekeepers were getting, as they converted stimulus money into everything from salaries for arts teachers to a herd of 24 heifers.