The North West Indiana County Times recently pointed out something fascinating about how Indiana was using funds granted to it under the American Recovery and Reinvestment Act:

Indiana State Budget Director Christopher Ruhl confirmed the federal stimulus money was used to provide basic tuition support dollars for school districts, allowing the state to squirrel away funds that normally would have been used for that purpose.

“The state dollars saved were placed in our education rainy day fund,” he said. “The special session budget required those funds be transferred from the education rainy day fund to the state general fund in 2010 to support school funding. We made that transfer in December.”

All the state’s reserves and rainy day funds are expected to be used over the life of the two-year budget, including 100 percent of the education rainy day fund, Ruhl said. The budget, which runs through June 2011, was built on revenue projections that haven’t panned out, setting up the need to drain the $1 billion in state reserves.

This raises a couple of questions:

Does this impact the appeal of Indiana’s Gov. Mitch Daniels, who’s keeping his options open to run for the Republican nomination in 2012? Part of that appeal has been his fiscal record as governor:

Daniels eradicated a $1 billion shortfall, beginning in 2005 and built up an even bigger rainy-day fund $1.3 billion. He pared government spending, sold a toll road to private investors at an enormous profit, and attracted new business to the state. Revenues are off steeply, so he will use $300 million of the surplus in fiscal 2010 so that taxes won’t rise in a recession. Revenues, which are below 2007 levels, aren’t expected to recover soon. The rainy-day fund will last through June 30, 2011.

As to the stimulus, how well (or poorly) was it designed if funds under the act could be used in lieu of (rather than to supplement) state funding?

The Office of Elementary and Secondary Education of the State of Indiana reported that 9,924 jobs funded by the stimulus to Recovery.gov, but none of those jobs are necessarily new jobs, and it’s not clear that they’re “saved jobs” either (the state has some money–state money being diverted to rainy day funds–to pay the salaries). Does this explain, in part, why the stimulus has not made much of a dent in unemployment? But doesn’t it also make the program look more effective if Indiana’s education jobs are counted in the total?

And finally (we’ve written about this before) how meaningful is that 594,754 jobs figure on the Recovery.gov Web site?