Oregon Uses Stimulus Funds to Create Government Jobs, Provide Social Services

As debate continues over whether the $787 billion stimulus package is creating jobs, Oregon is providing the first glimpse into how states are spending the federal money to keep citizens employed.

Oregon announced that it has saved or created more than 9,600 jobs with the federal funds -- but three out of four are government positions, raising questions about the lasting impact of the stimulus funds.

The Beaver State was the first to report on where its share of the stimulus funds are being spent. So far Oregon has paid out nearly $1.1 billion. Of that, the majority of the funds -- more than $700 million -- has not gone into job creation, but rather social services such as unemployment insurance, food stamps and Medicaid.

The government's first priority is guaranteeing the security for the most vulnerable, according to Governor Ted Kulongoski's Deputy Chief of Staff Brian Shipley.

"The Recovery Act is as much about minimizing the impact of the economic devastation we've been facing as it is turning the economy around," Shipley told Fox News. "A lot of this is just about getting by."

Much of the stimulus money went to colleges and schools facing deep cuts. Some Oregon school districts were considering shortening the school year. The stimulus money allowed the state to pay teacher and professor salaries avoiding job losses.

Of the new jobs, several hundred are in the Department of Human Services. Jason Pruett had been out of work for more than a year and was receiving food stamps. The state used federal funds to hire Pruett as a DHS caseworker. Pruett says that even though his job is in the public sector, the pay he gets helps plenty of private companies.

"I spend money," Pruett told Fox News. "I have to eat, I shop, buy clothes, whatever, so obviously that money goes into the hands of business people."

But critics say the stimulus package is growing the size of government by creating jobs that are unsustainable when the federal money is no longer flowing. Pruett, for example, was told that his job was permanent even though he was hired to help deal with an increased caseload due to the recession.

Oregon's House Minority Leader, Bruce Hanna says the stimulus has been a failure. The unemployment rate -- which was at 11.9 percent when the stimulus money started flowing in -- is now at a stubbornly high 11.5 percent. And most of the decrease can be attributed to fewer Oregonians looking for work.

"When all we do is just prop up government jobs with federal money," Hanna argues, "we haven't addressed the long term issue of creating local work in local communities."

While public sector jobs are holding their own in Oregon, the state continues to lose private sector jobs. Brent DeHart, owner of Salem Aviation Fueling, has laid off 10 percent of his workforce due to a 30 percent slump in sales.

"We'd like to see the stimulus money take a business and provide the catalyst for that business to grow, and put them in a position to hire more people, to put them to work, then we'll be out of the recession," DeHart told Fox News.

One state economist agrees. Art Ayre says it generally costs more to create a public sector job than one in the private sector. That's because the government job has an additional 35 percent in cost above salary. Most of that comes in the form of health and retirement benefits.

"Stimulus spending lessens the pain of a recession, but slows the recovery process because it causes companies and the government to delay hard decisions," Ayre said.