The law specifies states will lose their share of the anti-recession spending if they miss a deadline or don't allocate the money fast enough. But state officials across the country have had trouble keeping track of the application deadlines and requirements in the 400-page law. For weeks the administration had failed to disclose what the rules were, even though governors are required to sign pledges saying they'll spend the money appropriately.
Obama said the rules he announced Friday "will help ensure that we are proving ourselves worthy of the great trust the American people have placed in us." Obama also told state legislators gathered at the White House that decisions about how money will be spent will be based on the merits of creating the most jobs and helping reverse the recession.
"They will not be made as a way of doing favors for lobbyists," he said.
To help ensure that special interests don't stymie stimulus efforts, Obama said his administration would post on the Internet all requests by lobbyists who want to talk to any member of his administration about particular projects that would involve using the money from the Economic Recovery Act.
All requests must be in writing, and details from meetings between Obama's administration and lobbyists about stimulus projects also will be posted online, the president said.
Obama said the administration will give priority to projects that create numerous jobs "so we can get the most bang out of every single taxpayer buck" and those that will help make health care more affordable and rebuild roads and bridges in the future.
Telling lawmakers he's trying to lead by example, Obama said he nixed a request to update electrical and heating systems in the East Wing of the White House, the first family's residence, because it won't create many jobs or hasten the economic turnaround. First Lady Michelle Obama's offices are in the East Wing, along with the State Dining Room and other social areas.
Still, Obama lobbied for money in a future bill, saying: "This is a much-needed project. It is long overdue, and I hope Congress funds it in the future."
As one of his first acts in office, Obama signed the sweeping stimulus measure last month to much fanfare, and his administration has been making money available to states since then.
The guidelines are the latest step in Obama's efforts to ensure transparency and accountability over the stimulus money. He appointed Vice President Joe Biden to oversee the stimulus implementation, and he's appointed an inspector general to prevent waste and fraud.
"No plan is perfect. And I can't stand here and promise you that not one dollar will slip through the cracks. But what I can promise you is that we will do everything in our power to prevent that from happening," Obama told the National Conference of State Legislatures.
He added: "The American people are watching what we do. They need this plan to work. And they expect to see their hard-earned money spent efficiently."
Obama discussed spending on the nation's infrastructure Friday afternoon during a meeting with Democratic Gov. Ed Rendell of Pennsylvania, Republican Gov. Arnold Schwarzenegger of California and New York Mayor Michael Bloomberg, an independent.
Before the meeting was closed to reporters, Obama said he was confident that "with all these bright minds sitting around the table" that he'll get a budget that reflects some of their concerns about improving the nation's roads, bridges and other infrastructure, separate from the stimulus funds designated for these types of projects.
Rendell said they talked about creating an "infrastructure bank," an idea Obama endorsed as a presidential candidate. Such a bank would raise money for major national projects by issuing bonds that could be leveraged into even greater funding.
Schwarzenegger said they "let the president know that we are 100 percent behind him on this, to go out and to sell this to the American people. ... Not only does it help us make our economy function better, but also it helps us in creating jobs."
Bloomberg said he and the governors pledged to work to help Obama get the support he needs on this issue.
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