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Recovery Deal Reached; State Aid Slashed Compared to House Bill

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Negotiators between the Senate and House approved a deal late Wednesday night for a recovery package.  The good news is that the Senate agreed to a significant recovery package at all, since at one time the legislation faced the threat of a filibuster that would have blocked almost all stimulus spending approved in the original House bill.

While all details of the full compromise between the House and Senate have not been released, the best news for state governments facing deficits is:

  • Congress approved about $90 billion to help states pay for Medicaid health care for the poor.
  • Another $150 billion will go to infrastructure including transportation, high-speed Internet service and energy projects.  This includes $29 billion for highways, $8 billion for rail, $8.4 billion for mass transit projects, $7 billion for broadband access, $11 billion to upgrade the nation’s electrical grid, and $5 billion to weatherize low-income homes.
  • Increases funding for food stamps, job training funds, housing assistance, Head Start and child care
  • Money for broadband focused on grants, mostly for rural areas, rather than tax credits to the telecom industry as the Senate had proposed.

The bad news so far announced:

  • Money for the State Fiscal Stabilization Fund and school construction was slashed from $99 billion in the House version down to a combined $54 billion in the compromise version. The resulting cut of $45 billion will lead to massive pain and suffering in states across the nation as education funding is slashed, medical access is cut and cops are removed from their beats.  
  • And while the final deal kept money to subsidize 60% of COBRA payments for the unemployed, it deleted the funds approved in the House to allow lower-income unemployed to access health benefits through Medicaid.  

It could have been far worse. Even with projections of state governments facing a collective $350 billion in deficits through the 2011 fiscal year, 36 US Senators actually voted for an amendment that would have eliminated essentially all aid to the states with nearly all spending replaced with tax cuts.  It is a bad sign for future debates that there is such a large core of Senators so completely indifferent to states' needs during this economic and fiscal crisis.   

Resources

Progressive States Network - Why States Need to be a Focus for Any Economic Recovery Plan
Center for Budget and Policy Priorities - State Budget Troubles Worsen
Office of US House Speaker Nancy Pelosi - Conference Report on American Recovery and Reinvestment Act: Preliminary Overview