Stateline Story

Aid to States Now Appears Likely

State officials breathed a collective sigh of relief Wednesday (Aug. 4) when a $26 billion aid package for the states cleared a key procedural hurdle in the U.S. Senate. The measure is likely to become law in the coming weeks and will provide an infusion of cash that had been looking more uncertain by the day.

As Stateline previously reported , the federal legislation, which aims to prevent teacher layoffs and bolster health care for the poor, is of particular interest to the 28 states that passed budgets this year on the assumption the money would come. Without the assistance, these states would be forced to make sharp, mid-year spending cuts, possibly in unpopular special sessions in an election year.

Pennsylvania is among the states banking on the jolt of federal assistance. "I feel tremendous relief," Governor Ed Rendell told the Pittsburgh Post-Gazette after Wednesday's vote.

Still, Pennsylvania — like most other states counting on the money — assumed the check from the federal government would be larger. It will receive $600 million in additional Medicaid funds, but lawmakers budgeted for $850 million. Difficult budget cuts, therefore, are still on tap.

In Washington state, where lawmakers had been debating a special session to make cuts in lieu of the federal money, that discussion ended — at least temporarily- with the Senate's vote. "I can't imagine, no matter what happens in the September (revenue) forecast, that we will face the kind of draconian cuts we were facing here," Governor Chris Gregoire told The Seattle Times .

The paper noted that majority Democrats in Washington have been fearful of meeting formally to make cuts because they were concerned that Republicans "would use a special session, held before the elections, to take pot shots at their party."

Even in states that didn't count on the federal money, the help arrives just in the nick of time. In Oregon, for example, where the state economist recently announced that a new, $577 million hole has opened up in the current budget because of declining income tax collections, the federal legislation will give local lawmakers some breathing room.

In a sign of the depth of the state's money troubles, however, "celebration in Salem was muted," The Oregonian reported . "The federal money, though welcome, amounts to less than half the shortfall projected for state government in this fiscal year. Oregon's unemployment rate is still stuck above 10 percent and the recovery is stubbornly slow."