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VOL. 124 | NO. 28 | Wednesday, February 11, 2009

State Budgets Being Delayed by Stimulus Debate

By BETH FOUHY | Associated Press Writer

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NEW YORK (AP) - Uncertainty over the final scope of the $800 billion-plus economic stimulus plan in Congress has delayed budget action in some states while governors and legislators wait to see how much federal relief they can expect for their cash-strapped programs.

Several governors have decided to hold up budgets until the stimulus bill is completed, while others have proposed budgets based on what they expect to receive and are keeping a watchful eye on House-Senate negotiations. Still others are crafting budgets that don't rely on stimulus funding at all.

"It's still a fluid animal, if you will, so I don't think we know what the final numbers will be yet," said Florida Gov. Charlie Crist, who delayed his budget address until Feb. 20 in hopes that the stimulus will be enacted by then.

Crist has estimated the state would receive $13.3 billion over three years from the plan passed by the House, which would go largely to fund education, Medicaid and transportation.

Crist, a Republican, planned to appear with President Barack Obama at a rally in Fort Myers on Tuesday to help Obama sell the package to skeptics, including Sen. Mel Martinez, R-Fla., who opposed the Senate version in a test vote Monday.

"I don't think we're relying on it, necessarily," Crist said. "We're hopeful to be able to receive it and certainly it could be an enormous benefit as it relates to our budget."

Forty-three states are running deficits this year, as the economic crisis created a steep drop in state income and sales tax revenues. With most states required by law to balance their budgets, the proposed federal stimulus could prove the difference between temporary solvency and drastic cuts to health care, education, road repair and other services.

The Senate planned a final vote on its version of the stimulus package Tuesday. Approval would then set up negotiations between the House and Senate on a final bill, which Obama has said he wants on his desk by the end of the week.

While both the House and Senate versions contain tens of billions for states, the Senate pared money for education-related spending by $40 billion to bring a few Republicans on board. Obama said Monday he hoped the final bill would reverse some of the education cuts.

The lack of clarity on what they might receive from the stimulus has led governors to craft budgets based on estimates that could change drastically before the bill is finalized.

In Wisconsin, Democratic Gov. Jim Doyle said he has been phoning other governors who stand to lose under the Senate bill to figure out how they can push for changes.

"We've obviously been really focused on how some of the members of the Senate who might be able to make a difference, what we might be able to do to support them, or educate them on our needs," Doyle said.

Doyle, like Florida's Crist, also delayed his budget proposal to Feb. 17 to see what his state will actually receive from the federal plan. Wisconsin faces a $5.7 billion shortfall by July 2011.

And in New Jersey, where Democratic Gov. Jon Corzine is scheduled to deliver his budget address March 12, aides said he would wait until the stimulus plan is passed before outlining how the state might use the money.

Other governors are openly relying on the stimulus money to stabilize their budgets and have signaled they will fight for cuts in the Senate version to be restored.

Connecticut Gov. M. Jodi Rell, a Republican, has said she is banking on $2 billion from the stimulus plan over three years, including $438 million over two years for education. Rell's budget office was working with the state's congressional delegation to reinstate the $40 billion in education-related spending, said spokesman Jeff Beckham.

Nevada Gov. Jim Gibbons estimates the stimulus plan could result in a "partial or full reversal" of cuts he's proposed to the state budget. Gibbons, a Republican, has called for a 15 percent cut in education spending alone.

Still other governors were applying "tough love" to their budget proposals, refusing to count on any additional federal money as they try to close looming gaps.

In New York, Democratic Gov. David Paterson said his 2009-10 budget, due April 1, won't include any federal stimulus funds, even though legislative leaders are counting on about $5 billion from Washington once the plan is enacted. Paterson has proposed a $3.3 billion cut in school aid and has warned of deeper cuts as a way to close an estimated $13 billion deficit.

"Any stimulus aid we receive will only cover a fraction of our long-term deficit," Paterson said. "We cannot look to Washington to solve all our budget problems."

California Gov. Arnold Schwarzenegger, a Republican, also has insisted he won't rely on the stimulus plan to close the state's $42 billion shortfall even though California could receive as much as $32 billion. He plans to apply most of the stimulus money to neglected infrastructure projects.

In Mississippi, lawmakers have begun developing a budget without any stimulus money and Gov. Haley Barbour has said he might reject some of the stimulus funding if the plan is enacted. Barbour already has cut $87.8 million from elementary and secondary schools – approximately 3 percent of the budget for the fiscal year that ends June 30.

Barbour and fellow Republican Govs. Mark Sanford of South Carolina and Rick Perry of Texas all oppose the stimulus plan as wasteful spending. But Oregon state Sen. Bruce Starr, a Republican, said state spending was the best way for a stimulus plan to work.

"Ultimately the dollars coming to the states will be well used by the states," Starr said. "I'm concerned by some of the pork in the bill, but I don't consider the money states need to continue services to be pork."

___

Associated Press writers Brendan Farrington, Susan Haigh, Judy Lin, Bill Kaczor, Beth DeFalco, Michael Gormley, Emily Wagster Pettus, Brendan Riley and Scott Bauer contributed to this report.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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