House Approves $26.1 Billion Aid Package to States in Special Session
Business + Economy

House Approves $26.1 Billion Aid Package to States in Special Session

The House shrugged off Republican resistance and gave final approval to a $26.1 billion package of state aid and economic stimulus designed to avert the layoffs of as many as 310,000 teachers, police officers and other public employees. Today’s vote was 247 to 161, with only two Republicans voting with 245 Democrats to pass the bill.

Lawmakers were summoned back to Washington from their August recess to approve the measure and send it on to President Obama. Congressional Democratic  leaders decided to call the extraordinary session after the Senate broke a GOP filibuster last week and narrowly passed the bill that would also help states cover increased Medicaid payments to low income families.

In the year since Congress and President Obama rushed through a massive package of spending measures and tax breaks totaling $862 billion, the public and many lawmakers have turned against stimulus spending. The package approved today is likely to be one of the last measures aimed at jumpstarting the economy that Congress will consider before the November mid-term election.

There was bitter political wrangling in the run-up to the final vote.  House Republican leader John Boehner, R-Ohio, declared that “The American people don’t want more Washington ‘stimulus’ spending – especially in the form of a payoff to union bosses and liberal special interests.” Rep. David Dreier, R-Calif., said that “Everything that Americans have come to hate about the way their government works – the waste, the ineptitude, the cynicism, the lack of accountability, the utter disregard for the concerns of taxpayers is all very vividly on display right here today.”

House Speaker Nancy Pelosi, D-Calif., fired back that  Republicans were “taking a page out of the failed Bush playbook” by urging the extension of tax cuts for the wealthiest Americans “while opposing a fully paid-for jobs bill that reduces the deficit and keeps teachers in the classroom and police officers on the beat.”

“Why wouldn’t House Republicans want to keep 310,000 teachers, first responders and private sector workers on the job instead of on the unemployment lines?,” she added.

The legislation provides $10 billion to school districts to rehire laid-off teachers or guarantee that more teachers won’t be discharged before the new school year begins late this summer. According to some projections by advocates, the money would keep more than 161,000 teachers on the job.

The remaining $16 billion in the bill will go for six additional months of increased Medicaid payments to the states. Medicaid constitutes about 20 percent of most state budgets.  By filling those Medicaid gaps in dozens of state budgets, the measure would free up funds to meet other priorities, including preserving more than 150,000 police officers and other public works. About three-fifths of the states have factored those funds into their budgets for the coming fiscal year.

The aid to states was fully offset with cuts and tax hikes elsewhere – a key Democratic move to counter the GOP charge that their spending would add to the deficit. The bill was partly offset by rolling back scheduled increases in the food stamp program that supports more than 40 million people. That increase would be postponed until March 2014.

Estimated Distribution of Fiscal Relief to States in Senate Jobs Bill, in Millions
 MedicaidEducationTotal MedicaidEducationTotal
TOTAL TO STATES $14,981 $9,989 $24,970 Missouri$292$190$482
Arkansas$125$91$216New Hampshire$54$41$95
California$1,869$1,201$3,070New Jersey$399$268$667
Colorado$159$159$318New Mexico$126$65$191
Connecticut$199$110$309New York$2,228$607$2,835
Delaware$48$27$75North Carolina$343$298$641
District of Columbia$54$18$72North Dakota$29$22$51
Illinois$545$415$960Rhode Island$72$33$105
Indiana$227$207$434South Carolina$138$144$282
Iowa$128$96$224South Dakota$27$26$53
Michigan$380$318$698West Virginia$81$55$136

Sources: FMAP allocations reflect Center on Budget and Policy Priorities’ estimates using Medicaid spending projections from February 2010 and unemployment rate projections from February 2010. Expenditures for childless adults shifting from CHIP to Medicaid also would qualify for the higher matching rate. ARRA would be modified so that the base FMAP increase would be lowered from 6.2 percentage points to 3.2 percentage points in the second quarter of federal fiscal year 2011 and to 1.2 percentage points in the third quarter. Figures are rounded.

Notes: Education total excludes shares for administration and the U.S. territories. CBPP’s FMAP estimates may differ somewhat from estimates issued by the Congressional Budget Office (which estimates a total of $16.1 billion under the extension, rather than $15 billion) as well as state-specific estimates generated by state officials, because of differences in the methodology or in the underlying data related to Medicaid spending and projected state unemployment rates.

Republicans objected to offsetting about $10 billion of the bill’s cost by raising taxes on some U.S.-based multinational companies. “This spending was a direct order from Washington unions to Democratic leaders, and people will remember that Democratic members listened to union bosses and their liberal leadership rather than their constituents, who want to stop the spending and end the bailouts," said Michael Steel, a spokesman for Boehner.

President Obama met with a group of teachers in the White House Rose Garden in the run-up to the final vote.  The Department of Education will administer funding for teachers after reviewing state applications and create formula allocations based on population and school age population.

The five states that will receive the highest amounts of fiscal relief of over $1 billion – California, New York, Texas, Florida, and Pennsylvania – have some of the highest unemployment rates in the country on top of rocky housing markets.

National economic troubles including a persistent 9.5 percent unemployment rate have exacerbated state-level governments' woes and forced states to slash public services in order to meet budget deficits. Last week the Labor Department reported that an estimated 48,000 state and local workers lost their jobs in July. Since August 2008, more than 316,000 public service jobs have been lost, according to the Center on Budget and Policy Priorities. The Washington, D.C.-based liberal think tank concluded that states will face total budget shortfalls of $260 billion in fiscal years 2011 and 2012, because of high unemployment and faltering revenues.

“That is a trend the nation cannot afford to continue,” said Jon Shure, the director of the think tank’s   State Fiscal Project. “If we don’t do this it could get worse.”

In June, ten governors met in Washington to urge Congress to pass a six-month extension of Federal Medical Assistance Percentages (FMAP) funds so they could bridge their budget shortfalls.

Pennsylvania Governor Edward Rendell (D), who spear headed the lobbying effort, welcomed the Senate’s passage of the bill. “I feel tremendous relief,” Rendell told the Pittsburg Post Gazette after last week’s Senate vote. Pennsylvania faces a $4.1 billion budget gap for 2011, and had assumed $850 million in funding for programs covered by the provision. Rendell said he has already made $3 billion in cuts to the state budget. The Keystone state is slated to receive more than $1 billion dollars in state aid.  

“A $190 million gap is much easier to deal with than nearly $1 billion,” said Donna Cooper, secretary of policy and planning for the Pennsylvania governor. Cooper estimates the aid will avoid nearly 12,000 state, local and municipal layoffs.

But not all governors are praising the state aid package. Republican Gov. Rick Perry of Texas opposes the bill and urged Texas House members to vote against it. Perry claims an amendment in the bill conflicts with the state’s constitution in the way to fund public schools, leaving less funding to a majority of the 1,232 independent school districts and charter schools in Texas.

Some districts would lose up to $1 million because it would go through Title 1 formula funding versus state funding formulas, said DeEtta Culbertson, spokesperson with the Texas Education Agency.  “We would appreciate the money but there are the legal hurdles in order to qualify for it,” she said. But Rep. Lloyd Doggett, D-Tex., dismissed the Perry administration claim as a “phony legalistic argument.”

School teacher unions and government agencies praised the bill. The National Education Association estimated that students would face larger class sizes of up to 35 to 40 students without the legislation. Some states already face dire education situations. In Illinois for example, 13,000 to 20,000 teachers were laid off last spring and all of the 869 school districts face delayed payments totaling $700 million, said Mike Vanover, spokesman for the Illinois State Board of Education.

But some critics argue that the additional spending on school systems can’t be justified in the face of a $1.4 trillion budget deficit that won’t necessarily improve the educational system. 

“Employment has grown ten times faster than enrollment over the past 40 years,” said Andrew Coulson, director of the Center for Education Freedom at the Cato Institute, a conservative  think-tank. “If we could say that hiring all that additional staff for public schools had improved achievement you might need all of those jobs or all of those jobs.”

“I'm not sure where the money is coming from to pay for this aid, and I'm usually uncomfortable with the amount of money our government spends,” said Danielle Forest, fourth grade teacher at Undermountain Elementary School in Sheffield, Massachusetts.  “However, lack of funding for education is a very real problem.”

Robert Huckins has been a social studies high school teacher for 14 years in New Hampshire and witnessed the recent hiring freezes and layoffs throughout the granite state. He believes funding schools is important while the economy recovers but it isn’t the best solution to avoid teacher layoffs.

“Throwing money at schools and teaching positions doesn't guarantee positive help because schools do different things with the money,” said Huckins , who teaches at Hollis-Brookline High School. “Governments are notoriously horrid at overseeing these things. But schools often are ‘beacons in the night’ for strapped towns, in both educational and social ways, and this isn't something to be taken lightly.”

Table data compiled by the Center on Budget and Policy Priorities.