Stimulus II: Congress Ponders Aid for Cash-Strapped States

Washington – Washington soon could come to the aid of California, New York and other cash-strapped states that face the need to raise taxes or cut spending again next year to balance their books.

The House of Representatives took the first step late Wednesday, passing a $75 billion jobs bill that would help states pay for infrastructure projects and prevent more public employees from being laid off.

Some are calling it “stimulus II,” and a sequel would be good news for the 35 states that face budget gaps totaling $31.5 billion by the middle of next year. California is projecting the largest shortfall, at $6.3 billion, followed by Illinois and New York, according to the Center on Budget and Policy Priorities, a research center in Washington.

Earlier this year, the White House disappointed California officials when it said it had no interest in backing the state’s emergency loans as a short-term measure.

Now, however, the White House is signaling that it wants to send more money to the states. Without offering any specifics, President Barack Obama mentioned the idea last week in an economic speech, and state officials are eager to hear what the White House has in mind.

On Capitol Hill, Democratic House Speaker Nancy Pelosi of California is urging Congress to finalize a bill quickly, before state legislatures begin their work in 2010.

“It is very important. … It would prevent the firing of schoolteachers, police officers, firefighters and health care workers who are meeting the needs of the American people,” Pelosi said.

Many Republicans scoff at the notion of another stimulus, calling the members of the majority party spendthrifts.

The vote was close, 217-212, with many Democrats joining Republicans to oppose the additional spending.

In a speech Wednesday on the House floor, Minority Leader John Boehner of Ohio called the jobs package “more wasteful Washington spending” that will be paid for by future generations.

“Who are we kidding?” he asked. “We’re not kidding anybody. I just think it’s time to put the brakes on all of it.”

Under the latest House package, called the Jobs for Main Street Act of 2010, all the states could compete for a chunk of $48 billion for infrastructure projects and $27 billion to keep more public-sector employees on the payroll.

Pelosi said state and local governments would begin their budgeting in January and February, “and it’s important for them to have some idea of if and when we would be doing something.”

It appears as though she’ll have to wait, however, at least until early next year. No action is planned this year in the Senate, which remains intensely focused on its health care overhaul, leaving no time for other issues.

The White House is promising to work out details of a new aid package with Congress. In his speech last week, Obama said that the first stimulus “has saved the jobs of hundreds of thousands of teachers and public school workers, firefighters and police officers.”

The president said a new package should include emergency assistance to senior citizens, extended unemployment benefits “and relief to states and localities to prevent layoffs.”

“This will help folks weathering these storms, while boosting consumer spending and promoting job growth,” Obama said.

While budget woes will dominate the agenda for state legislatures next year, the situation is expected to worsen. State coffers aren’t likely to begin rebounding until the third quarter of 2010 or later, said Arturo Perez, a fiscal analyst with the National Conference of State Legislatures in Denver.

“States tend not to bottom out as far as their finances are concerned until at least 12 to 24 months after the end of a national recession,” Perez said.

On the Web:

The Center on Budget and Policy Priorities report on state budget shortfalls