Democrats Push Cash for States as Key Part of Stimulus Bill

In an attempt to whip up support for the $825 billion stimulus package on the eve of its vote in the House, governors and House Speaker Nancy Pelosi came out today to emphasize the necessity of a key portion of the package—its aid to states.

More than $200 billion of the current package, which is due to reach the floor of the House for a vote tomorrow, would go to states and localities. That includes $87 billion in federal money to state Medicaid programs, about $120 billion to education, and $4 billion for state and local law enforcement funding.

That's a smart investment, says Pelosi, because every dollar in state aid creates $1.38 in economic activity.

Critics have said that funneling federal money to states rewards those governments for poor budgeting and amounts to another "bailout." Unsurprisingly, however, governors Ed Rendell of Pennsylvania and Jim Douglas of Vermont disagreed. "We are not seeking to avoid responsibility as a result of this federal money," Rendell said. "We are all making painful cuts."

And, he said, with states currently facing budget deficits of more than $200 billion, failing to pass a stimulus with state aid would not just be a slap on the wrist for state governments—it would affect citizens.

"Without the aid to the states, what would happen?" Rendell asked. "The states would have to raise taxes. And without the aid to education, what would the local school districts have to do? They would have to raise taxes."

Tax cuts are a key portion of the House draft of the stimulus, accounting for a third of its $825 billion price tag. But those tax cuts, which include a $1,000 cut to working families, would be wiped away if state and local governments had to raise taxes, Rendell said.

Douglas, a Republican, also urged quick passage of the bill. Unlike many in his party, he emphasized that the bill must be passed quickly, despite concerns over expanding the federal deficit.

"For the short term," he said, "we really do need to get this help to the states."

• Read more news about the stimulus.