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States Tap Stimulus Aid; Holdouts Remain

April 28, 2009 5 min read
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Even as the U.S. Department of Education announced the first states approved to tap federal aid under a $48.5 billion economic-stimulus fund designed to help them deal with budget cuts, questions remained last week about whether the governors of at least two states would try to claim their share.

Gov. Mark Sanford of South Carolina, a sharp and vocal critic of the $787 billion federal economic-stimulus law, has said he would forgo some $700 million in federal aid from the state fiscal-stabilization fund mostly designated for education, unless he could use it to pay down state debt, a request the White House has rejected.

The stance of the GOP governor, who is thought to be mulling a run for the White House in 2012, has infuriated not only Democrats in his state but some leading Republicans as well.

"Paying these funds down would give us greater latitude when the federal gravy train ends.” Gov. Mark Sanford, South Carolina Republican

Meanwhile, a high school senior in South Carolina recently filed a lawsuit arguing that the state legislature should be allowed to accept the money even if the governor doesn’t want it. The state supreme court last week said that the suit was “premature” and that it would not consider the matter until the legislature completes its current session, which is expected to end in June.

In Alaska, Gov. Sarah Palin has put the White House on notice that she may not seek all the aid the state is entitled to under the stimulus plan, including some education dollars. The governor, a Republican who entered the national limelight as her party’s 2008 vice presidential nominee, noted in a March 31 letter to President Barack Obama that the matter “will be addressed on a case-by-case basis.”

“We are not requesting funds intended ... just to grow government,” Gov. Palin, who also is seen as a potential 2012 contender for the White House, said last month at a press conference in Juneau. “We’re not going to increase our dependence on Washington.”

As with Mr. Sanford, however, Ms. Palin’s stance has put her at odds with the state legislature, which recently passed a budget that incorporates virtually all the federal stimulus money available to Alaska. Gov. Palin has yet to act on that budget.

The situations in Alaska and South Carolina were unresolved last week.

States Receive Funding

Other states were eager to get their share of the first of two rounds of money in the state-stabilization pot, which is largely focused on spending for K-12 and higher education.

As of press time, California, Illinois, and South Dakota had successfully completed their applications and could begin drawing on the initial funds. More states soon were expected to follow.

California now has access to nearly $4 billion in state-stabilization aid, Illinois about $1.4 billion, and South Dakota $85 million, the U.S. Department of Education said. The second round is expected to start rolling out by summer.

States and districts already have had access to stimulus dollars for education under other parts of the American Recovery and Reinvestment Act of 2009, including the Title I program for disadvantaged students, the Individuals with Disabilities Education Act, and other programs.

An April 17 document from the Education Department, however, indicates that little of the education-related stimulus money has been drawn on so far, with a couple of exceptions, including Pell Grants for college students.

Maneuvers in S.C.

The Education Department questions the wisdom of turning down any of the education aid.

"We are not requesting funds intended ... just to grow government. We’re not going to increase our dependence on Washington.” Gov. Sarah Palin, Alaska Republican

“In the current economic climate, states refusing education money will be hard-pressed to show how that is in the best interests of schoolchildren,” said Sandra Abrevaya, a department spokeswoman. “We just don’t want to see states balancing their budgets on the backs of kids.”

In South Carolina, state lawmakers were hoping to get around the governor by requesting the state-stabilization money themselves. A provision in the stimulus law—an amendment added late in the process—says legislatures may do so. But the White House budget chief recently ruled that the provision, as written, was insufficient, and the funds could only be released at a governor’s request. (“S.C. State Officials At Odds Over Aid,” April 8, 2009.)

The South Carolina legislature as of last week was still working on a budget for the coming fiscal year and had yet to determine whether the final plan would include its share of money under the state-stabilization fund.

Many leading Republicans, including the speaker of the state’s House of Representatives, Rep. Bobby Harrell, have said it should.

Gov. Sanford’s press secretary could not be reached for comment last week, but the governor has indicated no plans to back down on insisting the stabilization dollars be used to pay down state debt.

“Paying these funds down would give us greater financial latitude, when the federal gravy train ends in 24 months,” the governor wrote in an April 5 guest column in The State newspaper of South Carolina.

Mr. Sanford has been a leading critic of the federal stimulus package, arguing that it would drive up the federal debt and burden future generations stuck paying the bill.

Showdown in Alaska

In Alaska, it remains to be seen whether Gov. Palin will fully embrace the $9.8 billion operating budget lawmakers approved this month.

Under state law, she can veto any portion of the plan, including those elements that assume the use of education-related stimulus dollars.

“We have not announced a decision on that,” spokesman Bill McAllister said of the governor’s intentions regarding the budget. “That is still pending.”

Originally, Ms. Palin said she wanted to turn down most of the education funds, including Title I and special education dollars, not just money from the state-stabilization pot, but she appears to have backed away from that stance.

The key question, observers now say, is whether Gov. Palin will agree to access some $93 million in federal aid from the state-stabilization fund. In one recent twist, the governor urged lawmakers simply to replace state aid for education and some other programs with the federal dollars, an idea they declined to support.

The Associated Press contributed to this story.
A version of this article appeared in the April 29, 2009 edition of Education Week as States Tap Stimulus Aid; Holdouts Remain

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