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Aid package aimed at saving state jobs passes key hurdle in Senate

By Lori Montgomery and Jenna Johnson
Washington Post Staff Writer
Thursday, August 5, 2010; A01

An emergency plan to save the jobs of tens of thousands of public school teachers and other government workers overcame a key Senate hurdle Wednesday, and House Speaker Nancy Pelosi said she would summon lawmakers back from their August break to finish work on the measure.

Two Republicans crossed party lines to advance the $26 billion package, handing President Obama a victory in his campaign to bolster the shaky economy. With many governors struggling to close gaping budget deficits, administration officials feared a fresh round of state layoffs or tax increases could knock the nation's wobbly recovery off-course.

The aid package would not entirely close those budget gaps. Hampered by election-year anxiety over the mounting national debt, congressional Democrats were forced to slash Obama's original request for state aid nearly in half and come up with a plan to pay for it. Meanwhile, lawmakers in both parties signaled that the measure probably marks the end for spending bills aimed at boosting economic activity.

"I think that this should be sort of the final down payment," said Sen. Olympia J. Snowe (R-Maine), a key swing vote who helped break the impasse Wednesday and overcome a Republican filibuster. Sen. Susan Collins, also of Maine, provided the second Republican vote, allowing the package to clear its last major hurdle on a vote of 61 to 38.

Obama hailed the vote as "an important step towards ensuring that teachers across the country can stay in the classroom and cash-strapped states can get the relief they need."

Even as the federal government is preparing Friday to release new unemployment figures likely to underscore the weakness of the economic recovery, a separate jobs bill aimed at spurring hiring by small businesses was stalled in the Senate and unlikely to move until after Labor Day.

Obama urged the Senate to quickly wrap up work on the package. Aides said a final Senate vote is likely Thursday afternoon.

The package would then go to the House, whose members will return to Washington on Tuesday, House leaders said.

"As millions of children prepare to go back to school -- many in just a few days -- the House will act quickly to approve this legislation once the Senate votes," Pelosi (D-Calif.) said in a statement.

House members left town last week, and many rank-and-file Democrats looked forward to the break as a chance to defend dozens of seats at risk in the November elections. But aides said many lawmakers will welcome the interruption, viewing it as a chance to score a fresh legislative victory for teachers and public-service unions, an important Democratic constituency. The House had earlier approved the state aid, though in a different form.

Republican leaders criticized the package as a giveaway to labor and an undeserved bailout for profligate state governments. Even though the final version of the bill would reduce deficits by $1.4 billion over the next decade, according to the nonpartisan Congressional Budget Office, Republicans also argued that the measure would darken an already grim federal budget outlook.

"Washington needs to take care of its own fiscal mess, not deepen it by bailing out the states," said Senate Minority Leader Mitch McConnell (R-Ky.). "Americans . . . are alarmed at the fact that the federal government is now for the first time in our history the single largest source of revenue for the states. They know that with more power in Washington comes less accountability. And they're fighting back."

The measure would extend programs enacted in last year's economic stimulus package, giving states an extra $10 billion for education programs and $16 billion to plug holes in their budgets opened by growing demand for Medicaid, the government-run health program for the poor.

To pay for the new spending, the measure would cut off in March 2014 an expansion of food-stamp benefits enacted in last year's stimulus. And it would end tax breaks for some multinational corporations that are based in the United States but have operations and pay taxes abroad. Closing those "loopholes," as Democrats call them, is the centerpiece of a House Democratic campaign to promote domestic manufacturing and discourage companies from shipping jobs overseas.

The U.S. Education Department estimates that the education fund would preserve the jobs of about 160,000 teachers and other educators. California is projected to receive the most funding, an estimated $1.2 billion to preserve about 16,500 jobs. Locally, the District would receive about $18 million, saving 200 jobs. Maryland is slated to get $179 million for about 2,500 jobs, and Virginia would get $249.5 million for 3,800 jobs, according to education officials.

Officials in Maryland, Virginia and the District declined to comment on how such funds would affect their budgets, saying it was too early in the process to accurately make predictions.

Education Secretary Arne Duncan said the money would go to school boards across the country to forestall teacher layoffs, cuts to after-school programs, increases in class sizes and, in a few cases, plans to shorten the school week from five days to four.

"The stories that we were hearing were absolutely scary," Duncan said in an interview. "We couldn't in good conscience not work to make it happen."

State officials say the aid will spare them from laying off thousands of other workers. States face a cumulative budget gap of $62 billion for the current fiscal year, said Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers. At $26 billion, the package "might not be enough to solve all of the shortfalls," he said. "But it will be a tremendous help."

Staff writer Michael Fletcher contributed to this report.

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