State budgets provide jobs that support the private economy.
Exhibiting a belated burst of urgency, leaders of the U.S. House and Senate abruptly announced a tentative deal on a stimulus bill Wednesday. Congress deserves applause for its improved sense of timing, and for many of the features of the slimmed-down $789 billion bill. Its $150 billion in infrastructure spending is particularly welcome.
But in St. Paul and other state capitals around the country, a key element of the deal met with disappointment. State leaders in more than 40 fiscally distressed states were rooting for retention of the $79 billion in state "stabilization" aid authorized by the House version of the stimulus bill. Instead, the agreement would send states $44 billion in that coveted, unrestricted category -- only $5 billion more than the Senate approved Tuesday.
It's disheartening that help for recession-rocked states was cast aside as somehow superfluous to a measure aimed at creating and maintaining jobs. State budgets are all about jobs. One way or another, more than $4 of every $5 Minnesota state government collects in taxes winds up in somebody's paycheck. State money pays directly or indirectly for teachers, professors, police officers, firefighters, nursing home caregivers, engineers and a lot more of the workers a civilized society requires.
Tens of thousands of those Minnesota jobs are threatened by declining state revenues. The same is true in many other states. That's why governors of both parties spoke out this week, reminding members of Congress about the importance of preserving those jobs. The work those employees do creates the conditions in which the private economy can prosper again.
For Minnesota, the difference between the House version of the bill and the agreement announced yesterday amounts to about $480 million. That's about 10 percent of the deficit currently forecast for the next two-year budget. It would not have been nearly enough to save every at-risk government-related job. But, for example, it could have averted most of the city aid cuts proposed in the governor's budget, which in turn would have kept hundreds of police, fire and public maintenance workers on the job.
There's better news for Minnesota in the stimulus agreement's Medicaid provision. It will increase the federal matching share of Medicaid costs, allowing states like Minnesota to free a portion of their own Medicaid spending for other purposes. Minnesota's share is likely to be rich enough, even after some requisite adjustments, to net several hundred million dollars more than the $920 million Gov. Tim Pawlenty booked from the federal stimulus in his 2010-11 budget recommendations.
That encouraging word for the state's bottom line must be tempered by the sobering economic news that's arriving almost daily. Pawlenty said Wednesday he expects the next state revenue forecast to put the coming two-year budget another $1 billion to $2 billion in the hole. That would make this recession's impact on the state budget larger than the ordeal of 1981-82.
Knowing that's what's coming, it's regrettable that Pawlenty chose not to join the chorus of governors -- including Republicans Charlie Crist of Florida and Arnold Schwarzenegger of California -- who asked Congress to be generous to the states. He passed up a fine opportunity to be a visible leader in advising Congress that state assistance and job preservation are one and the same.