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Continued: Minnesota's stimulus take: About $9.1 billion

  • Article by: KEVIN DIAZ , Star Tribune
  • Last update: February 16, 2009 - 10:26 AM

WASHINGTON - A massive plan to zap the U.S. economy out of its doldrums could infuse Minnesota with an estimated $9.1 billion to rebuild schools, roads, bridges, health programs and family pocketbooks.

The $787 billion economic stimulus package promises to save or create 66,000 jobs in Minnesota, part of a net gain of an estimated 3.5 million jobs nationwide.

But for Minnesotans in Congress, as for lawmakers nationwide, Friday's largely party-line votes accentuated old partisan divisions about government spending and how best to get the nation's moribund economy moving again.

Minnesota's Collin Peterson joined six other House Democrats in voting against the bill. "I hope I'm wrong," said Peterson, the only Minnesotan to cross party lines. "I hope this works, but I'm skeptical."

Much of the job creation in Minnesota is expected to come from about $502 million in spending on "shovel ready" road and highway projects, a figure that was boosted from $478 million in response to bipartisan calls for more infrastructure investment.

Nevertheless, state job-creation estimates were dialed back from some of the original projections as lawmakers worked to trim the bill's size. Under the first version passed by the House, economists suggested that Minnesota could net as many as 92,000 jobs.

Moreover, in an effort to win the critical GOP votes that put the plan over the top in the Senate, Democrats were forced to trim aid to local and state governments, a move that dropped Minnesota's share from more than $1.1 billion in the original House-passed version to $821 million in the final bill.

Some of the savings were carved out of government housing and social service programs, a move that was sharply resisted by Rep. Keith Ellison, D-Minn., and others in the 42-member Congressional Black Caucus. Still, Ellison called the final product "a step in the right direction."

In Minnesota, the final bill allocates more than $2 billion to help the state deliver Medicaid services to low-income patients, one of the largest single spending categories in the stimulus package.

The state's cut of the Medicaid funding was increased by $203 million through a measure proposed by Sen. Amy Klobuchar, a Democrat, who worked with Pennsylvania's Arlen Specter, one of the three Senate Republicans to back the stimulus package. Klobuchar also worked to preserve funding for rural broadband development, a measure she said will keep the state competitive in the global economy.

Protections for taconite

The economic recovery legislation also includes some protections for Minnesota's taconite industry. Iron Range Democrat Jim Oberstar, chairman of the House Transportation Committee, included "Buy American" provisions that assure federal highway construction dollars can't be used on steel that is "dumped" in the U.S. market at prices below the cost of production.

Several other Minnesota Democrats, including Reps. Tim Walz and Betty McCollum, scrambled to restore school construction money that had been scrapped during House and Senate negotiations.

But the final bargain funneled much of that school modernization funding through state and local government aid, leaving many House Democrats worried that it may be diverted to other purposes.

"Losing the set-aside for school construction is a disappointment," McCollum said. "Now school construction has to compete with everything else, which I think is a missed opportunity for jobs in Minnesota."

Minnesota's three House Republicans found plenty not to like, and all three voted no.

"It's just not addressing the needs of the country right now," said freshman Erik Paulsen, who, like most Republicans, backed an alternative plan that he said focused more on infrastructure and targeted tax relief, particularly for businesses.

Republicans contend that the legislation is laden with wasteful spending that will add another trillion dollars to the national debt.

Along with Paulsen and Rep. Michele Bachmann, Rep. John Kline said his office has been inundated with calls in opposition to the bill, whose general outlines were forged in the White House. "They are frustrated with ineffective legislation that favors the creation of new government programs over jobs," Kline said.

Nearly half of Minnesota's allocation, about $4.1 billion, comes through established spending programs, including more than $35 million for law enforcement, $189 million for alternative energy and weatherization initiatives, and $94 million for transit systems.

But many other programs in the recovery plan will be distributed through competitive grants to states and localities, making it impossible to calculate each state's overall take precisely. Democrats cited a study by the Center for American Progress which estimates that more than $9.1 billion will go to Minnesota. That figure includes direct tax cuts, which are about a third of the package.

An estimated 2 million Minnesota workers are eligible for the stimulus package's tax relief, which provides savings of as much as $400 for individuals and $800 for couples. The package also shields some 473,000 Minnesotans from the Alternative Minimum Tax, which was originally meant to only hit the rich.

Jobless benefits are increased by $100 a month and food stamp benefits go up 13 percent.

'This is not an ordinary time'

The total infusion of cash and benefits, which is equivalent to about 3.6 percent of Minnesota's gross state product in 2007, comes as welcome news to state DFL legislative leaders who have been facing off with Gov. Tim Pawlenty over how to handle a projected $7 billion budget deficit.

Members of the state's congressional delegation said that the federal money will likely result in a reexamination of Pawlenty's proposed budget, which would pare $2 billion from state spending.

Pawlenty's office referred questions about the stimulus package to Tom Hanson, the state management and budget commissioner.

"This is not an ordinary time. We have rising unemployment and a growing state budget deficit," Hanson said. "The federal stimulus dollars will provide one-time assistance in balancing the state's budget and will help us provide assistance to people who are hurting because of the recession. We look forward to partnering with the Legislature to get the dollars into the local economy as efficiently, quickly, and transparently as possible."

Kevin Diaz • 202-408-2753

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