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Getting the State Aid Cuts Straight

Maybe it's the decade or so I spent working in federal-state relations for three Georgia governors, or maybe it's just that I'm amazed at how little specific information is being provided in the MSM about the cuts made in the Nelson-Collins amendment to the Senate economic recovery/stimulus bill, but I decided to do some digging and calculations about the "$40 billion in state aid cuts" that are mentioned in most of the stories.

The original House-Senate "State Fiscal Stabilization Fund" was set at $79 billion over two years. After a small rakeoff for territories and administration, it was divided roughly into $39 billion to the states (with a pass-through to school districts for unused funds) to restore prior state education cuts; a $15 billion "state incentives grant" program keyed to progress towards state education goals (presumably those set by No Child Left Behind); and then a $25 billion fund that could literally go to any state function, including education. This last flexible fund is basically general revenue sharing, though unlike the old Nixon-era program, it all goes to the states.

The amendment killed the flexible fund entirely; cut the "state incentive grant" fund in half (to $7.5 billion); and then left the remaining $31 billion in the fund distributed to offset state education cuts. So in the state fiscal stabilization section alone, the $40 billion cut everybody's talking about involves $25 billion in flexible money and $15 billion in education funding.

There are obviously some separate cuts in education spending, though much of it is in school construction funding that presumably doesn't affect operating budgets, though it does reduce the stimulative effect of the overall bill.

Additionally, though I missed it earlier, the original Senate bill cut out a House-passed $1 billion temporary increase in appropriations for the Community Development Block Grant, which is the most flexible money that would have been available to local governments.

All this matters because one of the original rationales of the entire legislation was that state and local government service and personnel cuts would undercut the stimulative effect of the federal effort.

States (and indirectly, local governments) will still benefit considerably from other elements of the bill as enacted by the Senate, most notably the estimated $87 billion that would be made available through temporary federal matching rates for the Medicaid program. But if the Nelson-Collins amendment sticks through the House-Senate conference (a very good bet given the one-vote-cushion the bill seems to have in the Senate), the flexible money is gone, and education has taken a pretty big hit.

If you want to strain your eyes by staring at the bill as it now stands in the Senate, go here. And the best detailed summary of the cuts made in the original Senate bill and the Nelson-Collins amendment, the National Conference of State Legislatures has a spread-sheet in a new article on its site.