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State's stimulus share close to $25 billion 2-year aid will boost schools and projects

New York's share of the new federal stimulus package will reach nearly $25 billion over the next two years, a considerable boost to help erase some of the state's worsening deficit that threatens education, health care and other programs.

"This will be a huge stimulus, not only for the physical structures of our state government, but also to the belief that we can emerge from this economic crisis," Gov. David A. Paterson said Saturday.

The clearest winner will be the state's public schools, which were facing $700 million in operating aid cuts under the governor's 2009 deficit-ridden budget.

Now, that amount -- and possibly then some -- will be made up with the federal bailout. That will also put less pressure on local property taxpayers to make up the difference in what had been looming lost state aid.

But the governor still sounded a cautionary note, arguing that the money flow is only temporary and still does not relieve soaring deficits his administration is projecting years into the future.

"We're spending more than we have in revenue. That's our biggest problem. If we address that, then the stimulus package becomes a plus," he said Saturday afternoon in a conference call with reporters.

"If we use it as replacement money," he added, "then it becomes the same deleterious function that we have suffered for a number of years where we put our problems off into the future and compounded them."

Still uncertain -- in part because of the different federal rules attached to the spending -- is how much the package will reduce the upcoming 2009 deficit, now projected to reach as high as $14.2 billion.

While Paterson's hands are tied as far as how he can spend some of the federal money, there are ways funds can be shifted around, especially in the area of health care.

The federal bill, expected to be signed next week by President Obama, includes nearly $11 billion in additional Medicaid aid for New York over the next 27 months. Seventy percent of that will go to the state, with the remainder to counties and New York City.

The new money for Medicaid merely lowers the percentage that New York State now pays for the health insurance program for the elderly, disabled and poor. That, then, will free up money the state was otherwise earmarking for Medicaid for other uses.

Paterson said he would be interested in using some federal money to undo some of the more than $500 million worth of "nuisance" tax and fee hikes on everything from entertainment admissions to clothing sales.

"I didn't want to put them in," he said of the taxes. He also wants to restore some social programs cut in his budget plan and cuts he made to higher education.

But health care groups late last week were already mounting a furious campaign to pressure Paterson to use any additional Medicaid stimulus money for health care initiatives. Paterson on Saturday disputed those claims, saying Washington left the Medicaid money discretionary for a reason.

"They really wanted stimulus and they wanted deficit reduction," he said.

The most direct beneficiary of Washington's stimulus legislation will be New York's public schools, which are in line for $2.5 billion in additional federal aid over the next two years.

Paterson said half of that money will be used in the upcoming fiscal year that begins April 1. By law, the money must go to restoring proposed cuts to school aid, and with Paterson having planned a $700 million reduction in state funding for the state's 700 school districts, the money appears to more than cover that amount.

Public school advocates, though, have insisted Paterson's true school aid cut number in the coming year totaled $2.5 billion. Critics, however, have worried that the federal bailout for New York will hamper long-stalled efforts to rein in school spending. State aid to schools since 2003 has grown 48 percent, and yet property taxes are still soaring.

The federal package also includes $556 million for New York for "flexible" education aid. That means the state can use the money for any purpose, including non-educational programs. Another $5 billion nationwide pot of funds will be eligible for states meeting certain educational performance standards.

High-needs schools, such as Buffalo, could strongly benefit by a provision sending $940 million over two years in Title 1 funding to help New York schools meet the federal No Child Left Behind requirements. Another $760 million will go for special-education programs.

College students with Pell grants will see a $500 increase in their maximum award in the bill that will send New York $180 million for the popular program.

The federal bill included a surprise for New York -- $1.9 billion in Medicaid funds for the 200 8/0 9 budget. It comes just two weeks after Paterson and lawmakers pushed through $1.6 billion worth of cuts, tax hikes and fund swaps to close the gap. Paterson Saturday said he'd now use that new pot of funds to help close the 2009 projected deficit.

New York is in line to get $1.25 billion for mass transit improvements, $1.1 billion of which will go to the transit system in the New York City area. Another $1.1 billion is for roads and highway work, of which upstate will see a considerable share.

There is also money for water and sewer projects and high-speed rail initiatives. New York will also get about $126 million for energy efficiency and renewable energy efforts. Paterson said the state expects $404 million from the bill to help low-income residents weatherize their homes.

While the state has already identified nearly 2,000 shovel-ready projects -- including new facilities at the University at Buffalo and the downtown expansion of Erie Community College -- the Paterson administration has said it will work with local governments to identify priority projects it may have missed in its preliminary assessments.

But state officials have cautioned that tight federal guidelines will push off many signature-style projects, such as the Peace Bridge replacement span, because they are not far enough along in the design or approval phase.

The federal package also includes $1.3 billion for New York for additional food stamp benefits and $1.3 billion to pay for a 33-week expansion of unemployment benefits, bringing the period laid-off workers can get the jobless benefits to 59 weeks. Another $100 million will go for child care programs for low-income residents.

On the surface, the bailout would appear to all but erase much of the state's deficit. But Laura Anglin, the governor's budget director, said a sizable portion of the spending will have no impact on budget-balancing efforts because they are outside the budget process.

Also, if Paterson removes much of the $500 million in planned tax hikes, then that amount has to be made up using stimulus money to cover the lost revenues.


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