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States take different view of stimulus funds

CHICAGO (Reuters) - U.S. states are gearing up to receive their share of a nearly trillion-dollar economic stimulus package, with some governors delaying budget cuts or leaving holes in proposed budgets they hope will be filled with federal funds.

The U.S. House of Representatives passed an $825 billion version of the recovery plan on Wednesday and the Senate is negotiating its version, which could hit $900 billion.

When the House bill was introduced nearly two weeks ago states jumped to review how they would handle the money, said Scott Pattison, executive director of the National Association of State Budget Officers.

“I think they realized, ‘OK, this is real, it’s going to happen, gotta gear up,’” he told Reuters.

Maryland, for example, which must close a $2.7 billion deficit over the next two years, delayed slicing aid for community colleges because it hopes to capture more than $4 billion from the package, Democratic Governor Martin O’Malley said on Tuesday.

Facing a $4.8 billion projected deficit in Minnesota’s upcoming two-year budget, Republican Governor Tim Pawlenty on Tuesday released his proposed spending plan that counts on $920 million in money.

Missouri’s Democratic Governor Jay Nixon also tapped $809 million in anticipated federal money for the fiscal 2010 budget plan he unveiled late Tuesday. But his administration said it was ready to cut spending if federal help falls through.

Republicans still faulted the plan. “A budget based on a one-time bailout is no long-term plan,” said Lt. Governor Peter Kinder.

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Washington state lawmakers are drafting a budget to rival that of Democratic Governor Christine Gregoire, which tentatively included $780 million of health-care related stimulus funds, and both sides are waiting on news of their state’s share of stimulus spending.

“We’re sort of in a wait-and-see mode,” said Glenn Kuper, a spokesman for Gregoire’s budget office. “There really won’t be any more (budget) proposals put out there until the federal government is done.”

Other states, including New York, are eager for the extra federal dollars but hesitate to include them in budgets already under consideration.

Democratic Assembly Speaker Sheldon Silver on Tuesday said New York was not yet ready to deal with aid, although the legislature plans to enact a plan to close the state’s 14-month, $15.4 billion deficit by February 5.

In Republican-led Utah, officials are not counting on federal stimulus cash to balance the state’s books, said state budget director John Nixon.

“The stimulus package would be a big benefit ... but until the money is in the bank we really don’t budget it,” Nixon said.

H.D. Palmer, California Gov. Arnold Schwarzenegger’s spokesman for state financial matters, said the state and its local governments could receive $37 billion in federal cash over two years, with $15 billion for education, $12.9 billion for health and human services, $4.7 billion for infrastructure and $4.1 billion for labor related spending, including unemployment benefits.

Schwarzenegger, a Republican, did not write stimulus money into his budget plan and his top priority for the state’s share would be to rid the plan of $4.7 billion in proposed debt.

“To the extent we do get general fiscal relief our highest priority is to either buy down or buy out that level of borrowing,” Palmer said.

In Republican-led Florida, which just put $2.3 billion of budget cuts in place, Governor Charlie Crist is monitoring the package but has yet to put forth recommendations on how to spend the money.

“Right now, we’re just waiting to see what comes out of Congress,” said Jill Chamberlin, a spokeswoman for House Speaker Ray Sansom.

At least one governor is opposing the federal cash give-away. South Carolina’s Gov. Mark Sanford said the spending is wrongheaded and his state may not accept the money.

“The governor has proposed $1 billion in reduced spending and feels that’s what governments should do. The stimulus money has to come from somewhere, and he doesn’t want to pass this debt to future generations,” said Joel Sawyer, a spokesman for the Republican governor.

Reporting by Karen Pierog; additional reporting by Michael Connor in Miami, Jim Christie in San Francisco, Lisa Lambert in Washington, Joan Gralla in New York and Michael Peltier in Tallahassee, Editing by Chizu Nomiyama