States, local governments look beyond bailout

SAN FRANCISCO (Reuters) - U.S. state and local officials are not counting on any of the $700 billion in the Troubled Assets Relief Program and instead are looking to the incoming Obama administration for a stimulus program, especially for public works, to boost their weakened economies.

Their comments followed U.S. Treasury Secretary Henry Paulson saying on Tuesday that money from the program, known as TARP, is not slated for state and local governments.

“We are looking at programs and thinking broadly about dealing with state and local governments, municipalities that would take tax-exempt financing, and we are not looking at TARP doing that directly,” Paulson said.

Many local and state governments could use cash help right away as revenues slump and shortfalls open in their budgets as the national economy slows, with some sectors taking an especially hard beating.

Wall Street’s turmoil, for instance, may cost New York city 175,000 jobs and California is facing a combined $28 billion shortfall for the rest of its current fiscal year and its next fiscal year.

As much as California, the most populous state, could use cash from the federal government to balance its books, that is not a priority in the state capital of Sacramento.

“We need to get our own fiscal house in order first,” said Aaron McLear, a spokesman for Gov. Arnold Schwarzenegger. “We always will push for our fair share from the federal government ... but we can’t depend upon on it as we go through our own financial crisis.”

Nevada Treasurer Kate Marshall said she would not turn away a check from the U.S. government to help her state balance its books. “I wouldn’t kick it out of bed for eating crackers,” she said, but added it is unlikely money will be in the mail soon.

Instead, the federal government should focus on infrastructure partnerships with state governments, Marshall told Reuters in a telephone interview: “Those things not only propel us forward but create jobs right here and now ... We’re willing to get to work and we’d like the feds to go to work with us.”

Randy Rentschler, director of legislation at the Metropolitan Transportation Commission, which finances the maintenance of San Francisco Bay area bridges, said improving and expanding public works is overdue, and would pay economic dividends well into the future.

“We’re a lot less interested in the feds coming in and bailing us out than in getting a serious infrastructure program,” he said. “Building local infrastructure is a jobs program ... but it’s also an opportunity to build things that can benefit future generations.”

President-elect Barack Obama’s announcement that he would meet with governors next week raised hopes among state and local officials of quick help early next year with targeted projects through a federal stimulus package.

Chuck Reed, mayor of San Jose, California, the tenth-largest U.S. city and the biggest city in the high-technology hub of Silicon Valley, said he expects Obama to also listen closely to local officials.

“The stimulus program that the Obama administration is likely to push should have money in it for cities,” Reed said.

“My guess is they’ll be looking for projects that are ready to go to get the stimulus going so that means for us some transportation projects,” Reed added. “I would encourage them to put some money into clean technology because in San Jose we have the opportunity with our solar companies to create some more jobs quickly.”

Miami Mayor Manuel Diaz told Reuters on Monday speed is of the essence for a federal stimulus effort: “I don’t think we can wait a week, but if we have to, we have to.”

Additional reporting by Lisa Lambert in Washington and Joan Gralla in New York; Editing by James Dalgleish