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U.S. governors unlikely to turn down stimulus funds

WASHINGTON (Reuters) - Even Republican governors who have said they will reject some of Washington’s stimulus money will end up taking much of the funding, the leader of the National Governors’ Association said on Saturday.

“In the end ... most of the governors will accept most of the money and use it for the benefit of their citizens,” said Pennsylvania’s Democratic governor, Edward Rendell, at the association’s annual meeting.

In the four days since President Barack Obama signed the $787 billion economic recovery bill into law, providing increases in federal backing for states’ social services, infrastructure and education funding, at least two Republican governors have said they may not take all of the money.

The stimulus package won only three Republican votes in Congress, amid charges that it was filled with wasteful spending and its $282 billion in tax cuts were not enough.

Mississippi’s Republican Governor, Haley Barbour, told reporters at the meeting he would decline some $50 million in extra unemployment insurance funding, because it includes a condition for expanding the benefits to more people.

“Once the federal money is gone we would have to replace it with state money, which means we would have to raise the unemployment insurance tax on employers,” he said.

Even if governors turn down money, the economic recovery law includes a provision allowing state legislatures to override governors. Barbour added that “100 percent of the governors are going to take some percentage of the funding.”

Louisiana Governor Bobby Jindal, who has often been mentioned as a potential Republican presidential candidate for the 2012 elections, said late Friday he too would not take Louisiana’s portion of the unemployment money.

The Louisiana Workforce Commission estimates that would total $32.8 million over three years, but once the stimulus plan ended the state would have to cover the benefits at roughly $12 million a year.

But in Maryland where unemployment has spiked in recent months, Democratic Governor Martin O’Malley said his state had no problem with the unemployment provisions in the law.

“I don’t believe they’ll cause tax increases or spending increases,” he said. “We welcome the unemployment dollars.”

WAITING FOR THE DOLLARS TO FLOW

The governors will meet with Obama on Monday to discuss the economy. Many states have already coordinated with their transportation agencies to apply the roads funds the federal government will distribute within the next three weeks.

The package includes $120 billion for public works projects including highway and rail projects.

Almost all agree, though, the stimulus plan will not make up for budget shortfalls hitting a majority of states.

“There is not a state in this union that is going to be able to use this stimulus money and wipe away all of the problems and all of the challenges that we face,” Rendell said, adding that $1 billion in spending still had to be cut recently from Pennsylvania’s budget.

Utah Governor Jon Huntsman, a Republican, said his state recently cut its transportation budget in order to preserve funding for education and other social services.

“Now the stimulus money comes in and it basically allows us to backfill in many of these critical areas like public and higher education and healthcare,” he said. “So we can now take the transportation money that was taken off the table a couple of months ago back to where it was originally intended. Our transportation budget is going to be whole.”

Reporting by Lisa Lambert, editing by Jackie Frank

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