Skip to main content

The Senate is set to pass a $26 billion bill to provide aid to cash-strapped states and their school districts Thursday. A Wednesday vote of 61-38 ended debate on the package , which is intended to stave off teacher layoffs, prevent cuts of Medicaid services to the poor and generally alleviate out-of-control state budget deficits.

The final Senate vote is expected Thursday. House Speaker Nancy Pelosi said she would call representatives back from their summer recess so that the House could grant final approval to the bill, and President Obama has already promised his signature, saying it would save teaching jobs and ensure “cash-strapped states can get the relief they need.”

If passed, the new legislation will provide $10 billion to retain teachers who otherwise would have been let go due to current school budget constraints. Democrats in support of the bill estimate it will save as many as 140,000 teaching jobs.

The remaining $16 billion in aid comes through an increase in the federal contribution toward Medicaid costs. The residual savings will prevent otherwise imminent state budget cuts, protecting other state jobs outside the realm of education.  

Scroll to Continue

TheStreet Recommends

The bill met opposition from some Senators who objected to another round of stimulus spending. Last week, a Republican filibuster blocked a $42 billion small business lending bill for similar reasons.  

“Washington needs to take care of its own fiscal mess, not deepen it by bailing out the states,” Sen. Mitchell McConnell (R-Ky.) said during the Senate’s debate.
Democrats were able to secure enough votes to end the debate as the $26 billion bill was written to pay for itself through government spending cuts and a provision to close a tax loophole. Many states who have already been forced to make budget cuts due to high state deficits are already counting on the aid.

A spokeswoman for California Gov. Arnold Schwarzenegger, whose state is set to receive $1.3 billion in Medicaid funds for its Medi-Cal program, told the San Francisco Chronicle that the money was "critical to preventing deeper pain and deeper job losses in California."

California received additional government funding through the Obama administration’s Hardest-Hit Fund, but do government bailouts work? Check out this MainStreet article for our take.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at