Federal aid money tests GOP governors eyeing 2012

Another helping of federal aid to shore up battered state budgets might be tough to swallow for Tim Pawlenty and other Republican governors who may challenge President Barack Obama in two years. They can take the money or make a stand.

The aid package enacted last week requires governors to sign off before their states can receive a share of the $16 billion in federal medical assistance money. The bill contained another $10 billion that school districts will get no matter what.

The situation is most taxing on GOP governors who are possible 2012 presidential candidates, such as Minnesota's Tim Pawlenty, Indiana's Mitch Daniels and Mississippi's Haley Barbour. They have railed against Washington spending. Taking the money opens them up to charges of hypocrisy, but rejecting it deprives their states of tens of millions of dollars.

The choice is reminiscent of 2009, when some Republican governors - Alaska's Sarah Palin, South Carolina's Mark Sanford and Texas' Rick Perry among them - made headlines for refusing portions of the $787 billion stimulus package.

The new health care money extends increased Medicaid payments to the states for another six months. It is offset by closing a tax loophole used by multinational corporations and by reducing food stamp benefits for the poor.

Reacting to the bill's passage last week, Pawlenty described it as a bailout to the states the nation couldn't afford.

"The federal government's reckless spending spree must come to an end," Pawlenty said then.

"[It's] his political future or Minnesota's financial future."

Pawlenty was campaigning for Republicans in Oregon and Nevada on Friday. His aides said he was unavailable for an interview and not ready to make a decision anyway.

"Since it just passed, the governor is reviewing the new law and studying its implications," spokesman Bruce Gordon said.

Minnesota has more than $260 million riding on his call, which must be made by late September.

State Rep. Erin Murphy, DFL-St. Paul, said she is frustrated that there's any hesitation on Pawlenty's part given Minnesota's shaky budget situation. Pawlenty's administration is considering taking out short-term loans to pay bills in a timely fashion.

"His political future or Minnesota's financial future" is how Murphy framed the decision. "His ability to say he's not taking federal money is a strong selling point in Iowa, but it is a risky decision for Minnesota's fiscal future," she said.

In Mississippi, Barbour called the federal bill "terrible legislation" within hours of its passage. On Friday, spokesman Dan Turner said Barbour's administration plans to apply for the money despite his misgivings.

"Because of the other stimulus package and the way it was structured, we have a pretty big cliff coming up," Turner said. "Quite frankly with the recession there have been a lot of choices that haven't been ideal."

Indiana's Daniels is still deciding whether to ask for the money but will do so by the Sept. 24 deadline, said Marcus Barlow, spokesman for the state's Family and Social Services Administration.

Daniels criticized the state aid package last week, but his spokeswoman said at the time that Indiana would cash a check if Washington sends one its way.

Barlow said the state could not make changes to its Medicaid program for six months starting Jan. 1 if it accepts about $200 million in additional federal stimulus Medicaid money. He said the state has not budgeted for the additional dollars, so officials are examining whether it would be worthwhile to take the money.

Both Daniels and Barbour put their names to a National Governors Association letter in February that pressed Congress to approve the Medicaid extension. Pawlenty didn't sign the letter.

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Associated Press writers Emily Wagster Pettus in Jackson, Miss., and Mike Smith in Indianapolis contributed to this story.

(Copyright 2010 by The Associated Press. All Rights Reserved.)

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