Money coming, state works on how to spend it

WASHINGTON

As President Obama signed an economic-stimulus package yesterday that will send at least $6 billion to North Carolina, state officials worked out the details on how to spend the money on roads, schools, health care for the poor and other needs.

Gov. Bev Perdue said that her office was combing through the mammoth bill to determine exactly how much the state is eligible for and had not yet determined which specific projects in the state -- new highway construction and others -- would benefit from the new federal money.

The $787 billion recovery package includes a broad mix of spending programs and tax cuts aimed at juicing the slumping economy and creating jobs, coupled with assistance for those hurt most by the slump.

More than a third of the package -- $288 billion -- is tied to tax breaks intended to stimulate the economy: breaks for people who buy new cars and houses this year, bigger tax breaks for college tuition and an increase in tax credits for the poor.

The package also expands unemployment benefits for laid-off workers and increases federal financing for training programs, and increases assistance to the poor through the federal school-lunch program and child-care programs.

Signing the bill in Denver, Obama said that the economic- recovery package represented "only the first part of the broad strategy we need to address our economic crisis."

White House economists predicted that the plan would create or save 3.5 million jobs nationally over the next two years -- including 105,000 in North Carolina. The state shed more than 100,000 jobs just last year and has the eighth highest unemployment rate in the nation, at 8.7 percent.

The economic downturn and declining tax revenues have left a hole in the state budget for this year that is projected to be between $1 billion and $3 billion

A similar gap is expected next year, which means deep cuts because the state is constitutionally mandated to have a balanced budget.

The recovery package will send an estimated $1.4 billion to North Carolina to help balance the budget for the next two years, the vast majority of which the state has to spend on education.

The package also increases the federal government's share of the cost of Medicaid, the insurance program for the poor that is jointly financed by Washington and state governments, worth an estimated $2.3 billion to North Carolina.

Perdue said that the federal money would not be a big enough help on its own and that she would have to continue cutting state services and programs.

"I don't want anyone to be fooled. There are going to be tough, hard decisions made," she said. "Every community in the state is going to feel this pain, regardless of how pleased we are today with the federal stimulus money."

Much of North Carolina's share of the spending contained in the package will flow through Raleigh for distribution.

Yesterday, Perdue created a new state office -- the Office of Economic Recovery and Investment -- to maximize the amount of money coming to the state and to determine where to best spend it.

She appointed Dempsey Benton, a longtime state bureaucrat, to lead the new agency.

"Part of what we want to do is look at the legislation with a North Carolina perspective," Benton said.

State leaders will have to work quickly to determine how to spend much of the money provided in the bill. For example, the $736 million for highway financing North Carolina is eligible for requires that half of the money be spent on projects ready to go within four months, and the other half within a year.

The governor's office has produced a long list of "shovel ready" projects eligible for financing under the bill but said it had not yet picked any for financing.

"States are going to have some issues trying to interpret all this, especially given the short time frame," said Robert Strange, a policy analyst with the National Conference of State Legislatures.

Winston-Salem officials said yesterday that they don't know what kind of stimulus money the city can get but said they are preparing grant applications for any stimulus categories that might apply, just in case.

"We're erring on the side of, if it's not excluded, we're going to at least prepare internally as best we can," City Manager Lee Garrity said. "We're making an educated guess at this point."

In January, the Winston-Salem City Council approved a "wish list" of items that it would like to spend money on if the federal government gave it enough money. The council's list totaled more than $618 million and would have created nearly 5,000 jobs.

Assistant City Manager Greg Turner said that city officials have taken that list and compared it to the categories financed in the stimulus act to see what city projects might be eligible. He said that some -- such as transportation improvements -- appear to be covered in the stimulus package. He said that city officials are still reviewingthe act to see what benefits it might have for public projects.

"The citizens obviously are taxpayers, and they can figure out their personal situation in terms of the tax relief that the law provides," Turner said. "But as far as what it provides to cities like Winston-Salem, we're still evaluating it."

Forsyth County officials are also considering their options.

Jane Cole, a county employee who acts as a liaison for the county at the state level, said she is gathering more information on how the stimulus package could affect Forsyth County. She has heard that there will be a lot of money available in the law-enforcement arena and to aid the homeless.

"We are pushing forward and are trying to get every cent we can," Cole said.

■ Sean Mussenden can be reached at 202 662-7668 or at smussenden@mediageneral.com.

■ James Romoser can be reached at 919-210-6794 or at jromoser@wsjournal.com.

■ Journal reporters Wesley Young and Laura Graff contributed to this report.