$26-billion aid package for states becomes law

Congress on Tuesday gave final approval to a $26.1-billion aid package for cash-strapped states that will keep 161,000 teachers and thousands of police, fire and other local government workers from being laid off. The legislation was quickly signed by President Obama.

The funding will also help states maintain medical services for low-income people.

The measure was approved on a virtual party-line vote after the House was summoned back to Washington from its August recess for a rare one-day session. The House approved the bill, 247 to 161, with all but three Democrats present voting for the bill and all but two Republicans present voting against.

Democrats supported the bill as crucial to maintaining vital public services at a time when the nation’s faltering economic recovery has left state and local governments in dire financial straits.

Republicans denounced it as another expensive federal bailout and accused Democrats of catering to teachers unions and other special interests.

In a sign of how heavily deficit concerns have come to weigh on this Congress, the bill is fully paid for mainly by ending some tax breaks for companies operating overseas, as well as by imposing an earlier end to a food stamp program.

Prior to the vote, Obama, joined by teachers in the Rose Garden, urged swift passage.

“We can’t stand by and do nothing while pink slips are given to the men and women who educate our children or keep our communities safe,” Obama said. “That’s why today we’re trying to pass a law that will save hundreds of thousands of additional jobs in the coming year.”

The House returned for the vote after the Senate surprised Washington by quickly passing the measure last week.

“I can’t think of a better reason for members to rush back to the capital than to invest in our children, our future,” said Jared Polis, a freshman Democrat from Colorado. “This is not spending we are considering today. This is an investment — an investment in our children and our future.”

Republicans had been under pressure not to yield on the aid package, even as governors from both major parties sought the funds. Many states had already counted the money in their budgets.

The U.S. Chamber of Commerce warned lawmakers that it might rate their performance on this vote. The group opposed the measure because of the proposal to close foreign tax breaks that it said would “impose draconian tax increases on American worldwide companies that would hinder job creation.”

Rep. David Dreier (R-San Dimas) noted the salary scandal in the city of Bell — where the former city manager, among other officials, had been paid exorbitantly — as an example of reckless government spending. “We need to put an end to the cycle of bailouts,” Dreier said.

The legislation provides $10 billion for state education jobs that the Department of Education said Tuesday would save 161,000 educators’ jobs nationwide, including 16,500 in California.

The package also provides $16 billion to extend through June 2011 a funding increase for Medicaid, the state-federal program that provides healthcare for low-income people.

States had been counting on the federal government to continue helping them pay for the rising costs of covering the poor, as had been approved under the 2009 economic recovery act.

Many states, including California, were exposed to gaping budget holes without the aid. California will receive $1.2 billion.

The liberal-leaning Economic Policy Institute estimates the Medicaid funds will save an additional 158,000 jobs nationwide.

lisa.mascaro@latimes.com