Dem wants unused state aid for deficit

Centrist Sen. Ben Nelson (D-Neb.) said Tuesday he plans to introduce legislation that would require unused portions of the recently-passed state aid package to go toward bringing down the federal budget deficit.

President Obama last week signed the $26 billion state aid package after the House returned from recess to approve it. Nelson said that his legislation would apply to the $10 billion education jobs fund included in the bill.

{mosads}”The new law will keep thousands of teachers on the job across our country and I’m pleased that it is fully paid for by cutting other federal spending and closing foreign tax loopholes for businesses,” Nelson said in a statement. “If a state or states, however, don’t need the additional money, we should make sure the unused funds aren’t shipped off to other states. Instead, the unused funds should pay down the federal deficit.”

Nelson’s bill underscores the focus on the deficit many centrist Democrats have taken heading into the November midterm elections.

Democrats have said that the state aid bill will add to the deficit since it is funded by eliminating a foreign tax credit and cutting food stamps, but some candidates in vulnerable races have been sensitive to charges that their party has driven up the deficit with large spending items like the stimulus and healthcare laws. 

Supporters of the bill say it will save thousands of teachers’ jobs and help states avoid budget crises.

Nelson does not face reelection until 2012 but his seat could be a pickup opportunity for Republicans since Nebraska leans right. 

The veteran senator said his legislation does not address the $16 billion designed to bolster state budgets and Medicaid payments because the Treasury Department only releases those funds if state governors apply for them and that unused funds would remain at Treasury.

Governors must also apply for the education funds, according to Nelson’s office, but unused dollars can be reallocated to other states or entities by the secretary of education.

Nelson said he plans to introduce the legislation when the Senate returns from recess in September.