As President Obama signed the federal stimulus package into law yesterday, officials in Rhode Island were still trying to figure out what the American Recovery and Reinvestment Act of 2009 would mean to the state's budget.

U.S. Sen. Jack Reed, a Democrat, yesterday said the $787 billion package would provide the state more than $1.1 billion of federal aid and create 12,000 jobs. He released a preliminary list of how the money would get spent.

The largest portion of the $1.1 billion will go toward Medicaid funding, according to Reed's office, which cited figures published by the Center on Budget and Policy Priorities, a nonprofit think tank.

Reed said the legislation will provide $470 million of Medicaid funding for the state over two years. The funding will come through a temporary readjustment to the Federal Medical Assistance Percentages formula which determines the ratio of state versus federal Medicaid funding.

But Gov. Donald Carcieri's spokeswoman, Amy Kempe, said in an e-mail that it was "premature to discuss with absolute certainty what the stimulus plan will mean for Rhode Island and the state's budget."

Last month Carcieri proposed a series of cuts and revenue measures to close a $357.4 million budget gap in the current fiscal year. His gap-closing proposal assumed the state would get $30 million of federal stimulus funds in the current fiscal year. Carcieri has postponed releasing his proposed fiscal 2010 budget while lawmakers consider changes to the current-year budget that would be recurring, including changes to the state pension plan.

According to Reed's office, Rhode Island will get $213.1 million for infrastructure projects including $137.1 million for highway funding, $29.5 million for transit funding, and $46 million for clean water and sewer infrastructure needs.

The state will also receive $167 million for its state fiscal stabilization fund, of which 82% must be spent on education in local school districts and at colleges and universities, and $93 million for education programs for disabled and disadvantaged children.

"This package of fiscal relief, tax cuts, and infrastructure investments is the start, not the end, of the effort," Reed said in press release. "The money must now be spent quickly and responsibly in order to be effective."

Tim Gray, spokesman for General Treasurer Frank Caprio, said state officials were still waiting to see what the package would bring. "We have the second highest unemployment in the country behind Michigan - anything that can get people working again is obviously a priority," he said.

Unemployment in the state hit 10% in December, according to the U.S. Bureau of Labor Statistics.

Speaking about states in general, Standard & Poor's analyst Robin Prunty said the additional Medicaid funding in the stimulus package will "offset some of [states'] costs and provide a buffer to some of the spending reductions that would have occurred."

The federal funds will help in 2009 and 2010 but aren't recurring, she said.

"The stimulus alone isn't going to solve most of the state budget gaps that have been identified," Prunty said. "If you're fully relying on the stimulus [to balance a state's budget], the return to structural budget balance will be a little more difficult."

Rhode Island's weak economy has put pressure on the state's local governments, according to a report released yesterday by Fitch Ratings.

"A challenging economic and legislative environment in Rhode Island continues to pressure local governments, which are managing high fixed-cost burdens," the report said. "Employment losses underscore weak economic conditions, which are exacerbated by precipitous home price declines and high foreclosure rates."

Two state laws have put further pressure on local governments, according to the report. Municipalities are constrained by a property tax levy cap that limits annual tax increases while another law allows local school committees to sue their local governments if they don't provide enough funding to comply with state mandates. Federal stimulus funds directed toward education could help alleviate that problem, the report said.

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