The Senate is poised to pass legislation that would extend and phase out enhanced federal Medicaid payments to states for six months through June 30, 2011, as well as provide $10 billion to local school districts to prevent an estimated 140,000 educators from being laid off.

The vote on the legislation — a substitute amendment to an existing transportation bill —  would come after 5:00 p.m. Thursday unless Senate members agree to waive the 30 hours allotted for debate.

Passage of the legislation was virtually guaranteed Wednesday when the Senate voted 61 to 38 to both limit debate on the bill and waive budget rules.

The votes in the Senate came after the Obama administration issued a statement Tuesday in strong support of the bill that said the Federal Medical Assistance Percentage extension “will provide critical assistance to states to help them maintain their Medicaid programs during a period of high enrollment growth and reduced state ­revenue.”

The American Recovery and Reinvestment Act had authorized a base increase of at least 6.2% in states’ FMAP, but the increase is slated to expire by the end of the year. The amendment would increase FMAP by 3.2% for the first quarter next year and 1.2% for the second quarter.

State and local governments, many of which have already taken the expected increase in Medicaid payments into account in planning their budgets, have been pushing hard for an extension, warning that without it, they would have to make billions of dollars of cuts in programs and personnel. 

The Congressional Budget Office found the FMAP provision would cost the federal government $16.1 billion over 10 years. The cost of the legislation would be offset by several revenue-raisers, including returning food stamp benefits to pre-ARRA levels, closing foreign tax loopholes, and rescinding funds for programs that no longer need them.

House Speaker Nancy Pelosi said Wednesday that she will  call House members back to Washington early next week for a special session to approve the bill before the start of the new school year.

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