WASHINGTON - The Obama administration warned states yesterday that it may withhold millions of dollars if they use stimulus money to plug budget holes instead of boosting aid for schools.
Education Secretary Arne Duncan made the threat in a letter to Gov. Rendell, but his words could have implications for Texas, Arizona, and other states as well as Pennsylvania.
And they raise the stakes for the White House, which will come under intense pressure from Congress if Duncan does hold back some money.
In the letter, Duncan wrote that he was displeased with a plan by Pennsylvania's Republican-led Senate to reduce the share of the state budget for education while leaving its Rainy Day Fund untouched. To do so "is a disservice to our children," Duncan wrote.
"Each state has an obligation to play its part in spurring today's economy and protecting our children's education," he wrote.
Duncan said the plan might hurt Pennsylvania's chance to compete for a $5 billion competitive grant fund created by the stimulus law to reward states and school districts that adopt innovations Obama supports.
Rendell, a fellow Democrat, asked Duncan to weigh in.
Pennsylvania Senate Republicans argue the economy is forcing states across the country to make up for budget cuts with federal stimulus dollars.
Senate Majority Leader Dominic Pileggi (R., Delaware) said lawmakers can spend only what they have, and they wanted to hold onto the rainy-day surplus in case it is needed once the stimulus money, two years' worth of spending, has run out.
Pileggi said yesterday that he was willing to reconsider because the financial picture has worsened since Republicans put their budget together.
"It's certainly something that needs to be re-examined, whether some part of the Rainy Day Fund needs to be utilized in the coming year," Pileggi said.
States use Rainy Day Funds to set aside extra revenue when times are good, to use in economic downturns. Rendell is pushing to use the surplus now.
"The state must make sure we do not simply use stimulus funds to cut state funding for schools," Rendell spokesman Chuck Ardo said.