Arizona could lose out on stimulus cash

Posted: Updated:

WASHINGTON -- The Obama administration is warning states 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 Pennsylvania Gov. Ed Rendell, but his words could have implications for Arizona and other states.

Duncan wrote he is displeased at a plan by Pennsylvania's Republican-led Senate to reduce the share of the state budget for education while leaving its rainy-day surplus untouched. Duncan said the plan may 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.

Arizona faces a projected shortfall of up to $4 billion in the fiscal year that begins July 1. Gov. Jan Brewer has proposed a one-cent sales tax increase to close the gap. She says without it, education and social services could be decimated.

Obama did not intend for state lawmakers to simply cut state education spending and replace it with stimulus dollars.

(Copyright 2009 by The Associated Press. All Rights Reserved.)