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States Say They Can’t Afford Emergency Fund

Many states are walking away from a $5 billion federal fund that some economists say is a swift and effective way to help people hurt by the recession and stimulate the economy.

The states say they can't collect their share of the emergency fund for needy families because they can't afford to put up the 20% of costs required by the federal government.

Six months after the money was made available under the $787 billion federal stimulus program, only 27 states have applied for funds, according to the U.S. Health and Human Services Department. Most have tapped @only a small fraction of the money they're entitled to - less than 15% in most cases. As a result, as much as $1 billion could be left on the table when the program ends in September 2010, estimates Jack Tweedie of the National Conference of State Legislatures.

The fund can be used to help states cope with growing welfare caseloads, create temporary jobs for the unemployed, pay rent for families facing eviction and immediately put cash in people's pockets.

Yet the $4-for-$1 offer from Washington is going widely unclaimed. Louisiana, for example, doesn't plan to use any of the funds, even though one in five residents live in poverty.

"We're in an almost crisis-level budget situation in Louisiana," said Sammy Guillory, deputy assistant secretary of Louisiana's Office of Family Support. "So even to start a program is not an option right now."

How other states have used the money:

New York@. The state spent $175 million with the goal of helping poor families buy back-to-school supplies and clothes. Its 20% share was picked up by a foundation funded by billionaire investor George Soros.

Tennessee@. In Perry County, where roughly one of every four workers had been unemployed since January, the state spent $5 million to create jobs for those laid off from an auto parts plant, including clearing brush, painting murals and baking turnovers at a pie factory. The county's jobless rate dropped from 27% in January to 19% in July.

California@. Los Angeles County is putting together a jobs program for 10,000 people. The $160 million project is picking up 100% of the workers' @salaries, because the state argued that costs to administer the program and supervise workers counts as the match.

Ken Wolfe, a Health and Human Services spokesman, said the department expects to receive more applications. Tweedie predicts most states will ask for only enough money to avoid welfare cuts and cover new recipients, instead of starting temporary programs.

"Virtually all the states are in really tough fiscal positions - they've been cutting, not expanding," said Tweedie, director of the children and families program for the National Conference.

Tweedie and public policy experts from other organizations have been traveling the U.S. educating states on the program's flexibility. The 20% portion doesn't have to come from state budgets, they say. It can be paid by cities, counties, private donors or non-profits such as homeless shelters or food banks.

"If they want to do back-to-school payments, go talk to Wal-Mart or Target," Tweedie said.

Harry Holzer, an economist at the Urban Institute and a professor of public policy at Georgetown University, said funding programs for food stamp and welfare recipients is one of the best ways to stimulate the economy.

"We know that virtually 100% of this money is going to be spent, and spent quickly," Holzer said.

Michael Grabell and Chris Flavelle are reporters for ProPublica, an independent, non-profit newsroom based in New York City that produces investigative journalism. USA TODAY editors worked with ProPublica in preparing this story for publication.

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