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Senate approves $26 billion for needy states

By Tami Luhby, senior writer

NEW YORK (CNNMoney.com) -- The Senate voted Thursday to send $26 billion more in federal aid to cash-strapped states.

The measure, which passed by a 61-39 vote, contains $16.1 billion in additional Medicaid money and $10 billion to prevent layoffs of teachers and first responders.

It now moves to the House, which will return Tuesday from its August recess to vote on the bill.

State officials have been desperately lobbying their representatives, saying they need the money to shore up their budgets. About 30 states had already included the additional Medicaid funds in their fiscal 2011 budgets, which began July 1, and would have to cut further if it doesn't come through. The bill is expected to save 290,000 jobs, according to Senate Democrats.

President Obama also weighed in earlier in the week, asking lawmakers to pass the additional assistance to the states, which has been kicking around Congress in various forms for months.

The Senate was originally scheduled to vote on the measure on Monday, but Reid pushed it back to amend the legislation after learning it would increase the deficit by $4.9 billion despite offset measures. The amended bill reduces the deficit by $1.4 billion.

The GOP, however, is not taking kindly to sending more aid to the states, saying the original $787 billion stimulus package was meant to do that.

"The trillion dollar stimulus bill was supposed to be timely, targeted and temporary," Sen. Mitch McConnell, R-Ky., said earlier in the week. "Yet here we are, a year and a half later, and they're already coming back for more. The purpose of this bill is clear: it's to create a permanent need for future state bailouts, at a time when we can least afford it."

Congressional producers Ted Barrett and Deirdre Walsh contributed to this report. To top of page

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