Stimulus package being felt in Va.

Hugh Keogh's military service is getting him a $250 check to stimulate Virginia's economy.

"I'll have some fun with it," he said of the Veterans Affairs payment for his service in the Navy during the Vietnam War.

But Keogh, president and CEO of the Virginia Chamber of Commerce, is more skeptical about other forms of aid that President Barack Obama has promised to Virginia as part of a massive stimulus package meant to slow an economic free-fall and lead the country back from recession.

His check is part of $335 million in aid to more than 1.34 million Virginians who receive a variety of federal benefits, including disability compensation for veterans.

"Government intervention may be necessary in the short term," Keogh said, "but in the long term, they need to get out of the way."

The role of government in boosting the economy is stirring plenty of debate, as two studies released last week show more than $9 billion coming into Virginia from the stimulus package and evidence of thousands of jobs saved by the infusion of federal money to state and local governments.

The Center on Budget and Policy Priorities called Virginia a stimulus success story. Its study showed that the federal money had closed 37 percent of the state's budget gap. That allowed mental hospitals to remain open and held down tuition increases at state colleges and universities, saved the jobs of more than 300 sheriff's deputies, and avoided deep cuts in budgets for public schools and Medicaid health services for the poor.

"The federal aid is arriving at a crucial time," said the study, which said every $1 of federal aid to states produces $1.36 in increased economic output.

The money includes $1.3 billion for Virginia's Medicaid program and more than $1.1 billion in money for public schools and higher education, not including additional funds for impoverished schools and students with disabilities.

Gov. Timothy M. Kaine estimates that the stimulus funds saved more than 7,000 jobs by plugging huge holes in the state's two-year budget, which is a major source of money for localities and health-care providers.

"The aid to the state was to forestall cuts that would have worsened the recession," said Michael Cassidy, executive director of the Commonwealth Institute, an advocacy group that released its own study Wednesday about the stimulus package's effects in Virginia.

The biggest single chunk of money went directly to state taxpayers, with an estimated 2.9 million Virginians receiving tax credits totaling $3.2 billion. The tax credits took effect April 1, putting about $13 a week more into the average worker's paycheck this year and $7.70 next year, for an annual boost of about $400.

The same day, the federal government increased food-stamp benefits for poor Virginians by 13.6 percent, putting an additional $355 million in benefits into people's pockets over the next five years. The increase also will provide local social-services departments with more money to handle caseloads that have swollen by 20 percent in two years.

More money also has gone to people who have lost their jobs. The stimulus package added $25 a week to unemployment benefits, which were extended to 59 weeks from 26, bringing up to $20 million in additional aid to more than 75,000 unemployed Virginians.

These kinds of direct aid are aimed at boosting businesses across the state.

"While it has benefited families, it was intended to drive the economy more," said Thomas J. Steinhauser, director of benefit programs at the Virginia Department of Social Services, which oversees the food-stamp program.

While some retailers say they haven't seen a big boost, others believe the additional benefits make a difference in sales, especially for essential items.

"The fact that these people have 33 additional weeks of unemployment [benefits] certainly helps them with just the basics, paying health and food and paying their mortgage," said Nancy Thomas, president of the Retail Merchants Association. "I think those are the things they're taking care of first."

But the aid has not come without controversy. The state received an additional $62.8 million for its depleted unemployment trust fund, but the General Assembly rejected two proposals to expand unemployment benefits, and that cost the state an additional $125 million in federal aid that would have come with the changes.

Advocates for the poor are unhappy with the state for not taking full advantage of up to $79.1 million available to Virginia's program of Temporary Assistance for Needy Families.

State social-services officials say Virginia does not meet the eligibility requirements to collect the full amount. Instead, with an increase of 8 percent in the caseload for poor families, the state expects to collect an additional $12 million to $15 million.

That upsets John Horejsi, coordinator for Social Action Linking Together, a Northern Virginia advocacy group.

"I think it's even more scandalous" than forgoing the additional unemployment aid, Horejsi said.

Jobs are the big issue for the state's struggling road construction and paving industry, which is hoping for a short-term boost from the stimulus package until Virginia devises a long-term solution for transportation funding.

So far, the aid has been slow to come and less than expected for highway projects, said Rick James, executive vice president of Roanoke-based Adams Construction Co.

"That has been a disappointment," James said. "Will the stimulus package provide work opportunities for our employees? Yes. Is it to the extent we hoped? No."

Adams laid off two-thirds of its 600-person work force at the end of the road-construction season in December. The company has brought most of those people back in anticipation of maintenance and construction projects, but James said, "The key is, how long do I get to keep all those people working?"

Contact Michael Martz at (804) 649-6964 or .