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Minnesota legislative leaders urge use of Medicaid money

CHICAGO (Reuters) - Minnesota legislative leaders urged Governor Tim Pawlenty on Tuesday to apply for enhanced federal funding for Medicaid that was passed by the U.S. Congress earlier this month.

"Failure to accept the funds would result in residents paying federal taxes to pay for Medicaid programs in other states," the heads of the Democrat-Farm-Labor Party-controlled House and Senate said in a letter to the governor.

With money from 2009's more-than-$800 billion federal stimulus act running out, Congress agreed to send another $26 billion to states to help fund Medicaid, the healthcare program for the poor, and to preserve education jobs.

Pawlenty, a Republican, proposed in February tapping $387 million in the enhanced Medicaid funding to help balance the budget. With congressional action on approving the funds unclear, the governor turned to other measures to balance the budget.

After Congress approved the funds, Pawlenty, a potential candidate for president, was critical. He said "the federal government should not deficit spend to bail out states and special interest groups."

Bruce Gordon, Pawlenty's spokesman, said the governor "is reviewing the law and studying its implications."

The legislative leaders reminded Pawlenty of his acceptance of previous stimulus money and said increased enrollments in Medicaid were straining the state's budget.

"You cannot let political ambition get in the way of doing what is right for Minnesota," the leaders wrote, adding that the governor has until September 24 to apply for the funds.

(Reporting by Karen Pierog; Editing by Dan Grebler)