The fate of US President George W Bush's $1.6 trillion tax-cut plan teetered on a dispute between the federal government and the states about who should pay for the public education of disabled children.

Decades ago, Congress promised that the US government would pay up to 40 per cent of the bill for special education, but it has never come anywhere near that level. The federal share is now about 17 per cent of the $35 billion cost, leaving local school districts struggling under a huge financial burden.

Senator James Jeffords, a Vermont Republican, backed away early this month from Bush's budget plan, after the White House rejected his demand for $180 billion in guaranteed spending on special education over the next decade. That left the tax cuts one vote short of a senate majority.