Mississippi Senate has backed off a plan to steer $25 million from a hurricane fund to a road project in north Mississippi, where Toyota is building a $1.3 billion manufacturing plant.

On Monday, Senate Appropriations Chairman Alan Nunnelee, R-Tupelo, changed a bill to remove the $25 million from the Mississippi Department of Transportation’s budget. The Senate approved the change.

Nunnelee said the money originally came from the Hurricane Katrina Disaster Mitigation Fund. The fund was created with about $270 million in state money after the storm struck in 2005. It was to be used as a match to any federal funds the state received for recovery. However, the federal government didn’t require a match for many of the projects.

Nunnelee said he wanted to pull the $25 million from MDOT’s budget so it could be used, if necessary, to shore up Medicaid, the financially strapped health care program that serves about a fourth of the state’s population.

Medicaid is facing nearly a $100 million budget shortfall this current fiscal year.

Sen. Nickey Browning, D-Pontotoc, said on Monday that the road funding is needed for economic development stemming from the Toyota plant.

“If we don’t get some highways in that area, we’re not going to get tier one suppliers,” Browning said.

Nunnelee said there’s legislation pending to borrow money for the road project near Blue Springs. The House passed a bond package that would authorize the issuance of $200 million in bonds for priority highway projects, many of which are in northeast Mississippi, and to replace or refurbish about 100 deficient bridges on state highways.

“The roads are important for economic development, but we don’t know if it’s vital we spend the full amount for FY09,” Nunnelee said, explaining that MDOT only wants to begin initial environmental work.

When Gov. Haley Barbour first proposed taking the money from the hurricane fund, several lawmakers in both chambers complained. They said there were still too many unmet needs on the Gulf Coast to use any hurricane-related funding for other purposes.

Barbour also recommended legislators take $82.5 million out of the hurricane mitigation fund and place in the state’s rainy day fund.

“Using the money for the rainy day fund would help protect against a slowing revenue growth and a possible downturn in the national economy that could affect Mississippi,” Barbour spokesman Pete Smith said.

“Barbour’s position on the need for road improvements hasn’t changed, but the governor is willing to work with the Legislature to find acceptable solutions,” Smith said.

The funding bill approved in the Senate provides just over $1 billion for MDOT, an $84 million increase over its current budget, Nunnelee said. The bill is headed to final negotiations between the House and Senate.

The bills are House Bills 1589 and 1624.