President Obama wanted states and local governments to spend their federal stimulus dollars stimulating the economy.

County Executive Chris Collins, however, would like to store millions from Erie County’s stimulus windfall in two reserve funds.

That goes over poorly with Rep. Louise M. Slaughter, D-Fairport, and a federal office policing the money. The office implied in recent weeks that it can take back some or all of the money, blowing a hole in Collins’ plans.

Letters and e-mails have flown between the Rath County Office Building and federal officials in New York City and Washington. At stake is $41 million.

Collins last week turned to Sen. Charles E. Schumer for backup. Schumer, D-N. Y., will help Erie County and the federal Centers for Medicare and Medicaid Services find a compromise that lets the money “stay and be used in Erie County,” his spokesman said.

In Buffalo today, Obama will emphasize the need to put Americans back to work — his goal in signing the $787 billion American Recovery and Reinvestment Act in February 2009.

But Erie County’s experience — however it plays out — shows that federal stimulus dollars do not always create jobs or stimulate the economy. Sometimes they just stabilize local governments by helping them plug their budget cracks and prevent layoffs or tax hikes.

That’s the way one aspect of the program was designed, said Andrew J. Rudnick, chief executive of the business-minded Buffalo Niagara Partnership, who recently lamented that so much stimulus cash remained within governments.

“A year-plus ago, the president and Congress talked about putting together and fast-tracking billions of dollars to go into initiatives that would create private-sector jobs and put people to work in light of this deep recession,” he said.

“They also categorized funding into packages that had little to do with job creation, so that local governments could balance their budgets without cutting services,” he added.

So it’s not Collins’ fault, Rudnick said, that the county received stimulus money, nor is it Collins’ fault that he wants to set some aside for a rainy day.

Erie County in 2009 collected about $41 million from a special stream of stimulus funding delivered to counties that pay a portion of their Medicaid programs — the practice in New York.

Collins had already budgeted safely for the year because he assumed Erie County’s sales tax income would falter during the worst economic crisis since the Depression. It did, but Erie County didn’t really need the $41 million to make ends meet last year.

Collins later boasted that Erie County in 2009 accumulated one of its largest surpluses in years, $44 million. Yes, the stimulus money comprised $41 million of that year-end total. But even without it, Collins would have ended the year in the black, he said. Few other New York counties could claim similar year-end results.

What to do with the money? Collins would not spend it covering shortfalls in state aid for assorted services. He even cut some 1,100 children from working poor families out of their day care subsidies because Albany had cut its support for the program.

Collins decided that, among other things, he would place $18.3 million into a county reserve used to pay off debt incurred for Erie County Medical Center.

He would also place $9.8 million into a tax-stabilization fund to help alleviate the need for any future property tax increase.

The Medicaid stimulus program never required counties to spend the dollars on a road project, or a new bridge, or some public works endeavor. Schumer had been its champion in the Senate, and he said he wanted the money flowing to counties so they need not “raise property taxes” or “lay off vital workers.”

But filling reserve funds? That was forbidden under the American Recovery and Reinvestment Act.

The Centers for Medicare and Medicaid Services, contained within the federal Department of Health and Human Services, said so in conference calls, e-mails and letters to Erie County.

Federal officials figured that the stimulus money made Erie County’s huge surplus possible and asked for an accounting. At one point, County Budget Director Gregory G. Gach countered by writing that the American Recovery and Reinvestment Act restrictions on reserve funds applied to states, not counties.

“Mr. Gach . . . we appreciate your discussion of why you believe that the ARRA provisions on reserve funds apply to the state and not the county,” came the e-mailed response, from Bill Lasowski, a deputy director. He went on to repeat that reserve funds were off-limits and that Erie County needed to prove that its special stimulus money was not going into them.

At the start of 2009, Collins had called economic development his top priority. Some county officials now argue that he should spend the money, not set it aside.

County Comptroller Mark C. Poloncarz said Collins could have poured the money into the same infrastructure upgrades that he is now financing with borrowed dollars, which must be repaid with interest.

“I don’t want to see this money lost,” Poloncarz said. “And I don’t want to see the federal government try to offset it in the future. There are many things that could have been done with this money that would have saved taxpayers money.”

Slaughter weighed in, too. She triggered the examination of Erie County’s stimulus funds.

“I have asked the Department of Health and Human Services to ensure that critical ARRA funding is being applied by Erie County in accordance with the law to aid my constituents, assist employment seekers and forestall job cutbacks,” she said.

Gach on Wednesday said he believes he has struck a compromise, though that could not be immediately confirmed with the other participants, such as Schumer’s office or the Centers for Medicare and Medicaid Services.

Gach said Erie County will still hold onto its money but will not place it in so-called reserve funds. The millions will be maintained as “unreserved fund balance,” readily available to pay assorted needs as they arise, he said.