MEDICAID STRAPS STATE SPENDING

With most states adding an extra million Medicaid recipients to their rolls, how will the financially strapped states that have no money pay for future Medicaid heath care costs? 

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    MEDICAID STRAPS STATE SPENDING   

    With most states adding an extra million Medicaid recipients to their rolls, how will the financially strapped states that have no money pay for future Medicaid heath care cost?
   After Congress gave $200 billion to states to prevent them from a fiscal calamity, the States find they are in a bigger financial hole than they had in the past.  They should be short  $260 billion for the next 2 years. Will they get more free money?   California, nearly bankrupt, is in a $6 billion hole, despite raising their income and sales tax.  Big New York is down to its last dollar, and revenues are going down, worsened by their stimulus gift.  Perhaps billionaire third term mayor Blumberg can lend them some money.

WHERE DID THE MONEY GO?
 
Many states used the money to offer benefits and childcare programs. The government gave $80 billion to cover Medicare health care costs for unemployed workers.  That extra free money will vanish by 2011.  The states will have an extra one million people on the Medicaid rolls and no money to pay for it.  

Perhaps the health reform bill will kick in, as it has for the states of Louisiana, Arkansas, Nebraska, and many others after Senators sold their votes for Medicaid money. Once these states increase their Medicaid recipients, they will have to match federal money with state money, no easy task will decreasing state revenues.

Only 2 states, Texas and Indiana, had the smarts to turn down their share of the $7 billion unemployment insurance, knowing once federal funds dried up, their states could not pay the benefits.    

STRINGS ATTACHED TO FREE MONEY  
 As with the stimulus money to banks, GM, and Chrysler, there were many strings attached to these financial gifts.
Environmental grants given needed matching requirements.  To get the dollars the cities facing huge deficits will need to spend matching dollars.
Construction projects now underway require that they will have to raise the costs to pay inflated union salaries.
States taking even a dollar of stimulus cash for 15 programs from road building to welfare can’t cut their spending, despite being broke. Sure makes the states  slaves to the federal government.

Medicaid benefits can’t be cut below the level on July 1, 2008.  That was by coincidence the peak of the last economic cycle, when states had lots of money.

The state of Washington, since accepting education stimulus money along with other states to the tune of $820 million, can only cut their $6.8 billion dollar budget by 9%.  85% of its budget is exempt from cuts and nearly 75% of college funding is also off the table   Most states are finding revenues down by more than 10%, many lower than 4 years ago.

COMMENTARY
 
Congress can’t balance its own federal budget, but is also dragging states that can’t balance their own budgets in the hole with them.     
The federal stimulus suckered them into having little choice but to raise taxes to meet their constitutional balanced budget requirements thanks to Nancy Pelosi.    Congress claimed the stimulus funds would prevent economically harmful state tax increases. Last year 10 states had to raise their income or sales taxes and another 15% have put taxes on everything from beer to cell phones tohunting and fishing. The states accepting free federal money had to  raise taxes anyway.   
 
Well here it is an election year!   Congress wants to pass another hundred billion dollars aid for this failing states to keep the mess of the first stimulus growing. Governors might tell Congress to shove the money and the rules and let the states adjust their taxes according to their lower revenues.  


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Sources:  Center on Budget and Policy Priorities/   WSJ 1.2.10