Worse State, DC Budget Woes To Come If Extra Medicaid Funding Dies

Recent weeks have brought us several important updates on state-level budget woes and their impacts on our still-struggling economy and anemic job market.

First came the Commerce Department’s quarterly report on the gross domestic product–a common measure of the country’s economic health. Cuts in state and local government spending reduced the GDP increase rate by half a percent. This translates into a loss of about $72 billion in economic growth.

Then the National Governors Association and the National Association of State Budget Officers issued the results of their latest fiscal survey of the states. Bottom line here is that Fiscal Year 2010 “presented the most difficult challenge for states’ financial management since the Great Depression.” More of the same is expected in FY 2011.

States spent an estimated $74.4 billion less in FY 2010 than in FY 2008. But they would have had to make even larger cuts if they hadn’t received emergency fiscal assistance through the economic recovery act. The single largest part of this was a higher-than-usual federal match on states’ Medicaid costs (FMAP).

Then we got the Bureau of Labor Statistics’ employment figures for May. While nonfarm payrolls showed on increase of 431,000 employees, but all but 20,000 of them were temporary workers hired by the Census Bureau.

State and local government payrolls shrank by 22,000 jobs. The Center on Budget and Policy Priorities reports that this brings the total to 231,000 jobs shed since August 2008, including 100,000 in education.

The American Association of School Administrators estimates that an additional 275,000 education jobs will be lost in the upcoming school year–unless the federal government steps in with more emergency aid.

And here’s the kicker. According to a lengthier CBPP analysis, 29 states and the District of Columbia developed their FY 2011 budgets on the assumption that FMAP would be extended. Without the assumption, projected shortfalls–and, therefore, cuts–would have been even greater.

It was a reasonable assumption. After all, both the House and Senate had passed bills including a FMAP extension. But, as I recently ranted, the House leadership dropped the extension to garner the votes needed to pass its version of the Senate’s jobs/tax cut extender bill.

Now the Senate leadership has put the extension back into the bill, encouraged by outcries from governors and the National Conference of State Legislators.

It’s trying to corral the magic 60 votes needed for a substantive vote on the bill by easing the tax rates applied to hedge fund managers’ incomes and raising more revenues from oil companies.

Hard to tell whether this will work–or, if it does, whether Blue Dogs will again push back when the bill cycles back to the House.

If the FMAP extension fails, the District will have an estimated $77.6 million budget gap to close. Shortfalls identified in CBPP’s analysis range from $85 million in Maine to a whopping $480 million in Washington state.

No way these and other impending shortfalls will be resolved without larger public service job losses. Mark Zandi, an expert in the economics of economic recovery, says they could be at least as large as those we’ve already seen–“in all likelihood measurably larger.”

Do our business-friendly, deficit-minded members of Congress have a grasp on the impacts? We’ll find out soon, when the Senate votes on whether to proceed to a final vote on the jobs/tax bill.

3 Responses to Worse State, DC Budget Woes To Come If Extra Medicaid Funding Dies

  1. […] surviving fragments of what began as a fairly robust jobs bill. It will, at long last, extend the higher federal match on state Medicaid costs (FMAP), though in a cost-cutting phased-down form rather than a straightforward extension. The […]

  2. Medicaid Beneficiaries says:

    Am I reading the below correctly is this company reporting 2.1 billion a quarter in revenues and that they have decided to help poor people make food choices for those who’s income is liminted and based only what their budgets dictates and what they can only really afford to buy and pay for and this will help them overcome “food insecurity” and this is done so that there choices will be like milk or cheese over say other choices then milk and cheese like kool aid for their kides…. and this has what to do with what they are quoteing like the U.S. Department of Health and Human Services as “households where there is a lack of access to enough food to fully meet basic needs at all times due to lack of “financial resources” and defined by the U.S. Department of Agriculture. You know its neat to throw around big Deparment names to impress but if I had my say these Departments should really look at how others are using their names and in what context etc. and if the poor children ages two through five are lactose intolerant do you still push what the Deptment of Agriculture says? What about the thousands of kides who are allergic to peanuts and or peanut butter? What ever happened to Mom knows best in any language?
    Key developments for AmeriChoice Corporation October 31, 2010 7:15 PM ET Bloomberg Businessweek.
    AmeriChoice Corporation Reports Revenue Results for the Second Quarter and Six Months Ended June 30, 2010 07/20/2010 AmeriChoice Corporation reported revenue results for the second quarter and six months ended June 30, 2010. For the quarter, revenues were $2,460 million compared to $2,040 million a year ago. The revenue increased $420 million or 21% year-over-year, driven by strong organic growth. For the six months, revenues were $4,796 million compared to $3,951 million a year ago. Sesame Workshop and AmeriChoice Partner on National Healthy Habits Outreach Project 03/4/2010 Sesame Workshop and AmeriChoice Corporation are partnering to develop a bilingual education outreach program aimed at “helping low-income families make food choices that are affordable”, nutritional and set the foundation for lifelong healthy habits. AmeriChoice will brand the partnership UnitedHealthcare, by which it is known in many markets. More than one in five children in the U.S. have insufficient access to nutritional and affordable food, the result of a challenging economy that continues to affect low-income Americans. The initiative will offer support and creative resources for families with children between the ages of 2 and 5 to cope with “food insecurity ” defined by the U.S. Department of Agriculture (USDA) and the U.S. Department of Health and Human Services as “households where there is a lack of access to enough food to fully meet basic needs at all times due to lack of financial resources. AmeriChoice Corporation Reports Revenue Results for the Third Quarter Ended September 30, 2009 10/20/2009 AmeriChoice Corporation reported revenue results for the third quarter ended September 30, 2009. For the quarter, the company reported revenues of $2.1 billion grew $475 million year-over-year, a 29% organic growth rate.

  3. Kathryn Baer says:

    If I understand correctly, Rudy, you are objecting to a large food company partnering with others to provide nutrition education to low-income families. This would certainly be a concern if the campaign promoted only certain products, i.e., those AmeriChoice would profit from. Also if it failed to take account of food sensitivities. But I don’t think we have any evidence that this will be the case.

    We do have some evidence that families at all income levels could benefit from a really good nutrition education program that provided both information and motivation. Low-income families could probably benefit most because cost and access are particular problems for them.

    USDA has limited funds to invest in nutrition education. For this reason, among others, it has welcomed other public/private partnerships.

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