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Friday, July 16, 2010

States need funding to help the unemployed

Kate Blocher

Staff Writer

Everyone is feeling the pinch of the recession, but none more so than the states facing severe budget deficits. Many states are heading into the fiscal year, which started July 1, with strained budgets:

States are expected to have faced $296.6 billion in shortfalls between the 2009 and 2012 budget years, and the National Association of State Budget Officers report found that the new budget year will be just as challenging, despite the expectation of modest increases in tax collections.

Unfortunately, without federal help, many state legislators are looking to slash programs—including those having to do with education, law enforcement, and roads, and even social services like Medicaid. Now is not the right time to reduce state spending: A reduction in state spending will subsequently cut jobs and slow economic growth in the state. Further, demand for many of the state social services that help families get through tough times—when facing job lay-offs or reduced income—is on the rise.

Medicaid is one of these important “safety net” programs. During this prolonged recession, there has been an increased demand for the health coverage that Medicaid provides. The weak economy has affected people from all walks of life, and Medicaid enrollment is growing as more and more people find themselves eligible.

[S]elf-employed construction workers, who have lost business during the housing bust, are turning to Medicaid and its companion program for children ... Hotel workers are seeking coverage through the program after losing their jobs because of a decline in tourism.

Because of the increase in demand for Medicaid and the parallel decrease in state tax revenues, states are struggling to keep their Medicaid programs and other vital state-funded services afloat. Many states were banking on a six-month extension of the federal aid they have been receiving from the stimulus package.

Congress has tried to pass a measure to extend this enhanced funding to states, but they have continually met opposition. Right before the state fiscal year began on July 1, Congress failed once again to extend important parts of the stimulus program through 2011, including $16 billion worth of funding for Medicaid to the states.

It’s hopeful that the Senate may revisit the issue as a stand-alone package later in the summer. But while Congress hashes it out, state budgets remain in limbo.