For at least 30 cash-strapped states counting on federal stimulus money, the news was a stunning blow: A deficit-weary Congress had rejected billions in additional aid, forcing lawmakers into a mad scramble to balance their budgets.
Now, with a new fiscal year just days away in most states, many governors are proposing to make up for the shortfall with tax increases, cuts in essential services and potential layoffs of thousands of public employees.
“I support restraining federal spending, but cutting the only funding designed to help states maintain the very safety-net programs Congress mandates us to preserve will have devastating consequences,” California Gov. Arnold Schwarzenegger said in a letter to his state’s congressional delegation.
California faces a whopping $19 billion deficit — more than 20 percent of the state’s total budget — despite deep cuts that already have been made to many programs. Its new fiscal year begins Thursday, and a budget deal there is nowhere in sight.
The federal stimulus program enacted last year is set to expire in December. Much of the money goes to states to provide unemployment insurance and to help offset cuts to education, health care and public safety brought on by the recession.
Congress was poised to extend some funding to states through June 2011, including $35.5 billion for unemployment benefits for the long-term jobless and $16 billion for Medicaid, the public health-care program for the poor. But the measure died in the Senate earlier this month, blowing a hole in the states’ budgets and bouncing thousands of unemployed workers off the rolls.
The stimulus money represents just a fraction of the help states typically receive from the federal government, but it’s the kind of targeted relief states count on during a poor economy, when revenue is falling.
The news came as a shock to many state lawmakers, who until recently had been assured the money was virtually certain to come their way. Several governors planned to travel to Washington this week to make their case for the additional aid. Without the extra money from Washington, states will be forced to divert cash from other programs to shore up Medicaid, which has swelled to a record enrollment during the economic downturn.
In Alabama, where the Legislature already has passed a $1.6 billion budget that included $197 million in additional Medicaid money, lawmakers warned of devastating consequences if the money is not restored.
Democratic state Sen. Roger Bedford warned of potential cuts to medical care for children or a reduction of nursing-home beds for the elderly.
“I hope our senators look at how devastating it would be to our senior citizens and children not to get this funding,” Bedford said.
The Legislature in Alabama and those in several other states already have adjourned for the year, but some will have to return to revise their budgets if the expected federal money does not materialize.
Copyright 2010 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.