States’ budgets in freefall without stimulus

June 29, 2010|ASSOCIATED PRESS

NEW YORK — For 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,’’ Governor Arnold Schwarzenegger of California 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 have already 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 budgets of at least 30 states and bouncing thousands of unemployed workers off the rolls.

The news was a shock to many state lawmakers, who until recently had been assured that the money was certain to come their way. Several governors planned to travel to Washington this week to make their case.

Without the extra money from Washington, states will be forced to divert cash from other programs to shore up Medicaid.