Economic Stimulus Bill Could Include Medicaid Funding Increase
Democrats are"increasingly touting" a second economic stimulus package that couldinclude a number of funding measures not included in the House and Senatepackages, such as additional funds for states' Medicaid programs, CongressDailyreports. Senate Majority Whip Richard Durbin (D-Ill.) said he supports a secondpackage that would include Medicaid funds. However, "it will be muchharder to apply the 'emergency' tag-line once the immediate stimulus impact isfelt," according to CongressDaily. In addition, Democrats,particularly the Blue Dog Coalition, likely will insist on includingpay/go rules for any new initiatives, considering that the group"grudgingly accepted" the current stimulus package, which does notadhere to pay/go rules, CongressDaily reports.
Senate Finance Committee Chair Max Baucus (D-Mont.) said theWhite House and congressional Republicans likely will oppose any offsets thatare paid for with tax increases. Baucus said, "I'm frankly a littleconcerned that we do it right because, don't forget the president in the Stateof the Union said 'I will veto any tax increases,' and in the second package... well, we'll probably adhere to pay/go rules, which means you've got to payfor some of this stuff," adding, "So we've got to find a way to get asecond package through that's more long-term, infrastructure and so forth thathas pay-fors in it, so we'll have to work it through" (Cohn/Goode, CongressDaily,2/1).
In related news, CongressDailyreports that as "the nation starts to be squeezed by the economic downturnand credit crunch," state and local government officials are reportingthat they have fewer financial reserves than they had before the lastrecession. At the end of 2007, state reserve funds were projected to be 6.7% ofstate expenditures for 2008, compared with 10.4% at the end of 2001 and 9.1% atthe end of 2002, according to a report by the National Governors Association and the NationalAssociation of State Budget Officers.
NGA Executive Director Ray Scheppach said, "We're in worse shape thistime," adding, "Cities are in some ways better and in some waysworse. Cities come to states to bail them out, and we already are seeingthat." Scheppach said cities largely depend on property taxes, so theymight not feel the effects of a recession as soon as states. He added thatstates feel more of the impact after a recession when Medicaid costs begin toincrease sharply. According to the report, many states are required to balancetheir budgets and must raise taxes or cut services when revenue falls short,which can make the recession more severe.
The report estimates that if current economic trends continue and follow thepath of past recessions, 35 to 40 states could face budget cuts in 2009. In theinitial stage of the economic downturn, 17 states are facing budget shortfallstotaling $14 billion, and 15 states project shortfalls of $30 billion for 2009,according to the report (Talbott, CongressDaily, 2/1).
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