Pennsylvania governor: U.S. will fall back into recession if Congress doesn’t approve Medicaid assistance

Jon Ward Contributor
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Democratic governors on Wednesday ramped up the pressure on Congress to pass a $24 billion extension of aid to states for spending on health-care assistance for the poor and elderly, with one saying that the country will slip back into recession if the money is not handed out.

“If we don’t do this I think this will put us back into recession,” said Pennsylvania Gov. Ed Rendell, who estimated that if his state does not receive $850 million in aid, it would cause 20,000 state workers to lose their jobs.

Rendell, on a conference call with reporters hosted by the left-leaning Economic Policy Institute, said Pennsylvania has cut all that it could from its $27 billion annual budget, eliminating $2.7 billion during the last 20 months.

“We’re down to our core functions. There’s nothing more on the programmatic side I can cut,” he said.

The recession is not technically over — despite the protests of one member on the government committee that makes the official determination of when recessions begin and end.

But Rendell said that Pennsylvania added 55,000 jobs during the previous two months.

“Our economy is beginning to hum in terms of jobs again,” he said. Governors from Wisconsin, Washington and Kansas chimed in with similar sentiments.

Much of the money under the Federal Medical Assistance Percentages (FMAP) goes to help states pay for elderly Medicaid patients in nursing homes. But when states with balanced budget requirements commit to pay for these services, or take on more Medicaid enrollees, if they do not get more money to do so then they have to cut from other parts of their budget.

The extension of financing to help states pay for expanded Medicaid populations would not kick in until January 2011 and would last for six months. The original increase in funding for FMAP was included in the $787 billion stimulus bill passed in February 2009.

States are clamoring for the money now because they have included the large sums in their budgets, or aim to. Most states have fiscal years that begin in July, and are either in the process of writing their budgets or did so in recent weeks.

“Thirty states reported that their budgets, both proposed and enacted, assumed that Congress would extend FMAP,” the National Conference of State Legislators reported in April.

“These states assumed amounts ranging from $33.7 million in New Hampshire to $1.5 billion in California. Twenty states did not budget for the extension; eight of these states drafted budgets before discussion of the six-month extension,” the NCSL report said.

Nick Johnson, director of State Fiscal Analysis Initiative at the Center for Budget and Policy Priorities, said such an assumption was a “reasonable forecast.”

Republicans in Congress, who have grown increasingly bolder about demanding that the Democratic-controlled legislature pay for expenditures to avoid adding to the $1.4 trillion federal deficit and $13 trillion national debt, have lost patience with the state governments.

“The federal government should be focused on getting its own fiscal house in order, not providing more bailouts with taxpayer money,” said Kevin Smith, spokesman for House Minority Leader John Boehner, Ohio Republican.

“The bottom line,” said a Senate Republican leadership aide, “is that states shouldn’t be writing their budgets with the expectation that the federal government is going to bail them out whenever they’re short on cash. The federal government is in a much worse deficit position than states.”

But even some Republican governors are supportive of the aid, such as Gov. Chris Christie of New Jersey, who has gone on a public crusade to cut spending from the state government since being elected last November.

“This is for us a more than $570 million in a year where we’ve had to cut billions and billions of dollars out of our budget,” said Andrew Pratt, spokesman for the New Jersey Treasury. “Our initial budget deficit was $10.7 billion. The stimulus money we received is almost gone. It’s going to be gone after this year. Our revenues are going to continue to drop.”

In fact, Pratt said, revenues have gone from $34.6 billion in 2008 to a projected $28.3 billion in Fiscal year 2011, which begins in July.

The FMAP extension has been attached in the Senate to a $140 billion bill extending unemployment insurance that also raises money through a tax on investments and increases the rate that oil companies must pay into the Oil Spill Liability Trust Fund.

The House stripped the $24 billion FMAP extension from the version of the extenders bill they passed in late May, as many Democrats joined Republicans in refusing to vote for legislation that added significantly to the deficit. Now that FMAP has been tacked back on, the total extenders bill would increase the deficit by $77 million.

Sen. Tom Coburn, Oklahoma Republican, on Wednesday filed an amendment that would reduce federal spending by $126 billion, in order to pay for the bill. Coburn proposed reducing the budgets for members of Congress by $100 million, saving $4.4 billion over 10 years by reducing the printing and publishing of government documents that are now online, eliminating $8.8 billion in bonuses for federal contractors who perform poorly, and collecting $3 billion in unpaid taxes from federal government employees, among other things.

Whether the Medicaid assistance will survive is currently unclear. A final vote on the extenders package will come some time next week, Democrats told The Daily Caller. If it does not pass, the Center for Budget and Policy Priorities projected that it would cost nearly a million jobs.

“State budget-closing actions could cost the national economy 900,000 public- and private-sector jobs,” said a CBPP report released Wednesday.

“It’s going to be a train wreck if the money doesn’t come through,” said Ron Wince, president and chief executive of Guidon Performance Solutions, a health-care management company.

Wince, however, disputed the claim that 900,000 jobs would necessarily be lost, citing the fact that many states might just raise taxes instead of firing workers.

The Daily Caller’s Alexandra Cahill contributed to this article.

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