State legislatures are now in session and most Governors have released their proposed budgets. There will be the usual "back and forth" as legislators negotiate with the Governor on parts of the budget -- with the goal of passing a budget before the session ends.
There are some significant differences for these budget makers in early 2012 compared to the last couple of years -- first, billions in federal recovery act funds have ended, and second, revenue continues to improve. Barring an economic "shock", this improved revenue trend is expected to continue. However, the improved revenue has not been enough to cover the lost federal stimulus dollars and the many requests for additional spending.
Since states have made 5 years or so of spending cuts and have not had money to start a new program, the pent-up demand for restoration of cuts and new programs is strong. Demands for more spending range from infrastructure to additional early childhood programs. Still others want tax cuts or incentives for businesses. Therefore, the challenge for state elected officials this winter and spring will be to deal with the spending and tax cut requests. Bottom line: even with the economy improving, states don’t have enough money to go around. Tough decisions will have to be made.
The first major challenge for states is how to handle previous cuts. States cut some departments by huge percentages and others like higher education were also cut quite significantly. Program advocates want some or all cuts restored. State officials have difficult decisions as they put their budgets together determining what cuts, if any, they may want to restore. Do you give money to the programs previously cut the most? How do you give money to the most effective programs?
The other major challenge for state legislators and Governors is how to deal with the federal funds that have stopped coming to states since most federal recovery act funding streams ended last June 30th. Due to various mandates, virtually all of those federal funds for the Medicaid program have been made up with state funds. Our recent report found that Medicaid spending is driving general fund growth with $19.4 billion additional general fund dollars allocated for Medicaid from fiscal 2011 to fiscal 2012 as compared to $1.3 billion for K-12. Also, state officials are reluctant to cut K-12 spending. After putting money into Medicaid, K-12 and the minimum in other areas like prisons, there’s not much left.
So, many programs face the same question: Are programs and agencies previously cut made whole again? What new programs can be funded? there is not enough money to do everything that citizens and advocacy groups -- and ultimately the elected officials – want to do.
-- Scott D. Pattison, Executive Director