Debt deal for states: whither Medicaid?

Debt deal for states

As we reach the end game in Washington, states still have no idea how a reduction in federal spending will trickle down to their budgets. drills down to the number one concern of governors and state legislators — Medicaid (emphasis mine):

Among the biggest concerns for states was — and remains — the fate of Medicaid, the joint state-federal health insurance program serving more than 60 million poor Americans. That’s because Medicaid is generally the biggest item in state budgets. In the short term, the debt deal appears to spare Medicaid from immediate cuts in federal support. What’s more, Medicaid was specifically exempted from a “trigger” mechanism that would reduce spending automatically if the special congressional committee does not achieve its deficit-reduction goals.


NYT: States and Cities Brace for Far Less Money From Washington

Reuters: Three reasons conservatives should oppose a balanced budget amendment

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Medicaid moguls

As a nice bookend to state officials’ concerns about Medicaid, the New York Times has an outstanding piece today on the excessive pay for executives who provide care to the developmentally disabled. Medicaid funds these programs with federal and state dollars. All is not well in the public, non-profit sector. From the NYT:

Mr. Castellani, the former Office of Mental Retardation and Developmental Disabilities official, calls them “Medicaid moguls” — the nonprofit executives who have prospered while providing services to 135,000 developmentally disabled people in New York.

At the top of the class are the executives at the Young Adult Institute. No organization in the field in New York has paid its executives as well. Four of its executives received compensation in excess of $500,000 in 2009; none of its competitors had more than one executive at that level, according to a review by The Times of tax returns of the 100 largest providers.

Medicaid is the beast

It’s not short-term federal budget issues and credit rating changes that should worry muniland; these issues will require adjustments and creative solutions, but they are transitory. The real issue for states is how their budgets will sustain the increasing load of Medicaid, the federal government’s healthcare program for the poor and those who require nursing home care. This is the real elephant in the room.

Today, multiple media outlets ran stories about the oncoming terror for states from a potential downgrade of the credit rating of the United States. For example, the New York Times ran an article with the headline “Debt Ceiling Uncertainty Puts States at Risk” on their homepage. The story details a litany of possible scenarios ranging from the minor, such as Maryland having to delay a scheduled bond sale for a few days, to the more substantial worries, such as the federal government stopping payments like Social Security and state and local tax revenues being reduced.

These are transitory problems, which, like the problems that happened when the state government of Minnesota shut down for three weeks, will cause inconveniences. Ultimately, the system will find work-arounds.

“Unrelenting rigidity”

“Unrelenting rigidity”

It feels as though American politics has become a war. The battle is not about civil rights or women’s suffrage; it’s a war about how large a role the government should play in the redistribution of income and the support of the people. There is plenty of room to disagree on these issues.

Throughout our history, there have been Americans who have suffered, and in the current faltering recovery, there are an exceptionally high number of people suffering. This makes the current war over reducing entitlements seem especially harsh.Unfortunately, Democrats and Republicans have taken rock-hard positions and have refused to come down from their pulpits. Minnesota has shut down the state government for seven days because the Democrats and Republicans refuse to even meet to discuss a compromise. From the Minneapolis Star Tribune:

In Minnesota, it remains uncertain whether results can be expected from an ad hoc budget group formed this week by former Republican Gov. Arne Carlson and former Vice President Walter Mondale, a Democrat.

The American Revolution was a beginning, not a consummation

“The American Revolution was a beginning, not a consummation.” ~Woodrow Wilson

Happy belated Independence Day to all! Step by step, the United States is transforming itself. It’s a good time to remember our founding principles:

Individual liberty
Personal responsibility
Constitutionally limited government
The rule of law

“To win the future, we must dream big and build big”

America’s Interstate Highway System celebrates 55 years

This is the best example of how public infrastructure can really anchor tremendous economic growth. We can learn from history and use this time of economic challenge to conceive of equally profound infrastructure goals. From Fastlane, the blog of U.S. Secretary of Transportation Ray LaHood:

As President Obama has said, to win the future, we must dream big and build big. One of the best examples of dreaming and building big in our nation’s history is America’s Interstate Highway System, which marks its 55th anniversary today.

On June 29, 1956, President Eisenhower signed the Federal-Aid Highway Act of 1956, which established a program for funding and building the new system. This legislation has been hailed by historians as one of the top ten bills in American history, surpassed only by the Civil Rights Act and Medicare, and the Interstate Highway System has been called the greatest public works project in history.

Muni sweeps: Show me the money!

I forget that the last recession was in the mid 2000′s.

We had a short, intense credit boomlet in between that and the crash of 2008.

The hangover from the housing and financial bubble has been tremendous.

Deficits, caused by the financial crisis,  are still a serious problem in muniland.

Remember that states must balance their budgets annually.

Here is a spreadsheet with the shortfall numbers for fiscal year 2012 from the Center on Budget and Policy Priorities.

The total shortfall for all states in 2012 is ~ $112 billion or approximately 17.6% of projected budgets.

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