Second Economic Stimulus Bill Could Include Medicaid Funding Increase
Democrats are "increasingly touting" a second economic stimulus package that could include a number of funding measures not included in the House and Senate packages, such as additional funds for states' Medicaid programs, CongressDaily reports. Senate Majority Whip Richard Durbin (D-Ill.) said he supports a second package that would include Medicaid funds. However, "it will be much harder to apply the 'emergency' tag-line once the immediate stimulus impact is felt," according to CongressDaily. In addition, Democrats, particularly the Blue Dog Coalition, likely will insist on including pay/go rules for any new initiatives, considering that the group "grudgingly accepted" the current stimulus package, which does not adhere to pay/go rules, CongressDaily reports.
Senate Finance Committee Chair Max Baucus (D-Mont.) said the White House and congressional Republicans likely will oppose any offsets that are paid for with tax increases. Baucus said, "I'm frankly a little concerned that we do it right because, don't forget the president in the State of 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 pay for some of this stuff," adding, "So we've got to find a way to get a second package through that's more long-term, infrastructure and so forth that has pay-fors in it, so we'll have to work it through" (Cohn/Goode, CongressDaily, 2/1).
State Budgets
In related news, CongressDaily reports that as "the nation starts to be squeezed by the economic downturn and credit crunch," state and local government officials are reporting that they have fewer financial reserves than they had before the last recession. At the end of 2007, state reserve funds were projected to be 6.7% of state expenditures for 2008, compared with 10.4% at the end of 2001 and 9.1% at the end of 2002, according to a report by the National Governors Association and the National Association of State Budget Officers.
NGA Executive Director Ray Scheppach said, "We're in worse shape this time," adding, "Cities are in some ways better and in some ways worse. Cities come to states to bail them out, and we already are seeing that." Scheppach said cities largely depend on property taxes, so they might not feel the effects of a recession as soon as states. He added that states feel more of the impact after a recession when Medicaid costs begin to increase sharply. According to the report, many states are required to balance their 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 the path of past recessions, 35 to 40 states could face budget cuts in 2009. In the initial stage of the economic downturn, 17 states are facing budget shortfalls totaling $14 billion, and 15 states project shortfalls of $30 billion for 2009, according to the report (Talbott, CongressDaily, 2/1).
