Budget Deficits Might Force Some States To Reduce Funds For Health Care Programs, Find New Revenue Sources

Main Category: Health Insurance / Medical Insurance
Also Included In: Public Health
Article Date: 15 Jan 2008 - 7:00 PDT

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A number of states face large budget deficits, "forcing some governors to come up with creative -- some say risky -- budget gimmicks to find new sources of cash" to pay for health care and other programs, the Washington Post reports. At least 13 states face large budget deficits for the next fiscal year, and about 12 others face serious financial problems, according to various estimates, reports from governors and a survey conducted by the Center on Budget and Policy Priorities.

According to the Post, because most state constitutions do not allow budget deficits, "legislatures convening for their 2008 sessions must make painful decisions about what programs to cut or which taxes to raise to close the gaps." For example, in California, which faces a $4.6 billion budget deficit that could increase to $14 billion by the end of FY 2009, Gov. Arnold Schwarzenegger (R) has proposed a 10% reduction in funds for all state programs -- such as Medi-Cal, the state's Medicaid program, and Healthy Families, the state's version of SCHIP -- in FY 2009, the elimination of cost-of-living adjustments and other reforms to address the issue.

Meanwhile, some states -- such as New York, which faces an estimated $4 billion budget deficit; New Jersey, which faces an estimated $3.5 billion deficit; and Massachusetts, which faces an estimated $1.5 billion deficit -- have considered "one-time budget gimmicks to raise badly needed cash to finance some of their favored long-term projects," the Post reports.

"Some say the problem is overspending by state governments," and "new governors in particular ... came into office with a list of plans to implement and promises they want to keep," such as a proposal by New York Gov. Eliot Spitzer (D) to expand health insurance to more children in the state, the Post reports. Nicole Gelinas, a senior fellow with the Manhattan Institute, said, "They try to get more and more creative financially, but all of this can't replace budgetary responsibility," adding, "At some point, the checkbook has to balance. At some point, they'll run out of things to securitize or sell off" (Richburg, Washington Post, 1/13).

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