Accelify Blog

Waiting Game: Will Congress Extend State Stimulus Funds? (MS)

June 14, 2010

Mississippi’s state budget woes will get much worse if Congress acts to make the nation’s fiscal situation more sound by cutting federal spending. But that will likely trigger calls for state and local tax hikes.

Confused? Don’t be.

Teachers and other state employees whose jobs have been targeted by budget cuts are learning the tenuous connection between what happens in the nation’s capitol and at the state Capitol. It’s a relationship that federal, state and local leaders have long maintained, and it’s one that’s about to be strained by election-year politics, re venue shortfalls and deficits.

That’s the broad explanation of the situation . Now let’s get specific.

Mississippi’s Medicaid Agency could take a $187 million hit if the U.S. Senate follows the U.S. House of Representative’s lead and refuses to temporarily extend stimulus aid to states. House leaders in late May slashed $24 billion in assistance to states from a tax and jobs bill that is now pending in the Senate.

"They’ve got to pass the enhanced Medicaid funding," said state Rep. Cecil Brown, D-Jackson. "There are too many states that have relied on it and here in Mississippi, those funds are important not only for Medicaid but for public education as well."

Brown is referring to a six month extension of the temporary increase in federal matching funds for state Medicaid (enhanced Federal Medical Assistance Percentages or FMAP) costs made available through the federal stimulus package.

Brown said the FMAP extension would help prevent deeper budget cuts in K-12 education and Medicaid as revenue collections continue to fall short of projections.

Revenue collections in May came in at 12.61 percent or $51 million, below estimates. That is the worst month for collections since May 2009 and the 20th month out of the last 21 months in which revenue collections have fallen short of projections.

In April, the Legislature hammered out a budget that is about $80 million less than last year’s funding level for K-12 education after budget cuts.

To put that in perspective, the Fiscal Year 2011 budget provides about $37 million less in Mississippi Adequate Education Program funding than the schools received this year and some $232 million less than the schools would have received had MAEP been fully funded.

But the austere budget that was adopted had an accompanying contingent budget that would put an additional $82 million back into K-12 education if the federal government extends the provision allowing a reduced state matching requirement for Medicaid.

Lawmakers agreed to spend $110 million of the $187 million in 2011 and carry the remaining $77 million forward to 2012. Coming on the heels of 9.4 percent across the board budget cuts in 2010, the FY 2011 budget that begins July 1 will feature cuts that range from 12 to 17 percent, but that average around 13.5 percent.

"Without the additional stimulus funds, public education is going to suffer from larger class size, less individual attention from teachers, greatly reduced funding for the school districts and the likely call for higher local taxes to make up the difference," said Kevin Gilbert, president of the Mississippi Association of Educators, the state’s largest teacher organization.

The additional federal Medicaid money was first extended as part of the 2009 stimulus package to states. But today, some conservative Democrats and most Republicans in Congress say they won’t vote for additional deficit spending, especially during the midterm congressional elections.

"With a $13.6 trillion national debt that is projected to grow to over $19 trillion by 2015, I just can’t support additional deficit spending that passes this debt to the next generation," said 3rd District U.S. Rep. Gregg Harper, R-Pearl. "I particularly can’t support it without some offsets in spending somewhere else in the federal budget. At some point, we have to draw the line on spending."

But advocates for public education and the poor say opposition like Harper’s is "misguided."

"With over $95 million hanging in the balance for the education of Mississippi’s children and for workforce training, Congress needs to include temporary provisions to extend the increased federal match for Medicaid costs," said Ed Sivak, director of the Mississippi Economic Policy Center. "Misguided opposition revolving around federal deficits threatens jobs in Mississippi and the quality of education that children will receive when school resumes this fall."

Because of Mississippi’s poverty, the state already enjoyed a federal Medicaid match rate of 75.67 prior to the federal stimulus. The fiscal 2010 federal match rate increased to 84.86 percent.

Just as Congress doesn’t want to vote on $24 billion in additional deficit spending facing elections, state and local officials have similar concerns.

While the fiscal 2010 and 2011 state budgets have been somewhat propped up by federal stimulus funds, those monies won’t be present for the 2012 budget. That means that lawmakers will be forced to hit the campaign trail in 2011 between the rock of voters seeking "no-new-tax" pledges and the hard place of revenue shortfalls that could exceed $1.2 billion.

So will local officials.

Brown said he believed local tax increases were going to be the ultimate result of the recession, the subsequent revenue shortfalls and cuts.

Mississippi Association of Supervisors Executive Director Derrick Surrette agrees.

"With counties not receivin g their full homestead exemption reimbursements, some counties will definitely be facing the prospects of higher property taxes or significant cuts in services," said Surrette.

Outside Mississippi, there is intense pressure on Congress to provide the additional stimulus funds.

Unlike Mississippi, more than half of the states included the extra Medicaid funds in their budgets for fiscal 2011, which for most begins July1. Without the additional funds, those states will have to make cuts or raise taxes to keep their budgets balanced.

U.S. Sen. Roger Wicker, R-Tupelo, said he would not support the $24 billion in additional stimulus funds.

Wicker and U.S. Sen. Thad Cochran, R-Oxford, along with Harper and 4th District U.S. Rep. Gene Taylor, D-Bay St. Louis, voted against the original stimulus package. Second District U.S. Rep. Bennie Thompson , D-Bolton, and 1st District U.S. Rep. Travis Childers, D-Booneville, voted for the stimulus.

"In the recent primaries, we’ve seen voters speak clearly against continued bailouts and deficit spending," said Wicker. "I didn’t support the first stimulus and I don’t expect to support this additional $24 billion. We can’t keep spending without offsetting it with some substantial budget cuts."