Wash. state and three others begging Congress for $24B Medicaid bailout

Four governors and a leading national economist urged Congress on Wednesday to send an additional $24 billion bailout to the states, saying cash-strapped governments face deep budget cuts and thousands of lost jobs without the aid.

The money would flow through Medicaid, the health insurance program for the poor jointly financed by state and federal governments. Congress picked up a larger share of Medicaid costs through the 2009 stimulus bill, but that aid will expire in December.

States have been hoping for a six-month extension as the slow economic recovery continues to crimp tax collections. In a recent survey, the National Conference of State Legislatures found that 30 states already were factoring the money into their budgets for 2011.

But election-year worries about the federal deficit have kept the larger Medicaid payments stuck in Congress, causing state leaders to scramble. Last month, the House cut the $24 billion from a broader bill aimed at extending jobless benefits, though the money still could be restored by the Senate.

On Wednesday, the Democratic governors of Washington, Kansas, Pennsylvania and Wisconsin warned that losing the cash they'd counted on could force them to make deep budget cuts in programs stretching beyond Medicaid, spurring thousands of lost jobs in the public and private sectors.

Mark Zandi, chief economist for Moody's Analytics, said job losses could rival the nearly 200,000 cut from state and local governments through the year ending in May.

"If state governments don't get additional help from the federal government in the coming fiscal year, then the job losses will be at least that large - in all likelihood, measurably larger than that," Zandi said.

Pennsylvania Gov. Ed Rendell said the loss of about $850 million in hoped-for Medicaid spending would cause about 20,000 layoffs, hitting social workers, teachers, police and firefighters.

"If we don't do this, I think this will put us back in a recession," Rendell said.

Those layoffs also will drive state costs higher as jobless workers seek government help, officials said.

"Some of them may even qualify for Medicaid services. So we actually dig ourselves a bigger hole," said Washington Gov. Chris Gregoire.

Democrats and Republicans alike have hoped the Medicaid bailout would be available to patch their budgets for the 2011 fiscal year, which typically begins in July and runs through next June.

It's a risky move. While states often rely on projections to determine how much money they'll have to spend, betting on a large amount of unapproved federal aid, especially in an election year, is different - not too far removed from writing a postdated check to satisfy a bill collector.

"From a standard perspective of risk and prudence in budgeting, this is risky and it is not prudent," said Donald J. Boyd, an analyst with the State University of New York's Rockefeller Institute of Government.

The trend illustrates the dire job state officials face following the Great Recession. While the economic collapse walloped tax collections and drove up costs, most states are still required to balance their budgets - unlike the federal government. That leaves cuts and tax hikes as the major options, and neither is appealing during an emerging recovery.

"They always have to take kind of a calculated risk about what's going to happen," said Columbia University law professor Richard Briffault. "If they only did the things that were absolutely guaranteed, it would be a more conservative budgeting process. But it would also cause some pain."