June 16, 2009. The National Governors Association (NGA) and the National Association of State Budget Officers (NASBO) released a report last week showing that nearly half of states have experienced negative budget growth in fiscal year (FY) 2009 and that almost three-quarters of states are recommending FY 2010 budgets with negative growth. The biannual report, titled The Fiscal Survey of States, finds that states face $183.3 billion in budget shortfalls between FY 2009 and FY 2011. This comes after states have already addressed $46.2 billion in budget gaps during FY 2009.
State spending pressures will continue to grow as rising unemployment leads to an increase in the demand for state services such as Medicaid, unemployment and welfare. If services like Medicaid are to be protected during this period of high demand, states must find new revenue sources, says NGA Executive Director Raymond Scheppach. Thus far, states have mostly been able to avoid dramatically cutting these services; however the 6.1 percent decline in FY 2009 state revenue collections (from sales tax, personal income tax, corporate income tax, etc.) puts programs like Medicaid at risk.
In reaction to the report’s findings, SHARE Director Lynn Blewett remarked, "To me, this report raises concerns about the ability of states to implement federal health reform. Congress should not forget the critical role that states will play in implementing health reform and the dire straits that they are currently in."
NGA’s Raymond Scheppach voiced precisely these concerns as he testified on June 11th to the Senate Committee on Health, Education, Labor, and Pensions. Speaking to the committee, Mr. Scheppach stated, “If a federal framework is developed it should include sustainable, sufficient financing mechanisms (through a combination of public programs and private sector incentives) to ensure that coverage and delivery system reform goals can be met. On their own, states are not well-positioned to sustain increases in their health care budgets.”
To access the full transcript of Mr. Scheppach’s June 11th testimony to the Senate HELP Committee, click here. SHARE researchers are currently evaluating various strategies to implement health reform at the state level with the goal of informing future state and federal reform efforts. For details about current SHARE-funded research projects, click here.
Click here to visit the NGA website, or click here to view The Fiscal Survey of States.