St@teside

For the first half of 2008, most states experienced stagnant or declining revenues when compared to the previous year.[1] As a result, states are confronted with a two part problem: first, keeping their 2008 budgets in the black, and, second, enacting balanced budgets for 2009.[2]  In fact, in early 2008, 29 states had already confronted budget shortfalls totaling $48 billion as they prepared their fiscal year (FY) 2009 budgets. By October 2008, new mid-year budget gaps emerged in at least 21 states and the District of Columbia, amounting to an $8.9 billion shortfall. This estimate does not even include potential deficits that may befall four large states: California, Illinois, Massachusetts, and Pennsylvania.[3]

Now, the number of states facing shortfalls in their current or upcoming budgets has increased to 39.  Budget gaps have widened to $12 billion (still not including large states), and as revenues continue to slow down, the budget situation will decline even further.[4] Some estimates indicate that budget deficits in 2010 could reach $100 billion.[5]

Given the continuing decline in the economy, a recent analysis found that for each 1 percent rise in the unemployment rate, an additional one million adults and children would enroll in Medicaid and SCHIP, and state Medicaid spending would jump by $1.4 billion. Increases in Medicaid enrollment and spending combined with serious budget constraints raise the strong possibility of Medicaid program cuts as states try to manage growth in their public programs with fewer resources. In fact, two-thirds of Medicaid Directors anticipate they may face Medicaid budget shortfalls, which could translate into cuts in eligibility or provider payments, or both.[6]  At least 17 states have already made cuts in Medicaid.[7] 

Several governors and other state policymakers have urged Congress to provide a federal stimulus package to states that also includes increased funding for Medicaid. Hearings will be held in the coming weeks to discuss economic stimulus legislation. In 2003, states received a total of $20 billion in block grants and increased Medicaid federal match rates.  As states brace for a much worse recession, the hope is that Federal relief will be larger in scope to avert large- scale cuts in state programs.