States and their Budgets

While observing that California’s state legislature missed its June 15th state budget deadline once again, you might wonder how other states are fairing with their budgets during these difficult economic times. Fiscal year 2010 will end on June 30th in 46 states. Except for Vermont, every state has some sort of balanced-budget law. We at LIS have researched our share of budget bills and know that the legislative process underlying these bills, whether state or federal, is complicated by issues involving politics, mandates, and economic realities, just to name a few. Below, we point out some of current economic realities affecting states’ budget bills this year.

The Bad News: In general, other states budgets are not fairing well. The main factors for the gaps in the 2010 state budgets are deteriorating revenues, shortfalls from prior budget years, and declining federal aid to states [the American Recovery and Reinvestment Act funds are mostly gone]. Also, unemployment remains at high levels for states which will keep state income tax receipts at low levels. Increased demand for Medicaid and future state-wide economic uncertainty will also tax the revenue gaps. The Center on Budget and Policy Priorities is predicting significant shortfalls in states’ budgets running into the billions of dollars. These billion-dollar-shortfall states are Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, So. Carolina, Tennessee, Texas, Virginia, and Wisconsin. Unfortunately, the Center is also predicting that 2011 will be worse unless faster-than-expected recovery occurs given also that there will be less federal money available to close budget gaps. Cuts to state services are the first line of defense to the budget shortfalls burdening the states. For example, there were 42 states that reduced overall wages or laid off state employees, 30 states that cut health care services, 25 states that reduced services to the elderly and disabled, 30 states that cut K-12 education, and 41 states that cut higher education.

The Not-As-Bad News: The Rockefeller Institute challenges the above-noted level of dire news on states budgets, publishing recently it found overall state tax revenues grew by 2.4% in the first quarter of 2010, compared to the same quarter in 2009, and personal income tax revenue increased by 2.7% for the nation. The Institute stated: “This is the first time since the third quarter of 2008 that states are reporting growth in tax collections on a year-over-year basis. Such growth is mostly attributable to revenue growth driven by legislated charges in two states alone – California and New York.” The report noted the realities of the weak economy, observing that state revenues were still significantly below pre-recession levels, and the important April collections from income taxes showed a 7.6 percent year-over-year decline.

First Day of Summer!

Put on a hat, dig those toes in the sand and pick up some fun reading materials – maybe even our quarterly newsletter, Engrossment - Summer of 2010, which is now published up at our website. We cover three states courts using legislative history materials in June and we highlight a few of California’s pending summer bills. During these happy days of summer, your legislature will likely be busy with their state’s budgets . . .

States Consider Protectionist Legislation Against Health Care

Federal and State Health Care Legislation: As you know, the Patient Protection and Affordable Care Act was enacted on March 23, 2010. There are now approximately 39 states proposing legislation to limit, alter or oppose one or more aspects of the federal health reform legislation. A few of these states are:

• Idaho: In mid-March, this state enacted the “Idaho Health Freedom Act, ” to provide that every person within the state “shall be free to choose or decline to choose any mode of securing health care services without penalty,” among its provisions.
• Georgia: On June 2nd, this state enacted SB 411 , the “Healthy Georgians Act of 2010” to provide exemptions from certain unfair trade practices for certain wellness and health promotion programs.
• On March 22nd, Utah enacted a resolution prohibiting any state agency from implementing health reform unless state agencies recommend action or the legislature passes provision.
• Virginia: On March 10th , Virginia passed the following law (will not apply to Medicaid and CHIP coverage): “Health insurance coverage not required. No resident of this Commonwealth, regardless of whether he has or is eligible for health insurance coverage under any policy or program provided by or though his employer, or a plan sponsored by the Commonwealth or the federal government, shall be required to obtain or maintain a policy of individual insurance coverage. No provision of this title shall render a resident of this Commonwealth liable for any penalty, assessment, fee, or fine s a result of his failure to procure or obtain health insurance coverage.”

State Budgets and Health Care

State Budgets and Health Care: With states attempting to close excessive budget gaps, it is not surprising that one avenue for savings will be in health care. The National Conference of State Legislatures has created useful tables showing the actions and proposals by individual states to balance their 2010 budgets with cuts to health care. As you will see, the states are cutting budgets related to both state and federal benefits. While Hawaii’s lawmakers failed to abolish the Hawaii Health Systems Corp., its Disability and Communications Board and its Planning and Development Agency through a combination of revenue measures, budget reductions and federal stimulus money, states such as Connecticut have cut millions from their Department of children and Families, its Department of Social Services, and Department of Developmental Services. Michigan and Ohio cut funding for mental health services while New Jersey decreased the funds available to hospitals by $20 million. The state of Washington enacted budget cuts of $225 million from human services by cutting the basic health plan for the poor and stopping enrollments in the plan, resulting in 40,000 residents losing coverage last July. For 2011 , more cuts are being proposed by state governors, such as Kansas proposing to cut its “Parents as Teachers” program, Maryland proposing to cut $362 million from healthcare and higher education, and North Carolina proposing to impose a hospital or provider tax. Missouri has already cut mental health and social services. Medicaid fees are proposed to be affected also by Missouri, as well as by New Hampshire, New Mexico, Oklahoma, South Carolina, Texas, Vermont, Virginia, and Wisconsin.