State Budget Cuts Update

States have been scaling back services and trimming their workforces for over two years now in response to sagging revenues resulting from the economic downturn.  As our new report shows, these cuts continue to deepen.  The cuts that many states have made for the current fiscal year (2011), which began in most states on July 1, go even farther than those in past years.  To cite just a few examples, in 2011:

• An estimated 10,000 families in Arizona are losing eligibility for temporary cash assistance as the time limit for that assistance is cut back to 36 months from 60.

• Colorado is cutting public school spending by $260 million, nearly a 5 percent decline from fiscal year 2010. The cut amounts to more than $400 per student.

• In Minnesota, due to higher education funding cuts, about 9,400 students will lose their state financial aid grants entirely and the remaining state financial aid recipients will see their grants cut by 19 percent.

• Washington is imposing a time limit on medical and cash assistance by people who are physically and/or mentally incapacitated and unable to work. In 2011, the limit will reduce the number of people receiving medical assistance by 2,350 and the number of people receiving cash assistance by 2,828.

Such cuts not only harm states’ most vulnerable residents, they also threaten the economic recovery.

Even as state budget cuts intensify, however, relief for states provided by the 2009 Recovery Act is rapidly running out.  For example, additional federal funding for Medicaid is slated to expire in December, in the middle of the current state fiscal year.  And states have used up much of their additional federal funding for education.

If federal aid is allowed to expire, states will be forced to take even more sweeping measures to balance their budgets.  Indeed, about 30 states assumed that Congress would provide additional aid in enacting their budgets for the current fiscal year.  These states would need to revisit their budgets if additional federal relief does not come through, and they would undoubtedly make more severe reductions to services.

Fortunately, the effort to extend federal relief for states is very much alive.  The Senate voted yesterday to move forward on a bill – SA 4575 – that would provide $16 billion in additional Medicaid funding for states, saving jobs in the public and private sectors, and $10 billion to help states avoid laying off teachers and other employees in their education systems. This is a crucial step forward in protecting the economy’s recovery.