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Senate passes $16 billion FMAP extension

August 5, 2010
by Dennis Grantham, Senior Editor
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States welcome the help, but still face years of tough budget choices amid financial recovery

Shortly after noon Thursday, the U.S. Senate passed an amendment to an earlier House-approved measure to extend a temporary increase in the Federal Medical Assistance Percentage (FMAP), the federal match for hard-hit state Medicaid programs. As part of the American Reinvestment and Recovery Act, Congress temporarily boosted the FMAP by 6.2 percent from fiscal year 2009 through the first quarter of FY 2011, which ends in December.

Upon House approval of the amended Senate measure, a $16.1 billion appropriation will fund extension of a “phased down” 3.2 percent increase in FMAP funding to states through the first quarter of 2011, and a 1.2 percent increase through the end of June. House approval is expected soon, since House Speaker Nancy Pelosi yesterday asked House members to cut their summer recess short and return to Washington, where a vote on the measure is scheduled for Tuesday, August 11.

While state governors originally hoped for a six month extension of the full 6.2 percent FMAP enhancement, budget hawks in the Senate would not support it, says Michael Bird, federal affairs counsel for the National Council of State Legislatures. “We got the six month extension we had hoped for, but we got a lower matching rate, to make the bill affordable to those on the other side of the aisle.”

While the money will make a dent in cumulative state budget gaps that exceed $80 billion for FY 2011, states that face balanced budget requirements continue to “do what they’ve got to do to make up the rest of the shortfall,” says Bird. “We’re talking about three consecutive fiscal years of very sizable budget gaps that have taken nearly every state way beyond the low hanging fruit, right into the muscle of their biggest ticket programs—Medicaid, public health, education, public safety, human services—where the bulk of their budget goes.”

At the state level, “it’s a ‘shark tank’ situation—who’s going to get hurt the worst, or are cuts going to be shared more equally?” He notes that Nevada, California, New York, Florida, Wisconsin, and Rhode Island are among the states with “the worst numbers.”

The outlook is improving, but only slowly. “In terms of financial recovery, the states are usually 12-24 months behind the national picture,” says Bird, with some recovering faster, others slower. “What we’re reporting as good news now is that the revenue numbers [for FY 2011] don’t seem to have deteriorated below the FY 2010 numbers, for the most part.” While this may indicate a “bottoming out on the revenue side,” Bird says that there’s a lot of trouble left behind, from all of the cutting and revenue raising that has already taken place.

“A FY 2011 number that’s equal to FY 2010 may be ‘good news,’ but the FY 2011 number now may be equal to what you had in ’06 or ’07, and you’re still expected to be doing all of the same things.” He sees “another year or two” of budget cutting, revenue raising, capital project delays, furloughs, and other painful adjustments at the state level.

“It’s going to take a lot to come out of this.”