The Maryland Public Policy Institute
OP-EDS
JUNE 16, 2010
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Way back in January when Maryland's legislative session started and the stimulus cash was still flowing, optimism fueled by federal handouts ran high.
Perhaps that's why Gov. Martin O'Malley submitted a budget that included $389 million in imaginary federal dollars for Medicaid. At the time he said, "We'll figure it out," if the money didn't come through.
Six months later, chastened by federal debt that is estimated to be 102 percent of GDP by 2015, members of Congress may no longer fulfill the hopes of profligate spending state legislators and executives around the nation.
Late last month the House dropped a $24 billion provision to extend Medicaid assistance to states in a bill to prolong benefits to jobless workers. Senate Majority Leader Harry Reid, D-Nev., wants to restore funding, but it's unclear if a final bill will include the Medicaid money.
Maryland is not alone in expecting federal dollars. Thirty states budgeted for it, most with no contingency plans.
Maryland is one of nine that has at least a partial plan to make up the difference, according to the National Conference of State Legislatures. At least it is doing better than New York, which announced it would delay paying $2 billion in bills to avoid going broke before the withdrawal of Medicaid funds became likely.
Whether Maryland can pay for the portion of Medicaid costs thought to be picked up by federal taxpayers without cutting other programs or hiking taxes is anything but clear, however. Legislators allotted $200 million from a local income tax reserve account to the pay the bill, with the rest coming from a planned general fund balance of $200 million.
The state has already borrowed $350 million from the local income tax reserve account to balance the budget. Taking more will not jeopardize counties receiving timely payments for their share of the fund, according to the state's top budget analyst, Warren Deschenaux. But expecting an additional $189 million to be available at the end of next fiscal year in the general fund to make up the difference is yet another exercise in budgeting on hope.
The state Board of Revenue Estimates anticipates a general fund revenue decline of more than 5 percent for the fiscal year ending this month from the previous year. As of March, general fund revenue next year is estimated to rise by 3.6 percent. But that report came out before the stock market tanked last month and before a jobs report showing new hires around the nation are mostly temporary Census workers. The board will release a new report in September, providing easy cover for O'Malley and state legislators to put off having to make tough budget decisions if revenue estimates decrease over the summer while campaigning for November's elections.
Even if the money coming into the state treasury next year rises, resolving the Medicaid dilemma, the practice of raiding state funds dedicated to other costs is morally if not legally wrong and allows the government to delay making hard decisions about how to finance its operations. At the very least O'Malley should put up signs at the entrance to each county saying: "Thank you for funding Medicaid with your local income taxes. Thank your children for this road/bridge. We issued more debt to pay for it."
Marta Mossburg is a senior fellow at the Maryland Public Policy Institute. mmossburg@mdpolicy.org
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