While Conditions are Improving, States Still Face Tough Fiscal Climates

This week the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO) released the Fall 2011 Fiscal Survey of States, highlighting the financial crunch that state and local governments are facing. The report notes that while states have improved from the depths of the recession, the fiscal climate is still fairly constrained. In fact, the total enacted general fund spending for fiscal year 2012 is still $21 billion less than the pre-recession high of $687 billion in 2008, despite the fact that the 2012 budgets call for $667 billion, an almost 3 percent increase compared to 2011 spending.

Even though recent unemployment numbers suggest that the U.S. unemployment rate fell to its lowest level in 2 ½ years, with over 13 million people still unemployed, the report predicts that Medicaid enrollment is expected to continue to rise. Unfortunately, the stimulus funds states were receiving from the Recovery Act have expired, and thus states will be tasked with finding other ways to cover the state match portion. According to NGA Executive Director, Dan Crippen, “States are being asked to expend more resources than they have.”  As a result, states will likely be diverting state dollars to cover the costs of the Medicaid program at the expense of other programs that are just as critical, like education and social services.

The NGA is not expected, however, to seek any additional stimulus or increased financial support from Congress to help meet this new burden. Instead, they will focus on working with Congress to prevent future cuts that would negatively impact the states’ budgets. As evidenced by this timely report as well as Congress’ inability to come up with a plan to address the country’s deficit problem, the fiscal climate of the nation as a whole will continue to feel the strain of our lagging economy for quite some time. It is incumbent upon advocates, governors, and Congress alike, to work together to protect and ensure the health and well-being of our children and families in the meantime.

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