Staunch the States’ Bleeding

The national economy has been on an upswing, but tell that to the governors of most states. The long national slump has inflicted deeper wounds than continued low interest rates and a revived growth rate can cure. Congress, which ponied up $20 billion in aid to the states over the last two years, needs to provide fiscal aid for at least another year.

As Gov. Arnold Schwarzenegger prepares to unveil his budget plan to make up a new shortfall of an estimated $14 billion, dozens of other states face funding gaps that are proportionately almost as large. In the last fiscal year, state legislatures closed budget gaps totaling $76 billion.

California, Georgia, Michigan, New York and North Carolina together are about $40 billion in the hole. As more states issue budgets, the total may exceed $50 billion, though states continue to trim budgets.

Who are the losers if budget cuts are the only tool governors have? So far, 34 states have adopted cuts targeted at benefits for low-income people. The number of uninsured Americans without health insurance rose by 2 million in 2002. Since then, Texas has slashed its public children’s health insurance program and Florida, Maryland, Alabama, Montana, Utah and Colorado have stopped enrolling eligible children in theirs. Missouri eliminated Medicaid coverage for parents whose incomes range from $11,750 to $15,260, and Oregon raised Medicaid premiums -- prompting enrollment to plunge by more than one-third. According to the nonpartisan Center on Budget and Policy Priorities, these cuts are reducing by 1.2 million to 1.6 million the number of low-income families and individuals in public health-insurance programs.

Federal relief to the states runs out in June for Medicaid and in September for general funds. Congress should quickly approve at least an additional $10 billion for fiscal 2005, with half directed for Medicaid and the other half for discretionary use. Congress also should decline any renewed Bush administration proposal to convert chunks of Medicaid into block grants with federal spending caps, a sure loser for the states.

Lawmakers eager to hold down spending may point to a looming $500-billion federal deficit to justify stiffing the states, but it’s profligate tax cuts that put the government in the red in the first place. Washington needs to help the states now, even if that means delaying or reversing tax cuts.