State’s share of stimulus plan unclear

For California, the question of how much medical aid states will get under the economic stimulus plan is a billion-dollar one. And it has revived a debate over whether the Golden State receives its fair share of federal dollars.

The House version of the bill that was approved this week would give financially strapped California about $11.1 billion in Medicaid funds to help pay for healthcare for the poor, according to the Washington-based Center on Budget and Policy Priorities. The measure the Senate will take up next week would provide about $9.6 billion.

But Democrats in the two chambers are divided over the formula Congress will use to divvy up the money.


The House bill, written by the committee chaired by Rep. Henry A. Waxman (D-Beverly Hills), gives considerably more money to states whose unemployment rates have increased significantly. That would put California, with a 9.3% jobless rate in December, in the top tier of recipients -- along with New York, Florida and others.

The House “took an approach that recognizes that in the current recession, all states need some help, but some need more help than others,” Waxman said. “It is only fair that the hardest-hit states with high unemployment receive more assistance than those with low unemployment.”

But senators in some smaller states say the House provision would shortchange their constituents. “The legislation is biased to big states,” Sen. Charles E. Grassley (R-Iowa) argued.

The issue is likely to be a thorny one when House and Senate negotiators meet to reconcile the differences in a bill that President Obama has called critical to turning around the economy.

It could also be a test of California’s clout in Congress.

In the House, California’s 53-member delegation is the largest state contingent. Californians chair five House committees, more than any other state, and Rep. Nancy Pelosi (D-San Francisco) serves as House Speaker.

But in the Senate, where each state has two votes, less-populated areas can wield more influence.

For every dollar Californians pay in federal taxes, roughly 80 cents makes its way back to the state. Gov. Arnold Schwarzenegger has cited that fact repeatedly, pointing to the federal government as a culprit in the state’s constant budget problems.

But there are reasons California gets back less federal money: It is a relatively prosperous state. Its highest earners send billions of dollars into the federal Treasury, but don’t qualify for the public-assistance programs that tax revenues fund. Federal formulas also favor states with a high ratio of elderly people, something California does not have. And a lot of federal money goes to states where government facilities are concentrated, such as Virginia.

Advocates for the poor in California say the federal formulas have a particular sting when it comes to healthcare spending.

Anthony Wright, executive director of the Sacramento-based nonprofit Health Access California, said Washington pays 50% of the cost of California healthcare programs that qualify for federal assistance. Other big states, such as Illinois and New York, are reimbursed at the same rate.

But smaller, more rural states, he said, get a much larger share of costs covered. The average reimbursement rate for states when it comes to healthcare programs is 58%.

“A formula that targets the economic climate of a state would put us at an advantage,” Wright said. “The Senate is de-emphasizing that kind of targeting.

“Given our high unemployment rate, California’s needs are great,” he said. “The Senate version would fall short of meeting even our basic needs in this tough time.”

Edwin Park, a senior fellow at the Center on Budget and Policy Priorities, added: “We generally believe that the states with the highest unemployment-rate increases strongly correlate with states with the largest deficits and the ones that are most at risk of really cutting back on services.”

The Kansas Health Policy Authority has alerted its senators that it would receive about $100 million less under the House bill than under the Senate measure. The House bill, the state agency says, “inexplicably rewards high-income states with higher stimulus payments.”

Sen. Jeff Bingaman (D-N.M.), who pushed for the language in the Senate bill, said, “I represent a poorer state. I’m not in any way trying to disadvantage California. I’m just saying poorer states continue to have their needs as well, and those needs need to be adequately addressed.”

H.D. Palmer, spokesman for the California Department of Finance, is hopeful the state’s interests will prevail during House-Senate negotiations on a final bill.

“Without question, there will be California delegation members who will be sitting as members of the conference committee, and we’ll be working very closely with them, because that’s where this issue is going to get resolved.”

One thing that could help California: Among the states that would benefit from the House bill is Nevada, home of Democratic Senate Majority Leader Harry Reid.