Less than a month into the 2010 legislative session, Gov. Chris Gregoire got some welcome budget news.
“The check’s in the mail,” White House officials told her.
“It’s what we’ve been waiting to hear,” she told reporters Feb. 1. “I feel now we should be able to assume with confidence that money will come.”
You know what happens next.
After 126 days of impatiently checking the mail box, calling back East, and pestering friends to intervene, the governor wrote a strong letter. Enough is enough, she said. It’s time to pay up.
Gregoire’s not the only governor to bank the promise. At least 30 states built budgets with phantom federal funds.
Here’s the issue. In last year’s stimulus bill, Congress increased the federal Medicaid match (FMAP) for states, providing an additional $87 billion. Although the lift is scheduled to expire Dec. 31, the Obama administration endorsed a $24 billion, six-month extension. But even though the House and Senate each passed FMAP extensions, the package never came together. Still, state lawmakers remained hopeful.
That was then. Now, however, as House Majority Leader Steny Hoyer told the Washington Post, “spending fatigue” has set in and it’s “tough in both houses to get votes.” The FMAP extension recedes as a bridge too far.
Who knew spending other people’s money could be so strenuous?
Returning to the rhetoric that sold the first stimulus bill, Gregoire emphasizes economics in her letter to this state’s congressional delegation.
“Removing this source of economic stimulus at this critical stage of our fragile economic recovery,” she writes, “presents significant risk.”
The biggest risk is to state budgets.
If Washington doesn’t get the $480 million it counted on, Gregoire says she’ll have to call a special session to cut the budget. Lawmakers left just $453 million in reserve for the budget cycle ending June 30, 2011. There’s no cushion. She warns of having to eliminate 6,000 to 12,000 state jobs. Maybe. Lawmakers have choices, including additional Medicaid cuts.
The president wrote his own strong letter to congressional leaders June 12, urging passage of the FMAP extension and other aid to state and local governments. Staying on message, he argues his plans “are among the most cost-effective ways of promoting economic growth.”
After 18 months, the political winds have shifted. Shaken by rising deficits, increased taxes and continued high unemployment, public opinion has soured on more government spending. Although the president, governors and legislators tout FMAP as an economic elixir, the tonic has lost its fizz. Voters aren’t buying it. They’re also uninspired by another bailout for what they see as free spending state and local governments.
Nonetheless, it’s likely that Congress will come through with the money. The calculation works like this: After all they’ve spent so far, stiffing the states for $24 billion wouldn’t win back voters fed up with profligate spending, but it would antagonize the political class counting on the cash. Still, it’s a close call.
Ordinarily, swooping in with a budget-saving bundle of cash would provide incumbent members of Congress a nice hero moment. These aren’t, however, ordinary times. Pork-barreling pols are as unfashionable as fur coats at a PETA convention.
The FMAP flap highlights the state’s larger concern. Lawmakers adopted an unsustainable spending plan that left too little in reserve. While the June 17 revenue forecast may change that somewhat, there’s little reason to expect the new estimate to add to the bottom line.
Most incumbents will desperately want to avoid a budget-balancing special session this close to the November election. Besides, while any move toward fiscal responsibility would be welcome, the record suggests the effort would be a flop.
State Auditor Brian Sonntag accurately characterized the last legislative special session for the Association of Washington Business in April.
“The end product,” he said, “was a patchwork of cuts and taxes that did little more than mask immediate cash flow issues … almost as if there was a state of denial.”
Almost?
Next January, we’ll again reap the consequences of lawmakers’ refusal to reset state spending.
Whatever happens with FMAP, our state’s budget problems should not be added to the extensive list of c ongressional failures. Olympia lawmakers have only themselves to blame.
Richard S. Davis, president of the Washington Research Council, writes on public policy, economics and politics. His e-mail address is richardsdavis@gmail.com.
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