States Would Feel Impact of Obama Budget

E-newsletter Issue #86 | Feb. 16, 2012

States could see an influx of funds for education and infrastructure in the federal  budget President Obama proposed Monday.

The president’s spending plan calls for $350 billion in short-term stimulus spending and a $475 billion highway program. That includes immediate spending of $50 billion for transportation infrastructure, $30 billion to modernize at least 35,000 schools and $30 billion to hire teachers and first-responders.

It also includes $850 million for Race to the Top, which implements systemic education reforms in five critical areas, including early learning and child care.

“The president’s budget fully funds the Race to the Top education initiative, which will continue promising reforms already underway in many states,” said David Adkins, executive director/CEO of The Council of State Governments. “This represents a positive partnership between the federal government and the states.”

But, Adkins said, the budget plan includes some issues of which states should be wary. For instance, the budget would implement payment innovations and other reforms for Medicaid, Medicare and other health programs. The Medicaid savings are estimated at $51 billion. It calls for blending the Medicaid and Children’s Health Insurance Program, known as CHIP, match rates beginning in 2017. It will basically mean a loss of matching funds for states.

“Medicaid spending is now the single largest and fastest-growing expenditure in most state budgets,” Adkins said. “Any cuts to the program at the federal level will only cause state budget gaps to grow. It is likely federal Medicaid cuts will trigger state budget reductions in discretionary areas such as higher education, which will result in higher tuition rates, actions directly at odds with the president’s budget priorities.”

Among the other impacts the budget could have on states:

  • It includes $8 billion to create a fund to promote job training for high-growth industries. The Community College to Career Fund, administered by the departments of Labor and Education, would help train 2 million workers for good-paying jobs in high-growth and high-demand industries, according to a White House fact sheet on the proposal.

  • States would be eligible for funding to support bonuses for training programs whose graduates find quality jobs shortly after earning a credential.

  • The fund also would support federal agencies partnering with state and local governments to encourage businesses to invest in America. State and local governments could apply for grants to encourage companies to locate in the U.S. because of the availability of training to help local workforces gain new skills.

  • The budget includes $300 million in new resources to improve child care quality and prepare children for success in school. 

  • A new $5 billion competitive program will challenge states and districts to work with teachers and unions to attract, prepare and reward great teachers.

  • The budget provides $260 million in funding for science, technology, engineering and mathematics programs, including a new $30 million evidence-based math education initiative to be jointly administered with a comparable program at the National Science Foundation. Also included is $80 million to help reach the president’s goal of recruiting and preparing 100,000 high-quality STEM teachers over the next 10 years.

  • The budget would implement payment innovations and other reforms for Medicaid, as well as Medicare and other health programs. It estimates these changes will save approximately $364 billion throughout the programs over the next decade.

  • The budget increases support to states and tribes by allotting $93 million for implementation of air quality management and water pollution control programs.

CSG Resources


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