Budget and Spending

Medicaid matching rates to states before, during and after Recovery Act funding are analyzed. For every dollar a state spends for Medicaid, the average state gained $1.07 additional match for each state dollar spent under the Recovery Act enhanced rates. 

Former U.S. Sen. Alan Simpson has six good reasons for wanting to see the country address its debt problems. His co-chair on the National Commission on Fiscal Responsibility and Reform, Erskine Bowles, has eight reasons. Those reasons would be their grandchildren.

No state in the Midwest relies more heavily on the sales tax than South Dakota. And in a state where more than half of total tax collections come from this revenue source, it comes as no surprise that lawmakers are trying to address a growing collection problem: the inability to bring in sales and use taxes from purchases made over the Internet.

Question of the Month: Which states require supermajority votes in the legislature to pass tax increases? According to Americans for Tax Reform, entering this year, 16 states required a supermajority vote for taxes to be raised. 

States face colossal fiscal pressures, including mounting public pension obligations that now represent a $1 trillion unfunded gap, according to the Pew Center on the States. That gap—combined with other mounting fiscal woes—has prompted a discussion of something states haven’t discussed before—bankruptcy.

The national conversation now underway whether Congress should enact preemptive authority for states to file for bankruptcy is treacherous because of its unintended consequences. The mere existence of a federal law allowing states to declare bankruptcy would only serve to increase interest rates, rattle investors, raise the costs of state government, create more volatility in financial markets, and erode state sovereignty under the 10th Amendment to the U.S. Constitution.

When President Obama's 2012 budget is unveiled next week, it will include a surprise gift to states indebted to the federal government for unemployment insurance trust fund loans. Administration officials are reporting that the president's proposal will include a plan to give states a two year respite from automatic tax increases and interest payments on unemployment insurance loans. 

For the past four decades, states have increasingly contracted with nonprofit organizations to carry out state financed human services. Due to tight budgets and budget shortfalls, services have been in jeopardy. Contract changes, late payments and alternate financing are just a few of the consequences.

While fiscal concerns usually top the list of important issues for states—even in good economic times—over the next few years, the dialogue among state policymakers will almost exclusively be on the topic of money: budgets, federal assistance, taxes, spending, borrowing and, ultimately, surviving.

E-newsletter Issue #62/January 6, 2011

As states are pulling out of the Great Recession, they face a multitude of challenges—creating jobs, addressing poverty, repaying the federal government loans from the unemployment insurance trust funds and, generally, doing more with less money.

Fiscal challenges are the Hot Topic of the January/February issue of Capitol Ideas, the bimonthly magazine of...

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