States Feel the Pinch of Tight Bush Budget

By Pamela M. Prah and Daniel C. Vock, Stateline.org Staff writers

States would be spared draconian cuts next year under President Bush's plan to balance the federal budget by 2012, but health, social and other programs important to states still would be squeezed.

Only defense and homeland security saw substantial boosts in Bush's war-time budget proposal, the first he has presented to a Democratic-controlled Congress. His $2.9 trillion blueprint for fiscal 2008 resurrects some failed budget cuts and seeks to wring new savings that will be felt by states, primarily in health-care funding.

Just as important to states is what is missing. The president's plan fails to include any new money to help states meet the federal government's sweeping mandate to revamp driver's licenses by May 2008. States are sure to seek relief from the new Congress from both the deadlines and the estimated $11 billion in costs imposed on them by the 2005 federal Real ID Act.

Bush's proposal includes more money for health insurance for children, but the increase is well short of the amount congressional analysts say is needed to keep covering 6.1 million already enrolled in the State Children's Health Insurance Program (S-CHIP). The president proposed adding $5 billion to the program over the next five years. But various analysts say states need a $13 billion to $16 billion increase just to keep covering the same number of families. His plan also would freeze enrollment of adults in S-CHIP.

The president also renewed his fight to curtail Medicaid spending, calling for $25.7 billion in savings over the next five years through a number of controversial proposals that previously have met stiff resistance in Congress. These include reducing the amount of federal money states could recoup for administrative tasks, limiting payments to public hospitals and eliminating Medicaid support for certain school-based services.

The $320 billion Medicaid program, whose costs are shared by the federal government and states, provides health insurance for 59 million poor and disabled adults and children.

Medicare, the federally run health plan for seniors, would take a much bigger hit under the president's plan, with the administration eyeing some $75 billion in savings.

Bush also unveiled major changes in federal tax policy to encourage individuals to buy their own health insurance. Congress, however, is a long way off from enacting a federal plan to cover the nation's 46.6 million uninsured. That still leaves states on the leading edge of efforts to cover the uninsured.

The four-volume budget proposal lays out the president's priorities and shapes the debate on Capitol Hill, but Congress makes final budget decisions. The federal budget provides nearly 30 percent of state revenues, making it the largest single source of funds for many states. So any cuts or increases from Washington could have a profound effect on state finances.

The president's plan to dig the federal government out of a $239 billion deficit estimated for 2008 and create a $61 billion surplus by 2012 relies on the new Congress to enact a swath of new initiatives that even a Republican-controlled Congress failed to do. That includes allowing oil drilling in the Artic National Wildlife Refuge and extending Bush's tax cuts that are set to expire in 2010. The president also banks on saving $12 billion by reducing or eliminating scores of programs, many of which he's tried before to scrap. Other elements of Bush's budget proposal:

• Child care – Child-care assistance for low-income families would be frozen at current levels without accounting for inflation. As a result, the number of children assisted under state-run welfare programs would be cut by 300,000 in the next five years, the Bush administration said.

• Education - While the president included an additional $1.7 billion for states to implement testing and reporting requirements under the No Child Left Behind Act, states likely will argue that the amount still is not enough. Governors and state legislators are among those who have charged that NCLB has been under-funded, by some estimates to the tune of $40 billion.

• Energy – Nuclear energy is one of the big winners in the president's $24.3 billion budget request for energy programs, with an increase of $114 million for Bush's Nuclear Power 2010 program, which is developing technology for a new generation of nuclear reactors. State aid to help low-income citizens make their homes more energy-efficient, however, would be cut more than $21 million under the president's budget. Grants to help states promote energy efficiency would be cut $5 million.

• Homeland Security – The administration's budget calls for $3.2 billion for state and local preparedness, including grants to train firefighters. An additional 250 law enforcement officers would be trained as part of a $26 million increase in a program designed to educate state and local law enforcement officials in immigration law. And $29 million will be devoted to identifying criminal aliens incarcerated in federal, state and local prisons and then extraditing them from the United States.

• National Guard – Reflecting the administration's reliance on the National Guard to fight wars in Iraq and Afghanistan, the budget calls for increasing the Army National Guard by 1,300 soldiers in fiscal 2008 to 351,300. A year ago, the administration had considered keeping the Army National Guard at 333,000, rather than a full force of 350,000. The president backed off after governors and U.S. senators protested.

• Transportation –A $175 million program to help states and cities reduce traffic congestion is a centerpiece of the president's proposed $67 billion transportation budget. The initiative includes ideas such as charging drivers more for being on the road at rush hour. Overall, highway funding would get a scheduled $300 million increase, while money for transit projects would be cut by slightly more than that, according to the American Association of State Highway and Transportation Officials.

• S-CHIP – The president wants to refocus funds on children in families making less than twice the poverty level ($41,300 for a family of four). Currently, 16 states allow kids in families with higher incomes to enroll. Under Bush's proposal, those states still could cover the children, but they would receive less of a federal match for doing so. His plan also would freeze enrollment of adults in S-CHIP. Of the 6.1 million people covered by the program, 639,000 are adults, often parents of kids in the program.

• Social services – The plan would cut $500 million from the $2 billion Social Services Block Grant (SSBG), which funds flexible state assistance programs for children, seniors and the disabled.

• Environment - The Clean Water State Revolving Fund, which provides funds to states for developing their water infrastructure, would be cut $396 million under the president's plan. States got $1.1 billion for the program in 2006.

• Food stamps - The Bush administration wants to make it easier for some low-income working families to qualify for food stamps by allowing states to exclude IRA savings plans when calculating families' assets. But other changes would make it harder for some welfare recipients to qualify for the food assistance program. Advocates for the poor say the changes are not expected to lower the total number of families served or the average monthly benefit.

Key Democrats on Capitol Hill appeared dubious of the plan. “The president calls for nearly $2 trillion in tax cuts, so in the name of balancing the budget by 2012, he hits domestic priorities such as health care, education, and the environment,” U.S. House Budget Committee Chairman John Spratt (D-S.C.) said in a statement. “I doubt that Democrats will support this budget, and frankly, I will be surprised if Republicans rally around it either,” he said. Click here for the White House's state-by-state budget information and for an overview of the president's 2008 plan.

Source: Stateline.org.