Florida Budget Cuts - The Grim Facts

The Center on Budget and Policy Priorities, nation’s premier policy organizations working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals has just published a report on the State of State Finances. Titled "FACING DEFICITS, MANY STATES ARE IMPOSING CUTS THAT HURT VULNERABLE RESIDENTS" by Iris J. Lav and Elizabeth Hudgins. the report paints a very grim picture.

When states cut spending, they lay off employees, cancel contracts with vendors, reduce payments to businesses and nonprofits that provide services, and cut benefit payments to individuals.  All of these steps remove demand from the economy, which only worsens a downturn.  Tax increases also remove demand from the economy by reducing the amount of money people have to spend.

22 STATES PLUS DC WITH PROJECTED GAPS FOR FY2009
	Amount	Percent of FY2008 General Fund
Alabama	$784 million	9.2%
Arizona	$1.7 billion	16.2%
California	$16.0 billion	15.4%
District of Columbia	$96 million	1.5%
Florida	$3.4 billion	11.0%
Illinois	$1,8 billion	6.6%
Iowa	$350 million	6.0%
Kentucky	$266 million	2.9%
Maine	$124 million	4.0%
Maryland	$808 million	5.5%
Massachusetts	$1.2 billion	4.2%
Minnesota	$935 million	5.5%
Nevada	$898 million	13.5%
New Hampshire	$50 million - $150 million	1.6 – 4.8%
New Jersey	$2.5 - $3.5 billion	7.6 - 10.6%
New York	$4.9 billion	9.1%
Ohio	$733 million - $1.3 billion	2.7 - 4.7%
Oklahoma	$114 million	1.6%
Rhode Island	$380 million	11.2%
South Carolina	$160 million	2.4%
Vermont	$59 million	5.1%
Virginia	$1.2 billion	6.9%
Wisconsin	$652 million	4.8%
TOTAL	$39.1  $40.8 billion	8.9  9.3%

To date, at least 20 states have made or proposed budget cuts that threaten vital services for many residents, including some of the state’s most vulnerable residents.  Examples of cuts in Florida include:

Public health programs:  Proposal to freeze reimbursements to nursing homes and relax staffing standards as well as to eliminate hospice care for 8,000 terminally ill Medicaid patients

Colleges and universities: Florida is among at least 12 states that have implemented or proposed cuts to public colleges and universities.  Florida has already cut university budgets and community-college funding, with further cuts expected

The federal government, which can — and arguably should — run deficits during troubled economic times, can help states minimize damaging budget cuts by providing assistance to the states, as it did in the recession in the early part of this decade. 

In the recession the federal government provided $20 billion in temporary fiscal relief:  1) a temporary, $10 billion increase in the federal share of Medicaid costs; and 2) $10 billion in general grants to states, based on their population.  The increased Medicaid match averted even deeper cuts in public health insurance than the substantial cuts that occurred, while the general grants helped prevent cuts in a wide variety of other critical services.

The major problem with that assistance was that it was enacted long after the onset of the recession, so it was much less effective than it could have been in preventing state actions that deepened the economic downturn.  To avoid that problem, the federal government should consider aiding states earlier, rather than waiting until the downturn is over or nearly over.

Another difference in this economic downturn is the uneven distribution of the economic and fiscal problems.  Some states are particularly hard hit, especially those in which employment is stagnant or declining, housing foreclosure rates are climbing, and poverty is rising.  Other states, including those with energy resources and those benefiting from higher commodity prices, have fewer or no problems.  To account for the unevenness, federal aid could be targeted based on economic factors to the states most in need of assistance.

Federal assistance can lessen the extent to which states take these harmful, “pro-cyclical” actions and prevent budget cuts in vital services residents need. 

Downturn Creating Widespread Deficits

When the economy weakens, state and local revenues decline but the need for public programs increases, as residents lose jobs, income, and health insurance.  Already, more than half the states are projecting deficits for the upcoming fiscal year or beyond.  In the 22 states (plus the District of Columbia) for which specific estimates are available, the combined deficits are expected to total at least $39 billion for fiscal 2009.  (In most states, fiscal year 2009 starts July 1 of this year.)  These deficits average 9 percent of these states’ general fund budgets.

Virtually all states are required to balance their operating budgets each year or each biennium.  Unlike the federal government, states cannot maintain services during an economic downturn by running a deficit.  Thus, states will have to close the deficits now being reported with a combination of actions: drawing down reserves, raising taxes, or cutting expenditures.

Some states have already begun drawing on their rainy day funds and reserves.  But if the economy remains weak or falls into recession, states’ reserve funds will be depleted and many more states will likely turn to harmful budget cuts to balance their budgets.  In addition, three states have already enacted significant tax increases, and a few other states are considering them.

Budget Cuts

At least 20 states have made or proposed budget cuts that will affect services for children, the elderly, the disabled, and families, as well as the quality of education and access to higher education.

Public Health Programs

At least 13 states have implemented or proposed cuts that will affect eligibility for health insurance programs and/or access to health care services.

Rhode Island’s governor has proposed rolling back eligibility for low-income parents from 185 percent of the poverty line to 133 percent.  This would eliminate coverage for nearly 7,400 parents.
Nevada’s governor has capped the state’s SCHIP program at its approximate current number of enrollees.  As a result, many applicants will be denied coverage, even though the economy is weakening and need consequently is rising.  Health services for some pregnant women have also been eliminated.

In Alabama, the Department of Public Health has said the SCHIP program will be closed to new enrollees in July if additional funding is not provided.  An estimated 16,000 children are expected to lose public health insurance as caseloads decline due to attrition.
Maine recently approved a budget that would require an annual $25 Medicaid enrollment fee for some low-income parents.  Enrollment fees can deter individuals from seeking needed health insurance.

In New Jersey, the governor has proposed cutting funds for charity care in hospitals by 15 percent, affecting hospitals’ ability to care for some of the state’s neediest residents.  He has also proposed imposing co-payments for Medicaid services, which would make it harder for some low-income individuals to afford needed medical care.
 
California’s governor has proposed cuts in the state’s SCHIP program, including increases in co-payments and premiums and reductions in dental services.   He has also proposed eliminating dental, vision, and other benefits for adults in Medicaid and requiring more frequent eligibility determinations.  (Research has shown that making redeterminations more frequent typically causes significant numbers of eligible families to fall out of the program and become uninsured).

In Vermont, the governor has proposed increasing co-payments and premiums for Medicaid and SCHIP recipients.
In Mississippi, Medicaid is facing a 13.9 percent shortfall, once special funds are taken into account. Policymakers have not yet determined how to address the shortfall.
 
Other states that have enacted or proposed cuts in Medicaid or SCHIP include Florida, New Hampshire, and Virginia, which have cut or proposed to cut reimbursements to health care providers, and Illinois and Connecticut, which have imposed major delays in paying providers, potentially affecting access to health care.  (California too has delayed paying providers and has cut by 10 percent reimbursements to many Medicaid providers.)
 

Programs for the Elderly and Disabled

At least five states are cutting or proposing to cut medical, rehabilitative, home care, or other services needed by low-income people who are elderly or have disabilities, or significantly increasing the amounts that such people must pay for the services.

Florida legislators have proposed a number of cuts which will affect elderly and disabled populations: nursing homes and other providers would not get scheduled cost-of-living adjustments in their reimbursements and staffing standards would be relaxed in the expectation that the freeze would result in staffing cuts; Medicaid reimbursements to hospitals would be cut; hospice care for 8,000 terminally ill Medicaid patients would be eliminated;  and the state’s only tuberculosis hospital would be closed. The Florida House proposes to eliminate coverage of hospital care from the state’s Medically Needy program, while the Senate plan would limit the program to children and pregnant women and eliminate 16,000 beneficiaries from the program. The Senate proposal eliminates a Medicaid program that covers 24,000 disabled and elderly state residents.

K-12 Education

State education funding has already been cut in Maine, Virginia, and Florida, with additional cuts likely in Florida. 
 
Colleges and Universities

At least 12 states have implemented or proposed cuts to public colleges and universities.

In Florida, university budgets and community-college funding already have been cut, with further cuts expected; schools are anticipating limiting student enrollment, closing satellite campuses, and laying off staff.  Florida State University, for example, is considering eliminating 218 faculty and staff positions and has instituted a freeze on hiring and travel.

Cuts in Other Services

States also are making or proposing cuts in a variety of other programs, including programs for very poor families and other vulnerable populations.

Florida and Arizona are considering reducing staff available to help children who have been abused or neglected.
In addition, some states are instituting across-the-board spending cuts, the impact of which is uncertain. Other states, such as Illinois, New Jersey, New York, and Virginia, have proposed or implemented cuts to localities, leading to local concerns about reductions in meals for the elderly, the number of police officers, victim services, libraries and other services.

WHERE DO OUR FEDERAL TAX DOLLARS GO?

As shown in Figure 1, about three-fifths of federal expenditures went to three areas, each of which comprised about one-fifth of the budget:

Defense and security:  In 2007, some 22 percent of the budget, or $590 billion, went to pay for defense, homeland security, and security-related international activities.  While roughly $125 billion went to support operations in Iraq and Afghanistan, the bulk of the spending in this category reflects the underlying costs of the Department of Defense and other security-related activities.
Social Security: Another 21 percent of the budget, or $586 billion, went to Social Security, which provided retirement benefits averaging $997 per month to 34 million retired workers (and dependents of retirees) in fiscal year 2007.  Social Security also provided survivors’ benefits to 6.5 million surviving children and spouses of deceased workers and disability benefits to 8.7 million disabled workers.

Medicare, Medicaid, and SCHIP:  Three health insurance programs — Medicare, Medicaid, and the State Children’s Health Insurance Program (SCHIP) — together accounted for 21 percent of the budget in 2007, or $572 billion.  Nearly two-thirds of this amount, or $375 billion, went to Medicare, which provides health coverage to more than 40 million people who are over the age of 65 or have disabilities.  The remainder of this category funds Medicaid and SCHIP, which provide health care or long-term care to more than 45 million low-income children, parents, elderly people, and people with disabilities in a typical month.