Washington impasse threatens state’s budget, residents’ pocketbooks

WASHINGTON–A spending stalemate in Congress could create a multi-million dollar budget gap in Connecticut. And it could have a devastating impact on state residents, who have already started to feel the toll of the financial tussle in Washington.

At issue are several spending bills now stalled in Congress, including emergency Medicaid funds to preserve that health insurance safety net for the poor, an extension of unemployment benefits, and billions of dollars in education funds to avert teacher lay-offs.

These proposals have been in limbo for weeks, while Connecticut officials have grown increasingly anxious about the possible ramifications on the state budget, and residents have already started to feel some of the effects.

At the end of last week, 3,000 Connecticut residents had lost their unemployment benefits, according to a breakdown of U.S. Department of Labor data by the National Employment Law Project, a Washington advocacy group for low-wage workers.

“By the end of this week, it will be 4,000, and by the end of next, 5,000,” said Maurice Emsellem, policy co-director at NELP.

“If you cut people off from unemployment compensation, not only are you hurting them so they can’t pay their basic living costs-rent, food, electricity-but you are also losing the stimulative effect on the economy,” said Sharon Langer, a senior policy fellow at Connecticut Voices for Children.

In the Senate, Democratic leaders scrambled unsuccessfully on Wednesday to round up enough votes to break the logjam. Senate Majority Leader Harry Reid, D-Nev., fell one vote shy of the 60 needed to avoid a Republican filibuster of a narrowly-tailored extension of unemployment benefits. Reid could secure that last vote after a week-long 4th of July recess. But the outlook for other spending items, such as Medicaid and education funding, is bleak.

The gridlock in Washington comes amid signs of an economic recovery, which has prompted Republicans and some moderate Democrats to oppose to more federal spending and instead call attention to the spiraling deficit. But many other Democrats argue that, with unemployment still high and the economy on shaky ground, Congress needs to keep the stimulus funds flowing.

Caught in the middle of that argument, in addition to the unemployment benefits, are proposals that would provide enhanced funding to the states for Medicaid and extend federal subsidies for unemployed individuals and their families to continue the health insurance they had when they were employed.

Currently, more than 50,000 Connecticut residents are receiving the federal subsidies to help pay for continued benefits under a federal law known as COBRA. Although they would not lose that assistance, anyone who has been laid off since June 1 has to pay the full cost of COBRA themselves, putting coverage out of reach for many, unless Congress acts to renew this provision.

In addition to those spending measures, Democrats in the House were hoping to add a $23 billion education rescue package to a war spending bill that could come up for a vote as early as today. Connecticut’s Education Commissioner, Mark McQuillan, has said without that funding, there will be “dire consequences” for public schools, including significant job losses and ballooning class sizes.

But House Democrats have now scaled that package back to $10 billion, and its fate in the Senate is murky at best.

In Hartford, it is the Medicaid money that’s causing the most heartburn, because Gov. M. Jodi Rell and state lawmakers assumed, when crafting the 2010-2011 budget, that Congress would steer about $266 million to the state to help cover the cost of that program.  That money is now in jeopardy. The Senate last week tried to pass a pared-down package that cut the state Medicaid funding nearly in half, but even that trimmed package failed to pass.

On Wednesday, Rell joined, via video, a press conference in Washington with other governors aimed at pressing Congress to act on the Medicaid legislation.

“We have cut in every possible place that we can,” Rell said.  “This is a plea to our federal government … We absolutely need this assistance.”

When the state included the added Medicaid money in the budget that takes effect today, Rell said, it did not act in “blind faith” but on the fact that, earlier this year, Congress seemed to be on the verge of passing the legislation.

However, Rell and the Democrats who control the legislature received several warnings before they enacted the budget that the funding was uncertain at best. The National Conference of State Legislatures issued a caveat to all states; U.S. Reps. John Larson, D-1st District, and Chris Murphy, D-5th District, both made public statements questioning the wisdom of relying on added funding; and the state legislature’s non-partisan Office of Fiscal Analysis declined to include addition federal spending in its revenue projections.

State Rep. John Geragosian , D-New Britain, co-chairman of the Appropriations Committee, said a new, more robust state revenue forecast means that the state may be able to offset lost income from the federal kitty, at least in part. He acknowledged that there would still be a budget hole, but said it was “premature” to discuss the impact or detail how officials might make up the difference.

But Rep. Vincent Candelora of North Branford, the top Republican on the Finance, Revenue and Bonding Committee, said this possible funding gap showed how faulty the state’s budget was in the first place. “We really have built a house of cards,” he said of the decision to count the federal money before it was guaranteed.

And publicly, some members of the state’s Congressional delegation were more sympathetic than others.

“It’s unconscionable that there is a stalemate,” Rep. Rosa DeLauro, D-3rd District, said on Tuesday, as the House failed, in the face of Republican opposition, to pass an extension of unemployment benefits. DeLauro said that during a visit to the St. Andrew’s Italian Festival in Wooster Square last weekend, five constituents stopped her to say their unemployment benefits had just run out or were about to. “There is an air of unreality here and the view that someone how people are going to survive, and they’re not.”

But others, such as Murphy and Rep. Jim Himes, D-4th District, said Congress could not keep coming to the rescue of the states when federal deficits are spiraling.

“It’s maddening that this problem has been laid at the foot of Congress,” said Murphy. He said that while he wants to help avoid a crisis in Connecticut, particularly on education funding, federal lawmakers need to find ways to pay for any new finding-a difficult task in the current budget climate.

Said Himes: “The state of Connecticut, like the federal government, has some really hard work to do.”