State officials anxious as Congress delays on additional aid

WASHINGTON-Congress has squashed hopes for a $10 billion rescue fund to save teacher jobs. Emergency Medicaid funding for the states is teetering on a political cliff. And the talk of extending health insurance subsidies for laid-off workers has gone quiet.

As Congress inches toward a five-week August recess without passing any of these funding measures, public officials in Connecticut are growing increasingly jittery about the financial fall-out at home. In Connecticut, the impact would translate into a $376 million budget gap-$266 million in expected Medicaid funds and $110 million in hoped-for education money-an eye-popping sum at a time when the state is already facing difficult fiscal decisions.

“It’s a big problem for us if we don’t get that money,” said state Sen. Toni Harp, D-New Haven, co-chair of the legislature’s Appropriations Committee.

“It will throw our budget of balance,” and the ability to find new savings will be painful, Harp added. “We were hitting the bone, now we’re starting to grind bone.”

A spokeswoman for Gov. M. Jodi Rell, Donna Tommelleo, said the governor and others have started working on a back-up plan. “The governor has been meeting with her Office of Policy and Management to discuss a contingency plan that would identify potential cuts and rescissions,” Tommelleo said in a statement.

But she provided no details and said Rell and others are still holding out hope that Congress will come through with assistance Connecticut and other states say they desperately need.

Connecticut got some additional bad fiscal news from Washington on Tuesday, when officials learned the state was not on a list of finalists for the prized Race to the Top grants. That’s another $175 million the state had anticipated, but will now not get, for education.

Some state leaders said that hit will be softened a bit by the announcement Monday that Connecticut would get $146 million in additional stimulus funding for schools. But Thomas Murphy, a spokesman for the state Department of Education, said those funds were expected and will not help stave off the impending teacher lay-offs or cushion the blow from losing out on Race to the Top money.

Looking ahead, even small increases in federal spending have become an increasingly tough sell in Washington. Last week, Senate Democrats barely eked out a victory on extending unemployment benefits to more than 2 million workers whose checks had run out. And the prospect of providing subsidies for laid-off workers to continue buying health insurance under a federal law known as COBRA was not even on the table, even though anyone who has lost a job since June 1st is ineligible for assistance.

Last week, when the Senate took up a spending bill for the wars in Iraq and Afghanistan, some Democrats joined with Republicans to strip out $10 billion for local schools, added earlier this month by House Democrats to avoid an estimated 140,000 educator lay-offs across the country.

In the wake of that vote, advocates hoped Rep. David Obey, D-Wis., who had championed the education funding, would add the rescue money to another bill moving through Congress. But a spokesman for Obey said that is unlikely at this point.

“The problem is not the vehicle, the problem is the votes,” said Ellis Brachman, the spokesman. “I don’t think, at this point, there’s a good vehicle to move it.”

Connecticut would have gotten about $110 million of that $10 billion, said Murphy, the state education spokesman.

When it comes to Medicaid, the amount of money at stake is even bigger and the crisis closer at hand. Democrats in Washington had initially hoped to send $24 billion in enhanced Medicaid payments to the states, with Connecticut slated to get about $266 million for this health care safety-net program. State officials counted on that funding as a sure thing when they approved the the 2010-2011 budget.

But the mood in Washington shifted significantly, and the measure has stalled in the Senate. Majority Leader Harry Reid, D-Nev., pared it back to $16 billion last month, but it still failed to move through.

Although top Democrats say they are still looking for a way to move forward on the measure, last week’s vote on the education funds-a smaller package that was paid for with other spending cuts and attached to a must-pass war funding bill-does not bode well.

Democrats have “tried many different times and different combinations” to pass the Medicaid bill, to no avail, noted Erin Shields, a spokeswoman for the Senate Finance Committee, which has led the effort to get the Medicaid payments through. Although it remains a high priority, she said, the calendar is very short for any action.

The House is set to leave town at the end of this week, and the Senate will follow suit next week, for a long summer break. It’s unclear whether lawmakers will have the stomach to take up these spending bills once they come back in September, weeks before the November elections.

Supporters of these funding bills say they hope public pressure will build over the recess and help break the logjam. If state and local employees start getting pink slips in September, for example, that could be just the impetus lawmakers need to act on these measures.

“States are facing a very dire situation,” said Michael Leachman, a senior policy analyst at the Center on Budget and Policy Priorities, a liberal advocacy group. “They’re going to be laying off teachers, they’re going to be reducing their spending on health care … which will cost jobs in the private economy” and hinder the fragile economic recovery.

Harp said that a range of interest groups, from the American Hospital Association to the AARP, the powerful seniors’ group, are lobbying Congress in favor of the Medicaid funding in particular. “I’m hoping they turn up the heat, because all of the states used these dollars to balance their budgets,” she said. “It will throw almost all of the states in the country out of whack.”

Harp said Connecticut’s projected surplus, now estimated at about $393 million, could be used to fill this looming budget hole, but that would mean the state could not reduce the controversial $956 million in borrowing that lawmakers approved to deal with existing revenue shorftalls.

“And if there are any other major problems with our budget, we could be back in budget mitigation at the blink of an eye,” Harp said.