Stimulus bill leaves out money state counts on to balance the budget; officials still hopeful

Despite hopes for an early resolution, state officials are still waiting to to see whether Congress will provide more than $360 million in extra stimulus aid – money already built into the new state budget.

A major stimulus expansion bill advanced in the U.S. House of Representatives on Friday – but only after being stripped of more than $24 billion earmarked for additional state Medicaid funding, including about $266.5 million for Connecticut.

“There’s no question that the states need that money,” said Rachel Morgan, a health care policy specialist for the National Conference of State Legislatures. “They just can’t agree on how they are going to pay for it.”

Morgan said there is strong support in both chambers – but particularly in the House – for restricting any future expansions of the federal stimulus unless they can be offset by matching tax hikes or spending cuts. And it was a lack of these so-called “offsets,” that created problems for the Medicaid funding in the House.

Another version of the bill adopted in the Senate does include the Medicaid funding, but it has not identified sufficient new tax hikes or spending cuts to offset the cost, setting up likely problems with the House.

The new $19.01 billion state budget that the General Assembly and Gov. M. Jodi Rell approved in early May for 2010-11 depends on $365.6 million in presumed new federal aid, including $266.5 million for Medicaid and child welfare programs, and $99.1 million for education. Congress also has not taken final action yet on any legislation extending education aid.

These state budget estimates are based on the assumption that stimulus grant programs set to expire on Dec. 31, or six months into the next state fiscal year, will be extended through June 30, 2011.

Those assumptions, originally offered by Rell when her revised budget proposal was offered in February, were based on federal budget proposals from President Obama’s administration.

And while the debate has not ended on Capitol Hill regarding stimulus, congressional leaders had been talking earlier in May about having the extensions resolved before the Memorial Day weekend.

U.S. Rep. John B. Larson, D-1^st district, a former state senator from East Hartford, warned state officials in late April that increasing pressure to offset any additional spending was threatening stimulus expansion. Chairman of the House Democratic Caucus, Larson is the fourth-highest ranking Democrat in the chamber.

But the congressman’s office issued a statement Friday indicating that despite funding being blocked on last week, the debate over further health care, child welfare and education dollars isn’t over.

“Congress will continue its work to address the economic needs of the nation and the fiscal needs of the states while balancing the fact they are constricted financially due to eight years of mismanagement by the Bush administration,” it read.

U.S. Rep. Christopher Murphy, D-5th District, who co-chaired the Connecticut legislature’s Public Health Committee before being elected to Congress in 2006, also couldn’t offer any assurances when he returned to the state Capitol two weeks ago to tout new jobs created through stimulus funding over the past year.

Murphy called the need to find cuts or revenues to pay for any stimulus expansion a “make-or-break” issue. “It’s a large concern for me and for many other members of Congress.”

Rell was cautiously optimistic about the funding Friday in a brief written statement.

“We have been following the … issue closely and our congressional delegation has been working on our behalf,” the governor wrote. “I am confident they will continue to push for the funds.”

Connecticut is one of 30 states counting on Congress to approve billions in emergency health care aid for next year – and one of 21 lacking any back-up plan if the funding doesn’t come through, according to an NCSL report issued in mid-May.

NCSL officials have warned that the education stimulus expansion measure is in similar jeopardy as the proposed increase in health care funding, lacking sufficient revenue increases or spending cuts to balance it.