State budget deficits loom large; signals deep health insurance cuts


WASHINGTON – The budget deficits now looming over state governments will likely reach $60 billion to $85 billion in state fiscal year 2004 and constitute the largest state budget gaps in half a century, according to a Washington research and policy group report.

This worsening of state fiscal crises could force deep cuts in programs for low-income working families and especially in health care coverage, according to the Center on Budget and Policy Priorities.

Close to home. In Ohio, that fiscal year 2004 deficit number stands at $2 billion, which is a deficit of 9.2 percent of the state budget.

In Pennsylvania, the deficit number ranges from $500 million to $2 billion. This is a deficit of 2.4 percent to 9.6 percent of the state budget.

Companion. The center also issued a companion study finding that in 11 states where specific health care cutbacks have already been approved or proposed, 1 million people currently covered by Medicaid and the state Children’s Health Insurance Program – the majority of whom are working-poor parents – will be forced into the ranks of the uninsured if the cuts are fully instituted.

The study covers only those states in which measures to cut health insurance coverage have been adopted or been proposed recently by governors.

Climbing. Since most governors will not unveil proposals to close budget deficits until they release their budgets next month, the study notes that the 1-million figure is expected to climb much higher.

The two reports released by the nonprofit organization provide new estimates, based on the latest information, on the magnitude of health insurance cuts and the size of state budget deficits.

Cuts ahead. “Taken together, the reports indicate that cuts of unprecedented depth in vital basic services – and especially in health insurance for working poor and near-poor families – lie ahead,” said Robert Greenstein, the center’s executive director.

“Only the provision of substantial fiscal relief to states by the federal government, a step that would also be more effective in stimulating the economy than most tax cuts under consideration, can forestall such an outcome,” he said.

Finding information. The analysis of state fiscal problems by Iris Lav, the center’s deputy director, and Nicholas Johnson, director of the organization’s state fiscal project, is based on a survey of budget watchdog groups, interviews with state officials, official pronouncements and press reports from 42 states.

It finds these 42 states are facing budget deficits totaling $60 billion to $85 billion for state fiscal year 2004, which represents 13 percent to 18 percent of state expenditures.

These deficits are at least twice as large as states faced during the recession of the early 1990s.

Adding up. The report notes that according to figures the National Conference of State Legislature recently released, these new deficits are on top of both $50 billion in deficits that states closed when enacting their fiscal year 2003 budgets and additional deficits of at least $17.5 billion in 2003 that have opened up in the months since the 2003 budgets were enacted.

“When governors release their budgets for 2004 next month and state legislatures convene, states will be faced with closing both the newly emerging gaps for the 2003 budget year and the massive new deficits for 2004,” Lav said.

“The choices states face will be stark,” Lav said.


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