Pennsylvania is about to be broke again

As you might recall, the state budget passed two weeks ago assumed that the federal government would pass an extension of higher reimbursement rates for Medicaid. But Gov Rendell and the legislature may have been counting their chickens before they hatched. According to an article in the Bond Buyer, it's looking increasingly unlikely that Congress will actually come through with more aid to states.

Several municipal market participants and legislative staff said yesterday that they are unaware of any new attempts to rewrite the legislation to gain more support for it and noted that the window for prompt action on the extensions is closing as lawmakers shift their attention to the rapidly approaching November elections.

The legislation included a six-month extension of enhanced federal matching funds under the Federal Medicaid ­Assistance Percentages program through June 2011, prompting several states to count on that funding in their recently approved budgets.

That's really bad news for Pennsylvania. The original budget deal did not include a back up plan if the $850 million in federal dollars from higher reimbursement rates failed to materialize. Later in the article, a spokesperson for Rendell says the governor is starting discussions about how to deal with the shortfall if Congress doesn't act soon.

We have a couple of thoughts about this. First, it's beyond stupid for Congress to fail to provide help to the states. The recession will only get worse if state governments are forced to lay off massive numbers of employees. Gov. Rendell has estimated that he'll have to lay off 20,000 employees, or about a third of the state workforce, if the FMAP extension doesn't happen.

At the same time, it was also beyond stupid for Gov. Rendell and state lawmakers to not come up with a plan for what would happen if the FMAP money didn't arrive. That should have been built into the state budget, so the public can evaluate the path taken by elected officials. Instead, the legislature is going to have to meet in an atmosphere of crisis to figure out what to do. That's a recipe for bad policy and could have been avoided if lawmakers had been a little more responsible when putting together the state budget.

Correction: Please note that an earlier version of this post characterized meetings with lawmakers as a "special session." Rendell is meeting with legislative leaders to discuss options if FMAP doesn't pass by the end of July.

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