Strapped states, facing up to $180 billion in budget deficits in the next fiscal year, are going hat in hand to Washington.
California wants $6.9 billion in federal money for the next fiscal year, and Republican Gov. Arnold Schwarzenegger says he'll have to eliminate state health and welfare programs without it. Illinois, facing a $13 billion deficit that equals roughly half of the state's operating budget, has what it dubs a stimulus team and a group in Washington pressing for additional state aid.
Among other things, Illinois is hoping the federal government will keep paying a higher share of Medicaid costs. "That's $600 million we desperately need," said Kelly Kraft, a spokeswoman for Democratic Gov. Pat Quinn's budget office. Those funds already are counted in the governor's budget proposal.
But in Congress, members are balking at further subsidies amid an election-year outcry over the U.S. deficit and federal involvement in the economy.
That tension sets up fierce battles as states work out budgets for the fiscal year beginning July 1. Because they can't run deficits, most states face yet more tough choices: raise taxes, cut services, lay off workers or trim employees' wages and benefits over union opposition.
About a third of last year's economic-stimulus package went to aid states, including $90 billion to help with Medicaid costs and $54 billion for schools and general services, the largest items in states' budgets. Supporters hoped the money would tide over the states for the worst of the recession.