Federal Stimulus Provides Near Term Relief, Long Term Uncertainty for State Budgets
Given the projected $1 billion FY 2010 State General Fund (SGF) budget shortfall at the start of this year’s legislative session, many Kansas lawmakers (myself included) have been anxiously awaiting two critical pieces of information to get a better sense of the types and sizes of cuts needed for a balanced budget. That information includes: 1) the April 2009 consensus revenue estimates, and 2) how the federal stimulus package (“The American Recovery and Reinvestment Act of 2009”, or “ARRA”) will assist the states. Over these past few weeks the second so-called piece of the puzzle is starting to fall into place as legislators have been learning about ARRA and how it will affect Kansas. I wanted to share this information with you with the hope that you can not only get a better idea about the various tax and spend decisions your state legislators will be making for the upcoming FY 2010 budget but understand the possible challenges future state budgets could be facing.
ARRA, which was signed into law by President Obama on February 17th, is a $787 billion initiative that seeks to stimulate economic growth in education, health care, transportation, energy and other programs via federal spending increases, tax cuts, and other provisions. Over $300 billion is targeted for state governments and state-related programs and is primarily done through various grant-in-aid programs. Kansas can expect to receive approximately $1.7 billion through more than 37 different federal grant programs. Five of those programs (State Fiscal Stabilization Fund for public schools and higher education institutions – $449.17 million, Federal Medicaid Assistance Percentage – $402.18 million, Highways and Bridges – $347.81 million, Special Education – $115.24 million, and Title I Education – $93.03 million) will receive over $1.4 billion. The positive impact of these funds is already being felt as Kansas received $71.5 million in additional Medicaid assistance last month and will greatly assist lawmakers in crafting both FY 2010 and FY 2011 budgets.
Not surprisingly, there are lots of stipulations regarding how Kansas can use these grant monies. For example, Kansas could receive an additional $68 million in funding if it adopts more flexible unemployment eligibility criteria. But ARRA’s big help will be in Kansas’ ability to supplant over $483 million in Medicaid and State Fiscal Stabilization Fund – Flexible spending with federal stimulus dollars over the next few budget cycles, thus avoiding draconian cuts and/or tax increases. Given that ARRA monies will have run out by June 30th 2011, the next real budget challenge could possibly come in the 2011 legislative session when the legislature puts together a 2012 budget.
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Thank you for letting me serve as your State Senator. I always appreciate knowing where you stand on the issues our state is currently facing. I can be reached at (785) 296-7372 (daytime) or (785) 865-2786 (evenings). My e-mail address is Tom.Holland@senate.ks.gov. Also, if you would like to be added to the mailing list of my e-mail newsletter which is published every two weeks during the session, please send me your e-mail address.