Budget Deficits Inflame Debates

Illinois Gov. George Ryan is on the warpath against Kenneth Robbins, accusing him of grandstanding.

Robbins, who has responded with equally harsh rhetoric, attracted the governor’s attention because he has been waging a very public battle against Ryan’s November order to cut hundreds of millions of dollars in Medicaid spending to balance the state’s budget.

Robbins, the president of the Illinois Hospital and Healthcare Association, is particularly concerned with the portion of cuts that would slash Medicaid payments to hospitals, which he says could force up to a half dozen rural hospitals to close, compromising care for small town residents and, in the long run, raising medical costs for everyone. In an intense lobbying effort, Robbins has recruited hospital presidents and business leaders to put pressure on the Republican governor, hoping to soften this blow to the state’s hospitals.

Ryan’s and Robbins’ Medicaid battle would be of only parochial concern were it not for the fact that over forty governors find themselves in positions similar to Ryan’s — they are leading states unable to cover expenses due to depressed tax revenues, and they are looking for programs to cut or taxes to raise.

The decisions they make will be watched closely, and in many cases, like Illinois, fought fiercely. And given that major elections will take place next November, when 36 governors races will be contested and Republicans and Democrats will fight for control of the country’s state legislatures, every budget cut or tax increase carries significant political consequences.

As is typical of most Januarys, governors across the country rolling out their budget proposals for the upcoming fiscal year. They are doing so amid warnings this will be the toughest budget season in a decade and perhaps since World War II.

But even as state lawmakers begin debating the details of budgets that won’t take effect until July 1 (for most states), they will be forced, in many cases, to take a scalpel to their current budgets.

In an address to Georgia legislators last Tuesday (1/8) , Gov. Roy Barnes could have been speaking for the leaders of many states when he commented on the difficult task facing Georgia lawmakers.

“We are here today to begin a job that won’t be easy, won’t be pleasant. In fact, the only positive word to describe it is necessary,” said Barnes.

Georgia has seen revenues decline for six straight months, the most since the early 1990’s recession. Forecasters expect several more months of declines, which could give the state an annual drop in revenues for the first time since the Korean War.

Barnes recently directed state agencies to pare $215 million from their budgets, but on Tuesday, he asked lawmakers to approve $900 million in new road and school construction. Barnes hopes the new projects, which would be financed mainly through borrowing, will put Georgia’s economy on the road to recovery.

Budget cuts are also headline news in other states.

On January 7, 35 disabled Hoosiers gathered on Indiana’s Statehouse steps to greet legislators as they returned to open the 2002 legislative session. Indiana lawmakers, who are facing a projected $1.3 billion deficit, are looking for ways to save money. The wheelchair-bound protesters were present to make sure Medicaid isn’t viewed as a fat and easy target for program cuts.

The state’s governor, Democrat Frank O’Bannon, made his budget pitch to legislators two days later, proposing to balance the budget by raising the cigarette tax, increasing a tax on riverboat admissions, cutting various programs and eliminating some tax breaks for homeowners and businesses. He would save some Medicaid spending by tapping the state’s tobacco settlement.

It remains to be seen whether Indiana’s protesters will save their Medicaid benefits, but they might take a pointer or two from Illinois’ Robbins in his fight with Gov. George Ryan.

After two months of battling with Robbins, Ryan announced on January 8 the restoration of $24 million in Medicaid payments to hospitals, the same payments he had slashed in November.

“We realized these hospitals serve a vital need to these communities and that is why we’ve worked hard to restore these funds,” Ryan said in a written statement.

But in a move that illustrates the often zero-sum nature of budget decisions, Ryan will make up for the lost funds by further cutting Medicaid payments to doctors and dentists who treat needy patients.