Safe you Finance

For at least 30 cash-strapped states counting on federal stimulus money, the news was a stunning blow: A deficit-weary Congress had rejected billions in additional aid, forcing lawmakers into a mad scramble to balance their budgets.

Now, with a new fiscal year just days away in most states, many governors are proposing to make up for the shortfall with tax increases, cuts in essential services and layoffs of thousands of public employees.

The federal stimulus program enacted last year is set to expire in December. Much of the money goes to states to provide unemployment insurance and to help offset cuts to education, health care and public safety brought on by the recession.

Congress was poised to extend some funding to states through June 2011, including $35.5 billion for unemployment benefits and $16 billion for Medicaid. But the measure died in the Senate earlier this month, blowing a hole in the states’ budgets and bouncing thousands of unemployed workers off the rolls.
The stimulus money represents just a fraction of the help states typically receive from the federal government, but it’s the kind of targeted relief states count on during a poor economy, when revenue is falling.

Without the extra money from Washington, states will be forced to divert cash from other programs to shore up Medicaid, which has swelled to a record enrollment during the economic downturn empire payday loans.

The legislatures in several states have already adjourned for the year, but some will have to return to revise their budgets if the expected federal money does not materialize.

A few states that counted on additional stimulus money to balance their budgets drafted contingency plans in case the money did not come through.

In Massachusetts, the loss of an estimated $687 million in federal funds forced budget negotiators to come up with two versions of the state budget — one that included the money and one that did not.

Some states, unwilling to count on the federal assistance, crafted budgets that did not depend on extra assistance from Washington at all.

"We assumed conservatively that there would not be a bonus check," Indiana Gov. Mitch Daniels told The Associated Press.

"It would have never entered our mind to put funny money like that into the budget."

Source