Advertisement

Archive for Sunday, July 14, 2002

Governors confront depressed economies

States’ leaders pin much of the blame on rising health costs

July 14, 2002

Advertisement

— The nation's governors opened their summer meeting Saturday with an eye toward shoring up faltering state economies by taking aim at their biggest budget albatross: the mounting cost of health care.

"Last year was pretty trying for the nation's governors," Michigan Gov. John Engler said as he launched the four-day National Governors Assn. conference.

"We've had to battle declining tax revenues ... and at the same time there's been an explosion in health-care costs. Boy, are they ever back," said Engler, the Republican chairman of the association.

Thirty governors are meeting in Boise under some of the worst economic conditions their states have seen. More than 40 states suffered budget shortfalls of $40 billion to $50 billion in the last fiscal year, leading to deep cuts, depleted emergency funds and some layoffs.

Despite signs of a gradual national recovery, the states' woes are expected to persist well into the current fiscal cycle.

Their biggest problems are the ballooning cost of prescription drugs and Medicaid, the state-federal health insurance program for the poor. Medicaid spending jumped 13 percent in the last fiscal year and makes up 20 percent of state budgets.

Governors will consider a proposal that calls on Congress to pick up a greater share of the Medicaid bill. A Senate measure would provide an additional $8.9 billion in Medicaid money to states over the next 18 months.

"What we're looking for is to get through this current downturn without making dramatic and really hurtful cuts in education and basic social services," said Kentucky Gov. Paul Patton, the association's Democratic vice chairman.

The chief executives also hope to increase affordability and availability of prescription drugs under Medicare, the federal health insurance program for the elderly.

The House last month approved legislation that would spend $320 billion over 10 years to provide a prescription drug benefit for senior citizens. The measure would gradually federalize drug costs for about 7 million seniors eligible both for Medicare and Medicaid, meaning a possible $38 billion in savings for the states.

However, governors acknowledged that the likelihood of final action on either front is uncertain while the White House is facing its own budget problems.

The Bush administration said Friday the government will run a $165 billion deficit in the federal fiscal year ending Sept. 30. That's $59 billion worse than the administration estimated in February.

"The same things that are causing those deficits in Washington are precisely what's responsible at the state level for the problems we have, but there's one difference," Engler said. "We've got to balance state budgets."

He said he was confident that President Bush would support the governors' priorities, but some Democratic chief executives were less sure.

"This is a serious issue that the states can't deal with, and Congress and the president need to focus on it," Alabama Gov. Don Siegelman said. "But you don't do that by running around the country campaigning on partisan politics. Unfortunately, this is an election year."

Other topics on the governors' agenda include homeland security, air quality and expanding economic development.

And while it's not likely to dominate any public discussions, the subject of corporate fraud also has chief executives weighing in.

Engler said that while the governors support legislation that aims to crack down on corporate wrongdoing, he is worried the scandal could overshadow the states' fiscal concerns.

"When we're talking about Washington and fighting for time on the national agenda, you think about how much time this is taking," he said, adding that the goal of this meeting is to ensure the states "don't get left at the altar."

Commenting has been disabled for this item.