31 states lack the funds for health, welfare costs

January 03, 1991|By Paul West | Paul West,Washington Bureau of The Sun

WASHINGTON -- Four-fifths of the states do not have enough money in their budgets to cover an "exploding" demand for health or welfare assistance to the poor, officials said here yesterday.

The unexpected increase in social welfare spending is complicating efforts by state officials to make ends meet as revenues dwindle. At least 31 states, including Maryland, project shortfalls collectively totaling more than $11.6 billion this year.

In releasing a 50-state survey, officials said that the fiscal squeeze is already as severe as the one caused by the 1981-1982 recession. The crisis may worsen, they added, if the economy fails to recover by midyear.

"If that does not materialize, it could get considerably worse," said Gerald H. Miller, director of the National Association of State Budget Officers, which conducted the survey.

The major cause of the fiscal dilemma is a falloff in tax revenue, especially sales and corporate income taxes, brought on by the recession. The downturn caught states with relatively little money in reserve, unlike the last recession, which they began with a 9 percent budget surplus.

At the same time that revenues are dropping, the costs of welfare assistance are going up sharply.

State spending for Medicaid, the government's primary program of health care for the poor, is "exploding" by 22 percent to 25 percent this year, said Raymond C. Sheppach, director of the National Governors' Association. Since 1980, Medicaid spending has risen from 9 percent to 14 percent of all state spending, according to the NGA.

Welfare caseloads typically increase in a recession, as growing numbers of families and individuals seek government help. But the federal government is aggravating the problem, say state officials, by ordering states to offer health benefits without providing the funding to cover the increased cost.

"A lot of states just can't handle any more cost-shifting," said Mr. Sheppach.

The governors' association, which is seeking an end to the so-called federal mandates, estimates that states have been burdened by $5.5 billion in added Medicaid costs brought on by changes in federal nursing home regulations and requirements from Congress to provide additional health screening, testing and treatment services for children.

A total of 40 states report that spending for Medicaid or for Aid to Families with Dependent Children will exceed the budgeted amount for this year, according to the survey of states. Of that number, 23 states, including Maryland, expect overruns in both Medicaid and AFDC.

In order to cover these rapidly rising costs, states are likely to reduce benefits or dig deeper than expected into funds that would otherwise go to education, mental health, transportation and other programs, Mr. Miller said.

The survey found that 28 states already face budget shortfalls this year and at least three others are expected to join the list. Hardest-hit are the Northeastern states, which were among the first to go into recession, but the budget troubles are spreading to the South and West.

None of the states facing budget problems is currently giving serious consideration to a tax increase, the survey found. Most states are turning first to hiring freezes, cutbacks in programs, layoffs and furloughs of employees and internal shifts of state funds.

At the time the survey was conducted, in December, the states had a combined shortage of $9.6 billion, but its authors told reporters that the figure has already gone up. A recent survey by The Sun found that the total had climbed to at least $11.6 billion.

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