Jobs, Bailouts & State Budgets

The House of Representatives rushed back to Washington this week to send $26 billion in budget relief to beleaguered state capitols by extending stimulus payments for Medicaid and state education programs. The funding arrives at a critical juncture, with the jobs of hundreds of thousands of teachers, police officers, and other public employees on the line. While support for the measure is not universal in state capitols, Congress' action will come as welcome relief to the 23 states that made high stakes bets that the funding would come through in time to meet their 2011 fiscal year budget needs.

From Topeka to Tallahassee, states remain in the grips of the worst budget crisis since the Great Depression. Although nearly half the states included the extension in their budgets, it was not always an easy decision. In Iowa and Kentucky, the governors' proposed budget did not include the extension, but the legislature added it back in before enacting. The opposite was true in South Carolina and Massachusetts, where the governors in those states vetoed the assumption that was included by the legislature. In Georgia, fearing that Congress would not approve the extension, Gov. Sonny Perdue ordered a 4 percent cut to state agencies starting in August, exempting only K-12 education. The Atlanta Journal Constitution reports the cuts will affect agencies that hand out driver's licenses, educate college students, and run parks and prisons, as well as health care programs that cover more than one million Georgians.

Despite the dire nature of state finances, some state leaders have expressed concerns about having Washington ride to the rescue of state budgets. While a broad coalition of state leaders, including 45 governors, called for Congress to approve the extension, Texas Gov. Rick Perry has expressed his concern that the bill would bind the state legislature to maintain education spending in future years. In addition, the heated debates over bailouts versus jobs that have been heard on the House floor are just as pointed in many state legislatures.

While the debate we have witnessed this week may seem unique to the wired media environment and globalized economy of 2010, the question of whether states should receive a helping hand from the federal government was just as contentious the last time we faced a crisis of these proportions. During the Great Depression it was a Republican governor, Pennsylvania Gov. Gifford Pinchot, who led the charge for more federal aid, despite dissenting voices from state leaders of both parties who feared that federal support would come with strings attached.

Congress' action this week won't end the debate over the merits of federal support for state budgets, nor will it prevent states from having to make more difficult choices down the road. However, for the 23 states that have been diligently waiting for a puff of white smoke from the Cardinals of the Congress, this is very welcome news.