Another $1 billion in federal funds, amazingly, won't help the state's fiscal challenge
There were some seemingly incongruous announcements on public spending in the past three weeks. First, recent federal actions will funnel about $1 billion into the state’s coffers. Then, the state promptly cut Medicaid reimbursement rates to all providers to save money. Boy, our revenue picture gets stranger by the minute.
First the good news if you’re a fan of continued federal largesse. On August 10th, Congress approved additional federal Medicaid spending for the states. For North Carolina, the action meant about $343 million for Medicaid. The state legislature had already planned for the additional Medicaid spending in this year’s budget bill, but they had planned for more than $500 million. To make up the shortfall, the budget bill allows the state to cut the amounts paid to doctors, hospitals, mental health services and other providers. That’s how $343 million in Medicaid dollars leads to Medicaid spending cuts.
The August 10th Congressional action also sends about $300 million in federal funds to North Carolina for education. The question is – does the state use it to restore some of this year’s budget cuts, or bank it to mitigate next year’s projected budget hole of up to $3 billion?
Finally this week, the Secretary of Education announced that North Carolina would be a recipient of Race to the Top funding, which means another $400 million for education. The bulk of Race to the Top funds will be distributed to individual school districts for new and innovative programs. While the funding is great for many schools trying desperately to improve their student performance, the distribution doesn’t do a thing for the state’s general fund budget.
So that’s how $1 billion in federal funds, while certainly a boost to the state coffers, does not do much to dig the state out of its projected fiscal hole. Is that enough state budget whack-a-mole for today?
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