States Counting on Second Stimulus Program to Bail Them Out

Wednesday, 19 May 2010 01:34 PM

By: Dan Weil

States have been able to use the money from last year’s $787 billion stimulus package to avoid facing up to severe spending cuts.

Now that the spigot is coming to an end, states are hoping Congress will extend some of the stimulus measures, particularly the increased federal funding for Medicaid.

Both the Senate and House have passed a six-month, $25 billion Medicaid extension, but they must figure out a way to pay for it before they can send it to President Barack Obama.

At least 21 states already have included the extension in their fiscal 2011 budgets, according to the Center on Budget and Policy Priorities, CNNMoney.com reports.

If the measure doesn't become law, these states are really up a creek and will have to make even deeper budget cuts, Nick Johnson, director of the center's state fiscal project, told the website.

"You're seeing states now are coming to that point where they will have to make additional cuts or find new sources of revenue for fiscal 2011 and that will continue in fiscal 2012," Todd Haggerty, policy associate at the National Conference of State Legislatures, told CNNMoney.com.

Experts already have begun to warn of a bubble in the municipal bond market.

And, “Now that stimulus cash is running out, states are falling even more passionately into the arms of all-too-willing debt markets,â€