While much has been written recently about the federal budget deficit, states across the country are continuing to struggle under budget crises of their own. Most states are required by law to balance their budgets. While the federal government often carries large deficits to finance its programs and priorities even when revenues are not sufficient, this is usually not an option for state legislatures. Often, the resulting deficit financed federal policies are responsible for making state fiscal situations worse. According to a report from the Center on Budget and Policy Priorities, shifting health care costs, federal tax cuts, federal restrictions on state taxing authority, and unfunded mandates such as No Child Left Behind have all placed added strains on state budgets, and are partially responsible for the massive deficits currently seen in some states today. In fact, the National Conference of State Legislatures has reported that “despite an improving economy, states still must close … a $36 billion [collective budget] gap in the fiscal year 2005.” These state deficits are not without consequences. As state legislatures convene early in 2005 to construct their budgets, many will be weighing the option of cutting government services in order to bring budgets into balance. For example, significant cuts are currently being debated in Tennessee, New York, California and Florida. Cuts to programs in these states give some relief to soaring deficits, but they will have a disproportionate negative effect on state residents, especially at the lower end of the economic scale. Tennessee is currently experiencing budget trouble because the Medicaid program makes up such a high percentage of the state’s budget that the program is becoming unsustainable financially. Medicaid costs have increased nationwide by 63 percent over the past five years and that increase has put a strain on state Medicaid budgets across the country. Tennessee Governor Phil Bredesen (D) recently announced he is cutting TennCare, one of the nation’s most innovative health programs for the working poor. TennCare is the state’s Medicaid program which covers nearly 25 percent of all residents and 40 percent of all births. The program provides health insurance for many of the state’s working poor. Under Bredesen’s proposed cuts, 323,000 low-income adults will be removed from the program, and an additional 400,000 will see services limited. In addition, law enforcement officials are predicting many of the mentally ill patients who are cut from TennCare will cause added strains on the criminal justice system. This will not increase the burden for other programs in the state, but it will also mean Tennessee has inadvertently chosen to embrace incarceration over treatment or rehabilitation – not necessarily a sound financial decision. The reason for this massive cut is that Tennessee cannot afford the government health plan; according to the Washington Post, Bredesen says the expanded Medicaid program is devouring the state budget. Increases in costs to the Medicaid program threaten to cut into funds for other state programs, like education. By cutting Medicaid, however, the state will also lose $1.1 billion in federal matching funds. Health care advocates nationwide see this as one step in a growing trend of states being forced to scale back government funded care. New York is also experiencing budget difficulties that may be resolved through cuts to health programs. Medicaid is the state’s biggest and fastest-growing spending category, and Gov. George Pataki (R) is calling for cuts in planned growth to the $44.5 billion program. Pataki has proposed slashing $1 billion from the state’s Medicaid program. Even though this cut would technically have 2005 spending levels up over last year’s, benefits for poor and working class New Yorkers would be sharply reduced. The state’s insurance program for the working poor, called Family Health Plus, currently serves 340,000 people. While some political analysts and government aides are noting this proposal is only intended to trim the current spending, others are more fearful of the consequences, especially for those 340,000 people. Kenneth E. Raske, the head of the hospital association, said in the statement that “the magnitude of these proposed cuts is unbearable, and if these cutbacks actually took place, the care of all hospital and nursing home patients would suffer.” Luckily, Pataki still has to get his plan through a legislature that, according to the New York Times, has “deep political investments in the Medicaid status quo.” In California, Gov. Arnold Schwarzenegger (R) has submitted a $111.7 billion budget proposal that freezes spending on schools, highways, and the poor. He is freezing education spending and instead proposing specific incentive proposals California Teachers Association President Barbara Kerr called “a smoke screen for the governor cutting funding and breaking his promises.” Schwarzenegger is trying to avoid raising taxes, and instead is focusing on spending controls with this year’s budget. Even though California is running a $9.1 billion deficit, the governor refuses to consider taxation as a way to help balance the budget. As a result, he is facing opposition from Attorney General Bill Lockyer, and State Treasury Secretary Phil Angelides, and the state legislature in passing his budget. Assembly Speaker Fabian Nunez (D) stated, “I will not support a budget that starves Californians of the services that they depend on.” For more on the situation with California’s budget, read this article. In perhaps the most egregious example, Florida Governor Jeb Bush (R) is proposing a change to the state’s Medicaid program that would make Florida the first state to allow private companies to decide the scope and nature of services in the state run program. Under the plan, Medicaid recipients in Florida would be allotted a sum of money to purchase their own private health insurance. This decision will have profound implications for the state’s 2.1 million Medicaid participants as it essentially will work to privatize the Florida system and move people into private managed care programs. This change is being promoted by Bush as a way to cap the costs of the state’s Medicaid program. In the report “Facing the Fiscal Crises in State Governments: National Problem, National Responsibilities,” Robert Behn and Elizabeth Keating state, “the existing, built-in financial demands of the states’ current responsibilities are growing more rapidly than are revenues.” Instances such as California’s $9.1 billion deficit are due not only to irresponsible budgeting, but also to this tension between output and revenues. States across the country, including California, Florida, New York, and Tennessee, are being increasingly squeezed because the federal government is not allocating as much money to them as in the past, yet at the same time are expecting them to fully fund the programs and policies passed in the U.S. Congress. The result, not surprisingly, is that state politicians – many of whom are scared or unable to raise taxes – end up making cuts to programs instead. This leaves people, many of whom are dependent upon government services, even more vulnerable. There are other alternatives to slashing low-income Americans from their health insurance and other government supports. In Indiana recently, Gov. Mitchell Daniels (R), a former Bush administration budget chief, asked for an income tax increase on the state’s wealthiest citizens, those who make over $100,000 annually. Daniels is quoted as telling the state legislature, “With this money, we will achieve a balanced budget... and bring our savings account to a level near the minimum standard of prudence. Let’s each agree to do a thing or two we’d rather not do, temporarily, so that the state we all love might get back on its fiscal feet.” Mitchell’s fiscally responsible and progressively oriented actions spreads the burden of providing for those who have the least across the entire population of Indiana – rather than letting the poor shoulder the burden. His example is one that could easily be followed by other governors and even the president himself in his FY06 budget. Unfortunately, it seems as though Daniels is alone in his commitment to preserving essential services for the poor.