NCPA - National Center for Policy Analysis

State Budgets Tighten

March 13, 2001

Strictly speaking, Texas doesn't have a budget crisis; the legislature started its 2001 session with a surplus. But the fight over cash has already begun, because the state must use its surplus to meet mandatory requirements, such as larger school rolls and Medicaid demands.

As state surpluses shrink, Texas isn't alone.

Lawmakers in Arizona, Iowa, Michigan, Missouri, North Carolina South Carolina and Virginia all started legislative sessions facing tight budgets. Arizona Gov. Jane Hull has implemented a hiring freeze, and Alabama Gov. Don Siegelman has faced protests over proposed spending cuts, including university appropriations.

One major reason for the belt tightening across the country is rising Medicaid costs.

  • Rather than just serving the poor, Medicaid has become the de facto long-term care policy for many middle-class Americans.
  • Medicaid has become the source for prescription drugs and nursing home care for many elderly and disabled patients.
  • In Georgia, for example, Medicaid expenditures on drugs have doubled since 1995, while Texas may need an additional $1 billion to meet Medicaid demands.

Interestingly, however, a group of governors recently proposed a plan that would add to people to their Medicaid rolls. They suggested that Washington let them offer families who exceed the program's income guidelines a modest, targeted benefit plan. That would allow states to reduce the number of uninsured, yet observers question how exactly they would finance the new enrollees if a number of states already face Medicaid problems.

Source: William McKenzie, "Many States Face Tough Budget Choice," Dallas Morning News, March 13, 2001.


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