The stimulus and the budget

State Rep. Jim Dunnam, who is the chair of the ad hoc committee that is charged with disbursing federal stimulus funds, gave an update on their proceedings. Among other things, the federal money may free up some state revenues.

Normally, the federal government pays about 60 percent of Texas' Medicaid expenses, a contribution known as the Federal Medical Assistance Percentage (FMAP). Under the stimulus law, the federal government would pay around 66 percent of the expenses, which would, according to Health and Human Services commissioner Albert Hawkins, free up about $4.6 billion in general revenue. Some of it would go to make up for the Medicaid shortfall, but the rest would be free to be appropriated.

The stimulus law says a state is not eligible for in increase in its FMAP funding if any of the increase ends up, directly or indirectly, in a state's reserves or rainy day fund.

"There's a question as to what that means," Dunnam said. He said the committee did not yet know whether maintaining the rainy day fund at its current level would result in the feds revoking the FMAP funds. At the beginning of the session, comptroller Susan Combs reported the state had a $9.1 billion budget shortfall, and it seemed to make ends meet, legislators would have to dip into the state's reserves.

"It was very, very clear that if not for the stimulus money that we were going into the rainy day fund," Dunnam said.

The committee hasn't discussed what to do with the freed general revenue, but it seems like Dunnam would be in favor of spending it. He said the stimulus funds were intended to stimulate the economy. If Texas were to use federal funds where state funds are usually spent, and keep state funds, then, he said, "you haven't complied with the intent of the act."

I feel confident there will be some pushback on that, mostly from Governor Perry. Which is why the more that he can be reduced in influence, the better. I hope that the end result of all this is a realization that we do have more money in the budget than we first thought, and should re-evaluate our assumptions about how we appropriate accordingly. If that means it takes a little longer than usual to bring HB1 to the floor, then so be it. Better to get it right than to rush.

Posted by Charles Kuffner on March 02, 2009 to Budget ballyhoo