An estimated 900,000 additional job cuts will be added to the 15 million unemployed workers that are already idled. With the Senate's failure to break a Republican filibuster on the HR 4213, commonly called the Tax Extenders Bill, which included re-authorization of extended unemployment benefits, states have begun to plan for layoffs, massive layoffs.
46 states are projected to run budget shortfalls for the coming fiscal year and without the additional funding from the federal government, they will have no choice but to trim the state workforce:
State budget woes are a worsening drag on growth as the federal government tries to wean the economy from two years of extraordinary support. By Jan. 1, funds from the $787 billion federal stimulus bill will dry up. That money from Washington has helped cushion state budgets as tax revenue has plunged.
State leaders won’t be able to ride out this cycle the way they have in the past. The budget holes are too large. For the first time since 1962, sales and income tax revenue fell for five straight quarters, through December 2009, according to the Nelson A. Rockefeller Institute of Government at the State University of New York at Albany.
In Pennsylvania, which is confronting a $1.6 billion revenue shortfall, the elimination of the additional Medicaid financing would mean having to come up with $850 million, Mr. Rendell said.
Because the state has already made more than $2.5 billion in cuts since the fall of 2008, when the economy went into a freefall, Mr. Rendell said layoffs were inevitable, not just at the state level but the local level.
"It’s going to be huge teacher layoffs, money to our universities, money to the counties and cities, municipal workers, firemen," he said. "It would be enormously destructive."
Another critical provision of HR 4213 was additional funding for state Medicaid programs. States had already included those funds in their upcoming budgets, without that funding states will have a large hole in their budgets for the coming fiscal year:
A total of 30 states had already factored the additional Medicaid money into their budgets, according to the National Conference of State Legislatures. Only nine states have come up with contingency plans. Most states begin their fiscal years on July 1.
The additional federal aid for Medicaid was initially supposed to be $24 billion but was later scaled back to $16 billion in the bill that stalled on Thursday.
Making the situation more difficult for states, the recent passage of the federal health care overhaul bars them from rolling back eligibility on Medicaid, so the cuts would have to come from elsewhere in their budgets — and would likely include layoffs from different parts of the state governments, many of which have already seen big cuts — or by slashing things like payments to Medicaid providers.
"If they don’t fund this, it’s an unfunded mandate on the states," said Gov. Jennifer M. Granholm of Michigan.
Making up for the missing federal aid would add another half billion dollars to Michigan’s existing $1.5 billion budget shortfall, Ms. Granholm said on a conference call with reporters Friday.
Adding an additional 900,000 to the already swollen unemployment lines could stall a sputtering recovery in the near term and possibly plunge the whole nation into a full blown depression.
Senator Debbie Stabenow (D-MI) suggested that Republican stalling could have political motives and that they are playing a dangerous game of chicken with the live of millions of Americans already battered by the worst economy in generations:
"We don’t have even one Republican willing to help us break this filibuster," she said. "We have every anticipation that we will not have the votes. It’s become very clear that the Republicans in the Senate want this bill to fail.
"It's a cynical move, because it doesn’t serve them in terms of their elections this fall. They have decided they want this economy to fail, and they’re willing to take the country down with them," she said in an emotional conference call.
What’s the price of this political obstructionism? In addition to the millions of Americans who stand to lose unemployment benefits, a huge number of private and public sector employees will lose their jobs due to state budget cuts. Without federal help, states will have to pour more money to prop up Medicaid, forcing them to make cutbacks in other parts of the budget. As a result, Moody's chief economist estimates that 200,000 jobs could be axed without federal Medicaid support, and the Center for Budget and Policy Priorities puts the number as high as 900,000—jobs belonging to teachers, firemen, police, and social workers, among others.
While federal and state governments both contribute to Medicaid funding, the economic crisis has left the states in a terrible budget crunch. The federal government has tried to step in, devoting over 60 percent of the federal stimulus money to propping up Medicaid so states wouldn’t have to make other cuts. But that money is now set to expire, and the states have yet to recover from the effects of the recession to make up the difference.
In addition to the unemployment benefit and job losses, the cuts to social services could be brutal.
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