WASHINGTON (Reuters) - A measure introduced on Tuesday in the U.S. Senate to help states pay for healthcare is already having a rocky time, and governors from across the country are rallying to try to get it passed.
Under the $863 billion U.S. economic stimulus plan passed last year, the federal government's payments to states for the Medicaid healthcare program for the poor were increased, with extra funds going to those with high unemployment.
The boost will end in December. If it does, many states will have to lay off thousands of workers, said a group of governors on a conference call with reporters on Wednesday. They are pressing to extend the boost by six months.
If Washington state does not get the extra funds it expects -- $480 million, it will have to lay off 6,400 employees, said the state's governor, Chris Gregoire.
Washington has already cut program funding to deal with a collapse in revenue caused by the recession that began in 2007, she said. The next cuts will have to be employees.
Gregoire said the layoffs would have a "bounceback" impact as the newly unemployed government workers would apply for jobless benefits and also, possibly, Medicaid, further stressing the state's finances.
Pennsylvania Governor Ed Rendell that if the Keystone State does not receive the $850 million it expects, the government will lay off 20,000 people.
Because 63 percent of the Kansas budget is dedicated to education, any cuts the state makes will be at schools, said Kansas Governor Mark Parkinson. Up to 4,000 Kansas teachers will lose their jobs without the extra $130 million.
Currently, the country's unemployment rate is 9.7 percent. In May, state and local governments cut more than 27,000 jobs.
More than half of the states included extra Medicaid funds in their budgets for fiscal 2011, which for most begins in less than a month. Without the boost, they will have to make cuts or raise taxes to keep their budgets in balance.
The measure, which is estimated at $24 billion, has been attached to other pieces of legislation over the last year. Gregoire and Parkinson said their states decided to add the extension in their budgets after the measure passed the U.S. House of Representatives twice and the U.S. Senate once.
It was added to a jobs bill introduced in both houses of Congress last month in order for it to quickly make it to the desk of President Barack Obama. But during House negotiations, the extension was stripped out of the bill.
The measure must now survive Senate negotiations, which are expected to last until next week. After that, it must make it through the conference when the Senate and House combine their bills into a single piece of legislation.
Democratic Sen. Ben Nelson has expressed concern about the large amount of spending the measure requires, noting that there is no revenue raised to cover the amount. Fiscal conservatives in Congress, including some Democrats, are worried about expanding the $1.4 trillion deficit.
"I understand the need to pay for and restrain federal spending. I support restraining federal spending," said California Governor Arnold Schwarzenegger, a Republican, in a letter to the state's Congressional delegation last week.
"But cutting the only funding designed to help states maintain the very safety net programs Congress mandates us to preserve will have devastating consequences."
Rendell said he is worried about members of the House yanking the measure in the conference committee meeting.
Economist Mark Zandi joined the call to push for the extra funds, saying the nation's "tentative" economic expansion after the deepest recession since the end of World War Two will be put in jeopardy if the measure fails.
Zandi said economic growth will not accelerate in the second half of the year and fiscal pressures at state and local governments will be a significant drag on any progress.
Zandi urged Congress not to worry about paying for the measure now.
"In all likelihood the national economy will not backtrack into recession," he said. "But the odds are too high that I could be wrong."
(Additional reporting by Kim Dixon in Washington and Jim Christie in San Francisco; Editing by James Dalgleish)
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