Medicaid vs. education

A little-noticed aspect of Washington’s health care reform is the impact it will have on state spending. In this era where states find themselves behind the budgetary 8-ball because revenues constantly fall short of expectations, governors worry that assuming their share of the cost for an expanded Medicaid program could force them to make unpopular cuts elsewhere or send their treasuries spiraling toward bankruptcy.

So far, states have weathered these hard times in no small part due to the generosity of Uncle Sam, with a large portion of stimulus funding spent thus far devoted to firming up states financially. But the red ink will remain as long as the economy shows a lack of growth and revenue streams once thought reliable – such as “sin” taxes on tobacco and alcohol, increased opportunities for state-sponsored gambling, or additional levies on the wealthiest taxpayers – fail to bear monetary fruit. Much as governors hate to make hard decisions, eventually there will be a day of reckoning in the area where states spend the largest amount of money – education.

According to figures from the National Association of State Budget Officers, in 2007 the percentage of state spending on Medicaid and K-12 education was exactly the same: 21.2% of their total expenditures went to each of these two components, totaling about $3 for every $7 states spent overall. However, if you only count state general fund expenditures, the K-12 education share leaps to 34.5% while Medicaid drops off to 16.9 percent. Add in higher education and according to the NASBO figures nearly half of state general fund dollars go toward education. Thus one would expect at least some necessary cuts to come out of that large proportion of state spending, especially when states – unlike the federal government – have to balance their budgets.

Yet on the state level education seems to be a “third rail” issue: touch it and you’ll be politically dead. In certain states the amount of education funding has been mandated by court order, but all states have a politically powerful lobby best known as the teachers union and those who face election rarely dare to do battle with them.

It’s for this reason state governors worry about the upcoming budget strain that expanding Medicaid on a federal level may provide and why they look to Uncle Sam to pull them out of the fire. This dependence comes with big risk, though, because no one can truly gage the impact “free” health care will have on the bottom line. However, governors are quite aware of the political cost of making cuts to education.

There’s a solution few in Washington dare to talk about, though. While there are those in Congress who pay lip service to decreasing the size and scope of federal government, no one is forcefully advocating an obvious solution: allow the states to tailor their own programs and slowly back the federal government out of both the health care and education realms.

In a world where the status quo doesn’t seem to work anymore, states which simply pass their overspending on to the federal coffers and expect continual bailouts fall short of the expectations of their taxpayers who are screaming, “Enough!” The people have seen the result of increased federal involvement in state affairs over the years, so governors who put off the hard choices they have to make by going to the federal trough and seem unwilling to make cuts won’t get a lot of sympathy.

Governors should instead be pushing for the chance to govern for themselves, not be slaves to a Washington master.

Michael Swartz is a Liberty Features Syndicated writer.

The twelfth in my series for LFS, this cleared back on October 15th.