Despite growing signs that Congress is finding it harder to spend with reckless abandon, New York State budget negotiators were counting on getting $1 billion in added Federal Medicaid Reimbursement Percentage (FMAP) aid under the so-called “jobs bill” expected to move through the U.S. Senate today.  Thursday.  Except … the bill didn’t move.  It was withdrawn, by Majority Leader Harry Reid (D-Nevada) before coming to a vote, once it became apparent that it wouldn’t garner enough votes to pass on its third try.

From Politico:

In stepping back now and pulling the bill, Reid made clear that he isn’t expecting a quick return.

The Senate will go home at the end of next week for the July Fourth recess and then return to what many expect will be a debate on energy policy. The long August recess follows, and, absent some breakthrough, Reid seems prepared to wait until after Labor Day before trying again.

By the way, the latest version of the bill the one Reid withdrew called for less FMAP money than the original.  In an effort to attract support from Republican moderates like Sen. Susan Collins of Maine, “$24 billion in new state assistance to pay Medicaid bills was scaled back to $16 billion and then phased out, as Collins had suggested, and fully paid for with offsets,” Politico noted.

In other words, the $1 billion originally expected by New York was really going to be more like $660 million.  And now, it may be three months before it’s clear that any of the dough will ever materialize.   Chalk it up as another example of why the entire Obama-era approach of providing temporary aid to states (on the Keynesian grounds that austerity measures will strangle the recovery) has actually tended to make a bad situation worse in places like Albany, where avoiding tough budget decisions is an art form.

Someone might want to convey this news to Governor Paterson and Democratic legislative leaders, who claim they are within striking distance of a budget deal to beat Paterson’s Monday deadline.

By the way, the newly agreed-upon New York City budget also assumes an increase in FMAP from the same federal legislation.  But the city budgeted its share much more conservatively, spreading a projected $600 million in added FMAP over three years, with $279 million included in the notional 2011 fiscal plan.  Mayor Bloomberg still has billions in reserve; for the city, unlike the state, a reduction in federal aid won’t spell the difference between red ink and redder ink.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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