Payrolls declined in 35 states, Bloomberg reports, citing US Department of labour statistics released today. Unemployment increased in 20 states. New York, Florida and Minnesota saw the most firings. The good news came from Michigan, which saw unemployment drop 0.7%, thanks in large measure to an improving auto industry. As states and municipalities wrestle with hard-to-close budget deficits, they are desperate for new sources of revenue. The best sources of revenue would come from people who are back at work, paying taxes and not consuming unemployment benefits. The fact that 70 per cent of the states are shedding jobs, not adding them, makes state and municipal governance that much more difficult.
In the absence of job creation, governors will have to target big ticket items like Medicaid to balance their budgets. To make matters more difficult, Federal money to help states pay for Medicaid cost hikes runs out on June 30 of this year. Caught in the “unfunded mandate” squeeze, states are hoping against hope that the economy improves, employment rises (and fast) and revenues flow to bridge the budget gaps.
“The biggest problem in the budget is Medicaid,” Governor Chris Christie (R-NJ) told Bloomberg. “We’re in a situation this year where we lose $900 million in federal funding for Medicaid but are being told that we can’t reduce benefits. In times of flat or declining revenue you run out of options quickly.”
Gov. Christie maintains that he is not thinking about bankruptcy — or some equivalency — as an option, at least for the moment. But if things don’t pick up, he will not only “run out of options quickly,” he will be left with one option (some equivalent of bankruptcy) that he never wanted or imagined he would need.
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