Steve Gardes
State budgets imploding across America
There is smoke billowing out of many state capitals all across America today, as their budgets are facing historic squeezes that have resulted in their K-12 teachers striking for more pay — their university presidents pleading for no more budget cuts — their roads and bridges crumbling — and their counties and cities in crisis mode as they are being forced to rely on less state aid to balance their books. Where there is smoke, there is fire, and begs the question — why is America imploding before our very eyes?
The findings of a recent Moody’s Analytics study of a Wall Street Journal analysis of Commerce Department spending data concluded that “the more we stare at the data, the more we realize all roads lead back to Medicaid and state pensions.” When you take a close look at states from Louisiana to Connecticut, Michigan, Illinois, Kentucky, Oklahoma, and Arizona — it’s all the same story. Medicaid costs have exploded to the point of fiscal crisis that is fueling bitter state budget battles all across America. Twenty-two states faced budget shortfalls in 2017; ten states couldn’t agree on a new budget before the start of their next fiscal year. To save money states are cutting back on core services such as education, infrastructure, police and fire protection, and financial aid to cities. Many cities, in turn, are increasing fees on everything — while others, like Hartford, Conn., are teetering on the brink of bankruptcy.
Does any of this sound familiar?
The cash crunch is likely to get much worse as Medicaid’s annual cost, which was $595 billion in 2017, is projected to exceed $1.1 trillion in 2026. Medicaid covers about 20 percent of the population, and states pay about 38 percent of that tab. Translated for Louisiana, its annual Medicaid cost — which was $1.7 billion is 2008 — is $3.3 billion today — and is projected to be $6.1 billion in 2026.
Louisiana is choking today on its $3.3 billion Medicaid tab; $6.1 billion is sure death. You would think that our state legislature would be taking steps to address this fiscal death threat that is coming our way. Unfortunately, State Senate Democrats have killed in committee every proposal to reduce Medicaid spending — from nursing home legislation, to work requirements for able bodied adults with no children, to Medicaid fraud legislation. Democrats say that are protecting the poor and elderly; a closer look indicates they are only protecting those who are fraudulently claiming to be poor, those who are poor because they don’t want to work, and political donations from the Nursing home lobby.
Steve Gardes is a certified public accountant (CPA) and certified valuation analyst (CVA) with over 40 years of public accounting experience.