Congress has approved and President Obama has signed into law a bill that will send $430 million to Minnesota to help pay for health care and to save public school teachers’ jobs. The breakdown is $167 million for education and $263 million in additional funding for health care provided by Medicaid.
As we have frequently blogged, federal aid to the states is an effective way to help support the economic recovery, as it prevents deeper state budget cuts and related job losses, both of which are a drag on the economy. The nonpartisan Congressional Budget Office has found that temporary federal assistance to the states is, in fact, one of the most effective measures the federal government can take to create jobs and increase demand in the economy. The extension of the federal matching rate for Medicaid is paid for, or offset, by reductions in other spending so that it will not increase the federal deficit.
Minnesota has already received nearly $1.3 billion in additional federal health care dollars thanks to an increase in the federal share of funding for Medicaid in the economic recovery act, funding that has protected health care for thousands of Minnesotans and has saved jobs in the health care sector. The original increase in federal funding for Medicaid will expire December 31, 2010. The new legislation extends the enhanced federal Medicaid funding for an additional six months, through June 2010.
The new legislation also includes additional federal support to local school districts to prevent imminent teacher layoffs. The funds must be used to preserve elementary and secondary education jobs. The U.S. House Committee on Education and Labor estimates that Minnesota could receive $167 million that would be used to fund approximately 2,800 teacher positions. The additional federal aid for education comes with maintenance of effort requirements that Minnesota must keep K-12 and higher education spending at 2006 levels or maintain K-12 and higher education spending at their 2006 share of total revenues.
As it stands, approximately $240 million of the $263 million in new Medicaid money will flow into the state’s general fund. This creates a cushion if a new deficit opens up in FY 2011, and could reduce or eliminate the need for short-term borrowing or additional budget cuts. If not needed to fill a budget gap in FY 2011, these additional federal Medicaid dollars could be used to improve access to health care for struggling Minnesotans.
The remaining $23 million goes in part to enhanced payments to the MinnesotaCare program and in part to counties to reimburse them for small Medicaid contributions. The state will have to spend a small amount of money (probably less than $10 million) to meet federal maintenance of effort requirements to get the Medicaid money.
The bill passed the U.S. Senate last week by a vote of 61 to 39, with both Minnesota Senators Amy Klobuchar and Al Franken voting “yes.” On August 9, the U.S. House of Representatives passed the bill by a vote of 247 to 161. Representatives Ellison, McCollum, Oberstar, Peterson and Walz voted “yes” and Representatives Bachmann, Kline and Paulsen voted “no.”