NJ and Pa. officials react to loss expected federal aid

For two states toiling to pass multibillion-dollar budgets despite recession-ravaged revenue, the news from Washington last week could not have been bleaker.

Just days before the deadline to approve spending plans for next fiscal year, Pennsylvania and New Jersey got word that Congress had scrapped a bill that would have sent a combined $1.4 billion to help them balance their budgets and pay federally mandated Medicaid obligations.

It is unclear whether, or when, that money will be approved through some last-minute political maneuver in Washington.

But it appears likely that the lack of federal money will force more painful cuts to programs, including mental-health and children's services, whose funding has already been eviscerated the last few years.

Not receiving the federal Medicaid funding "would be devastating," said Tim Allwein, assistant executive director of governmental and member relations for the Pennsylvania School Boards Association.

School districts in Pennsylvania, he said, would likely lose the extra money Gov. Rendell is proposing for basic education, leaving them to raise taxes or slash programs and teaching jobs.

Rendell had one word last week to describe the impact on the state budget should the Medicaid money be permanently axed: Armageddon.

He predicted the loss would result in 20,000 layoffs of state, county, and municipal workers, as well as public school teachers. Losing the money could also affect thousands of social-service organizations in the private sector that rely on state funding.

A total of 30 states had been counting on the federal money to help balance budgets. But on Thursday, the latest version of the funding measure did not get the votes it needed to survive a GOP filibuster in the U.S. Senate.

Pennsylvania was expecting $850 million and New Jersey $570 million.

Rendell said that without it, budget negotiations - already tenuous in Pennsylvania - could be derailed.

"We'd be back to ground zero," he said.

Rendell spokesman Gary Tuma said Friday that Rendell had been on the phone with governors from across the country to rally them to put pressure on Congress.

"The governor will do everything he can to make sure that funding" is approved, said Tuma, adding that several scenarios were being bandied about in Washington, including getting Congress to approve the money - or a portion of it - this summer.

Gov. Christie is taking more of a wait-and-see approach.

"The governor remains hopeful that the funding will be restored for states including New Jersey, in whatever form that ultimately ends up taking," said Kevin Roberts, a spokesman for Christie.

Roberts said the administration continued to have confidence in the New Jersey congressional delegation's advocacy for the state, and did not have a contingency plan to replace the $570 million shortfall that would be created.

"We'll cross that bridge when we get to it," Roberts said.

But New Jersey's Legislature is scheduled to vote Monday on a difficult $29.4 billion budget that would slash spending across every department, eliminate property-tax rebates for 2010, and cut funding for a wide variety of programs and services.

And a new shortfall of $570 million would require even more painful budget cuts.

In Pennsylvania, Rendell and the legislature are still negotiating.

The spending plan that they are discussing includes the $850 million, although Republicans who control the Senate have insisted that any budget deal must specify where cuts would come from if the money never materializes.

On Friday, Senate Majority Leader Dominic Pileggi (R., Delaware) agreed that losing the federal funding would likely result in serious cuts, but added: "People should put this in perspective. The money is less than 4 percent of our budget this year."

Steve Miskin, spokesman for House Minority Leader Sam Smith (R., Jefferson), said that Republicans weren't buying Rendell's doomsday scenario, and that "we can find ways, and we've proposed ways, to bring in savings without affecting programs that are truly needed."

Still, many organizations that rely on state money are worried.

Child advocate Cathleen Palm said many social-service providers had been told to prepare for massive cuts if the Medicaid money didn't come through.

Cuts that the Rendell administration has identified, she said, include a 50 percent reduction in state funding for rape centers and domestic-violence services, a 25 percent cut for child abuse and family strengthening programs, and elimination of drug and alcohol and homeless services.

"That's a pretty powerful illustration," Palm said.

Pileggi said it was impossible at this stage to predict where cuts would be made if Pennsylvania didn't receive the Medicaid money. He said it would be a matter of negotiation between the legislature and the governor's office.

But others said several years of tough budgets had left Pennsylvania with relatively few reserves to mine for extra cash.

And this being an election year - all seats in the state House and half in the Senate are up for grabs - legislators are wary of raising taxes.

Rendell has proposed a handful of new taxes this year, including one on the extraction of natural gas, but there is little support for them.

That leaves few options outside of slash-and-burn program cuts when looking for ways to make up for the lost money.

Cheryl Flanagan, executive director of Human Services Inc., a community mental-health center in Chester County, said no new taxes was guaranteed to mean service cuts.

"I don't even want to think about it," she said.

She added: "We're already down to the bare bones. And this at a time where demand for our services is going up."

Legislative leaders pushed hard throughout the day Saturday to reach an agreement on the new Pennsylvania budget, but they emerged in the evening short of an official deal.

"We made further progress, but we still have work to do," said Senate Majority Leader Dominic Pileggi (R., Delaware).

Leaders met in the Capitol, then moved the negotiations to the governor's residence. Talks broke off shortly before 10:30 p.m., but are scheduled to resume Sunday. Lawmakers emphasized that they still hope to meet the June 30 deadline to enact a budget.

"Things are progressing well," said Sen. Jay Costa (D., Allegheny), the ranking Democrat on the Senate Appropriations Committee. "June 30 is still very much our goal."

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