June 22, 2010 07:29 PM UTC

Budget Pain Set to Worsen

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• by: Colorado Pols

The latest chapter in a long, sad story, told by the Durango Herald’s Joe Hanel:

The good news: State government should be able to make it 10 more days, to the end of its budget year, with money in the bank.

The not-so-good news: In August, Gov. Bill Ritter will have to declare a fiscal emergency to propose an additional $75 million in cuts.

And the bad news: The end of the federal stimulus bill will require a predicted $687 million to be cut from the 2011-12 budget – nearly 10 percent…

A slightly worse forecast by Ritter’s budget office means Ritter will unveil another $75 million in cuts in August – a relatively modest amount compared with the $1 billion shortfall last year.

Ritter said more tough choices lie ahead, but he will propose “balanced” cuts that are fair to the whole state.

“While the worst is behind us, families, small businesses and many of our industries have a challenging climb ahead of them,” Ritter said.

The slightly improving economy would have been enough to keep the state in good shape in 2011, if Colorado had received the same federal stimulus payments as it did this year.

But stimulus funds are running out well ahead of the ongoing need; and the situation is potentially compounded by the failure of Congress last week to pass widely-expected extensions on higher health reimbursements to states, which bridged a considerable portion of Colorado’s budget gap in the last two fiscal years. The funds for Medicaid reimbursement helped preserve existing funds all over the budget. We warned last year that the stimulus funds for state budget stabilization in general were some of the most important to its success, and were being undercut in final negotiations–this is where some of that discrepancy was being made up.

By next year, unless Congress acts, both failures will be painfully apparent. FOX31’s Eli Stokols:

“Nothing is off the table,” Ritter said Monday. “But so much of this will depend on this decision that congress is going to make on whether to extend the FMAP relief by another six months.”

And there, at the mention of “FMAP” dollars  federal matching funds for Medicaid — is where the plodding freight train that is Colorado’s staggering state budget gets frighteningly close to a devastating financial cliff. It’s also where the needs of nearly 30 states, all facing devastating financial shortfalls, meet the political pressures of a difficult election season.

Those states have written their 2010-11 budgets on the assumption that Congress would approve an extension of an enhanced federal match for Medicaid as part of an “extenders” bill to augment the $787 billion in stimulus funding passed in February 2009.

But as November nears, that bill’s passage is looking less and less likely, as a number of congressional Democrats are getting cold feet about approving additional deficit spending items.

Video report after the jump.