States prepare for difficult fiscal year

WASHINGTON, Dec. 31 (UPI) -- State lawmakers are gearing up for a tough year in 2003 as legislatures struggle to close an estimated $17.5 billion budget gap during the next six months with no clear idea how they will offset it.

"State legislators will have to make important decisions on health care, education, election reform, sentencing and homeland security issues this year," said William T. Pound, executive director of the National Conference of State Legislatures. "But every issue state lawmakers debate this year will be influenced by the budget."

State legislatures are waiting for the U.S. Congress to reconvene next month and complete its work in the 2003 federal budget. Still, lawmakers have little idea how they will overcome serious funding deficits. NCSL officials said so-called rainy day funds set aside by states during the boom-time 1990s are dwindling.

The National Conference of State Legislatures on Monday said states would be working to erase a $17.5 billion shortfall between now and the end of the fiscal year in October 2003. Two-thirds of the states report revenue collections falling below forecasted levels in the early months of the fiscal year.

The NCSL, a lobbying group for state lawmakers,released its forecast of top issues that local jurisdictions will be facing in the upcoming year, all of which echo President George W. Bush's domestic agenda which he vowed to tackle as part of his blueprint to return Americans to work and stimulate an ailing economy.

Bush on Tuesday called the economy "strong" and "resilient." With the nation facing a possible war with Iraq, Bush said the economy could not afford another terrorist attack and vowed to protect the American people.

"Obviously, so long as somebody's looking for work, we got to continue to make it strong and resilient," Bush said from Crawford, Texas, where he is spending the holiday on his family ranch.

Education, Medicare, election reform, homeland security, welfare reform and crime are among the budget priorities that states will be struggling to fund as lawmakers return to work after the holidays. Forty-two of 50 state legislatures will convene before Jan. 21 with approximately 1,750 new lawmakers -- the highest turnover rate in at least 30 years, a result of term limits and redistricting.

One of initiatives that has yet to be fully funded is Bush's ambitious education reform plan, No Child Left Behind Act of 2001. The measure requires individual schools to students enhance teacher quality and meet minimum overall proficiency standards within three years.

NCSL spokesman Gene Rose said typically education is the costliest expenditure for states, but Medicare is quickly catching up. During the 1990s, state coffers were burgeoning with additional dollars used to expand Medicaid eligibility. Medicaid is taking a larger portion of state budgets with an increase in the number of people who need services as the economy sinks deeper into trouble. Rose said the federal program accounts for about 15 percent of the average state's general fund budget.

"It's our biggest concern," said Rose.

Forty-four states will consider freezing or reducing Medicaid eligibility, benefits and reimbursements in the upcoming 2003 state legislative sessions, according to an NCSL survey of lawmakers, governors' offices and executive agencies.

"Most states will be forced to make some very tough decisions during their 2003 legislative sessions," said Wyoming Sen. Charles Scott, chairman of NCSL's Health Committee. "However, state legislatures have been on the cutting edge of public policy in the past and will continue to explore innovative solutions to meet the needs of our constituents."

Additionally, 38 states will consider measures to control prescription drug costs including preferred drug lists, prior authorization and bulk purchasing; 37 states will address health care workforce capacity and staffing concerns in acute care hospitals and emergency rooms; 31 states will address the medical malpractice insurance crisis; 28 states will consider long-term care issues such as nursing home alternatives; and 27 states will consider policies to improve access to health insurance such as enacting statutes for high-risk pool, purchasing alliances and the rollback of mandated benefits.

In August, Bush announced an initiative to expand health insurance for the uninsured by making the Medicaid program more accessible. He proposed cutting out what he considered a confusing and inconsistent federal approval process for states. Congress has yet to pass the measure.

Homeland security remained a top priority for states as the New Year gets underway and the threat of war with Iraq looms. The federal government called on states to make efforts to protect their infrastructures, particularly power and water plants. This year some 1,500 homeland security bills wound through state legislatures for approval. Rose said lawmakers will be forced to weigh security against budget concerns.

States will also be wrestling with how to fund welfare reform.

Congress has also not yet signed off on the reauthorization of the 1996 law that overhauled the system and forced millions off the rolls and into jobs, though many were low-paying positions. The current welfare reform act is set to expire in mid-January.

Bush has asked Congress to build on the 1996 law with additional provisions as they consider reauthorization of the measure. Bush's plan would require welfare recipients to work 40 hours a week either at a job or programs designed to help them achieve independence. That would be an increase from the 30 hours per week mandated by the 1996 law. It would continue to provide $4.8 billion per year for child care through the Child Care and Development Block Grant, food stamps for legal immigrants for five years after entry into the United States, and continues the five-year ban on welfare benefits for non-citizens entering the country after 1996.

Under his "Ticket to Independence" program, Bush's proposal would allow states to consolidate a broad spectrum of social service programs such as food stamps, housing, workforce programs and adult education. And Bush's proposal would maintain funding of the Temporary Assistance for Needy Families block grant at $16.5 billion a year through 2007. Funds from that grant are channeled directly to individual states.

Rose said once funding for the welfare program is settled, states may have to cut vital programs such as after-school programs, transportation services, teen pregnancy programs and other services that made it easier for participants to return to work.