Over a year ago, we wrote our first post advocating in favor of federal assistance for state governments. The reasons were simple enough: a slowing economy causes revenues to decline and demand for services like Medicaid to rise; recessions always hit states later than the federal government; and the General Assembly is required by law to pass a "balanced" budget.
The Obama administration delivered with its $789 billion economic stimulus bill. Illinois received $2.9 billion in Medicaid relief, $1.6 billion in education money, and another $374 million in flexible state block grants. (The last figure was supposed to be considerably higher, but was cut during negotiations to appease "conservative" Democrats in the Senate.) These resources prevented devastating cuts to the state's human care infrastructure and saved thousands of jobs, a fact conservative critiques of the stimulus plan consistently overlook.
But Illinois' FY 2011 budget deficit will be even wider than it was this year. Indeed, it's currently estimated at $12.8 billion, thanks to declining tax receipts, loads of borrowing, and the fact that the remaining $1.4 billion in federal aid is scheduled to run out at the end of 2010. Nationwide the situation is no different, with states facing their largest collective budget shortfall in recent memory.
In a new paper published today, the Center for Budget and Policy Priorities (CBPP) offers a novel solution for policymakers in Washington: buoy states by approving additional fiscal relief.










