Local Politics

Federal jobs bill could cause state deficit to balloon

Posted May 28, 2010 5:11 p.m. EDT
Updated May 28, 2010 7:12 p.m. EDT

— A jobs bill passed Friday by the U.S. House could add another $500 million to North Carolina's budget deficit for the coming year.

The $93 billion package of jobless benefits passed only after Democratic leaders jettisoned provisions that would have provided extra federal economic stimulus money to states and extended health insurance subsidies for unemployed workers.

State lawmakers included $500 million in stimulus funds under the Federal Medical Assistance Percentage, or FMAP, program in their accounting for the 2010-11 budget. In their proposed spending programs, lawmakers moved money out of Department of Health and Human Services programs and intended to plug those holes with the FMAP funds.

"It's too big a hole for us to go in and just cut our budget some more because we've cut very very deep at this point," state House Majority Leader Hugh Holliman said.

Deeper cuts would devastate education and cripple health and human services, House and Senate leaders said. They predicted that thousands of jobs would be lost.

The U.S. House could reconsider the FMAP provision when members return from a 10-day Memorial Day break, but many Democrats said they wouldn't support more spending. Even if its added back in, the bill still must pass the Senate.

"In Washington, they're going to have to get focused and look out here at this economy and see what's going on," state Senate Majority Leader Martin Nesbitt said. "I think they'll see the light, and I think the money will be forthcoming. That's what I'm betting on."

Timing for any addition help from Congress is critical, though, since the new fiscal year starts July 1 and the lawmakers must approve a balanced budget.

"If it's not here by the time we finish our budget, we'll have to go to Plan B," Nesbitt said.

That backup plan might involve passing a budget that includes the $500 million in stimulus funds and then returning later in the summer for a special legislative session if the federal money doesn't materialize.

"I have talked to our congressional office," said state Sen. A.B. Swindell, co-chairman of the Senate Appropriations Committee. "That's the advice they give me. We just don't know right now, but we're hopeful this will happen. We have to have some hope."