On May 27, the Center on Budget and Policy Priorities released a brief examining the impact of the recession on state finances and the role of federal assistance in closing state budget deficits.  The brief examines the impact of the additional Federal Medical Assistance Percentage (FMAP) funding Congress provided to the states under the American Recovery and Reinvestment Act (ARRA), and suggests that Congress should extend that funding to help states close budget deficits.

From the report: A possibility would be for the federal government to reduce state budget gaps — and hence avert some spending cuts and/or tax increases — by extending the Medicaid funds over the period during which state fiscal conditions are expected to still be problematic, rather than cutting them off in December 2010. The federal government could also provide additional assistance to states for education through the State Fiscal Stabilization Fund. Ideally, such action would occur very soon, so that it can be factored into states’ budget decisions for fiscal year 2011.

Full report: Recession Continues to Batter State Budgets; State Responses Could Slow Recovery (PDF | 432.71 KB)

Center on Budget and Policy Priorities.  (2010).  Recession continues to batter state budgets; state responses could slow recovery.