Medicaid expansion, education funding and tax breaks are at the heart of the stalemates this year. The delays may hurt some states more than others.
BY LIZ FARMER | JULY 17, 2019 AT 4:00 AM
Massachusetts, New Hampshire, North Carolina, Ohio and Oregon still haven't passed budgets for fiscal year 2020.
Moody's Investors Service has warned that the delay could hurt local governments, school districts and hospitals.
Late budgets are unusual in Ohio, but that isn't the story in Massachusetts and Oregon where they've become pretty common.
More than two weeks after the start of the fiscal year in most states, five still don’t have a budget. In most cases, policy debates have held things up -- and that's causing instability in a few places.
The uncertainty is already hurting public universities in Ohio, where at least two schools have put off sending tuition bills to students due to the impasse. Lawmakers in the state are scrambling to work out their differences over Medicaid funding, money for education and major income tax breaks for businesses before the interim budget expires at midnight on July 17.
Moody’s Investors Service has warned that the delay could also hurt local governments, school districts and hospitals, saying such “downstream entities that rely heavily on state funding may be vulnerable to fiscal stress due to a late state budget, especially if the delay is pronounced or is unexpected.”
Late budgets are highly unusual in Ohio -- the last impasse was in 2009. But that's not story in Massachusetts and Oregon, where they’ve almost become a matter of course. Both states have had late budgets in four of the last six years. That’s a rate that Moody’s says could indicate a weakness in how well-run the government is. (In extreme cases, such as when Illinois didn’t pass a budget for two years, it can hurt a state’s credit rating.)
Both states have given themselves and their localities more leeway than Ohio has by passing longer stopgap funding measures. Massachusetts’ temporary budget runs until the end of this month while legislators in Oregon have authorized agencies to continue spending at the same level as the previous budget cycle through Sept. 15.
In Massachusetts, where legislators are debating whether to freeze tuition and fees at state colleges and universities, Gov. Charlie Baker has dismissed the warnings from Moody’s. “I don’t have a problem with the budget being a week or two late,” he told a group of reporters earlier this month. “I care a lot more about the quality of work product and the completeness of that work product and giving people the ability to do the stuff that they need to do depending on where we are to finish the process.”
In Oregon, lawmakers have passed a budget, but a political maneuver by the state Senate’s Republican minority stopped a climate change measure from being included. Gov. Kate Brown has until the end of this month to sign the spending bill and has said she will use her executive powers to include the emissions reductions measure if lawmakers don’t do it themselves.
Elsewhere, New Hampshire and North Carolina are also without budgets, both thanks to governors’ vetoes.
In North Carolina, Democratic Gov. Roy Cooper sent back the budget because it did not include Medicaid expansion. He and other Democrats in the state are also sparring with Republicans over teacher pay raises and other provisions that would increase the state’s spending by $523 million more than the legislature’s proposed budget.
The state isn’t in danger of a shutdown, thanks to a law that automatically appropriates annual funding in the absence of a budget. But the battle could become protracted if the Senate approves a now-pending resolution that would give the chamber a recess starting next week until August.
In New Hampshire, which has a temporary budget in place until Oct. 1, Republican Gov. Chris Sununu vetoed the budget passed by the majority Democrat legislature because it suspended a planned business tax cut to help pay for increases in education funding. Sununu has called the budget imbalanced and says it puts the state on a path to higher taxes.
This appears in the Finance newsletter. Subscribe for free.