State senators question federal stimulus stipulations over health care, education

JEFFERSON CITY - The federal economic stimulus package comes with several hefty strings attached to funds for the state's health care and education sectors.

Missouri is expected to receive an estimated $4.4 billion in federal stimulus funds out of a $789 billion package cleared by Congress on Wednesday. President Barack Obama is expected to sign the bill into law on Tuesday. Gov. Jay Nixon plans to accept the maximum amount of money allocated to Missouri state government, said Budget Director Linda Luebbering.

After Obama signs the bill, Nixon has 45 days to accept or reject the federal stimulus money. If he rejects any portion of the funds, state legislators can lobby to certify and use those funds anyway, according to the National Conference of State Legislators. If Nixon accepts the funds, state legislators cannot reject any of the money.

But members of the state Senate Select Committee on Federal Stimulus Oversight are raising questions over the stipulations attached to the use of funds in health care and education. According to NCSL advisers, matched funds allocated for Medicaid will be dropped if eligibility standards are altered to include more health care recipients in the receipt of stimulus funds. Also, most of the money allocated for education must be used to to restore funding losses and meet No Child Left Behind provisions.

Both of these stipulations are requirements classified as "maintenance of effort," a term not easily defined because its conditions vary with each state government program, said the conference's health policy director, Joy Wilson, during a conference call with the Senate committee on Wednesday. But "maintenance of effort" basically means that states must maintain certain standards and revenue levels set by the federal government in order to remain eligible for federal funding.

To receive full federal funds allocated for health care, Missouri must maintain the eligibility standards that were in place in July 2008 and cannot alter the income eligibility.

"With regard to maintaining your existing eligibility, you cannot change standards, methodologies or procedures," Wilson said. "There's no definition in the statute on that, but last week in a phone call with the speaker's office, they suggested that even changing the numbers of times in a year that you redetermine eligibility would be a change of procedure and would then put you in jeopardy."

On the surface, this implies that Nixon would be unable to act on his call to expand state health care to 62,000 more Missourians in his State of the State address. But Luebbering said only the adults newly added to health care would not receive the match rates enhanced by the federal stimulus funds.

"Under the governor's proposal, we would increase eligibility for adults to 50 percent of the federal poverty level," Luebbering said. "So those adults who fall between the old eligibility standard, which is 23 percent of federal poverty level, and 50 percent would not qualify for the enhanced Medicaid match rate. They'd still get the normal 64 percent match rate; they just wouldn't get the 6 or 7 percent boost."

In the final federal stimulus bill cleared by Congress, $53.6 billion has been set aside for education. About 80 percent of that funding will go toward individual states, with about $940 million appropriated to Missouri's education sector.

Of that $940 million, the bill requires that the state use $770 million to restore funding losses for fiscal years 2009, 2010 and 2011 to match fiscal year 2006's fund levels and to meet certain provisions of No Child Left Behind. Chief among these provisions are the hiring of more teachers and the funding of struggling schools, which several senators on the oversight committee view as long-term expenditures that would face the ax once the federal stimulus funds dry up after two years.

The remaining $170 million of the $940 million can go toward capital improvement projects.

"We're getting $770 million for one-time money for program expansion, and we're getting $170 million for other things, possibly construction -- but that's the only thing construction could come out of?" Sen. Kurt Schaefer, R-Columbia, asked the NCSL advisers during the conference call. When his answer was confirmed, Schaefer said sarcastically, "What a great way to allocate one-time money."

The direction of the conference call then turned to how the state can generally use federal stimulus funds. Because the federal bill emphasizes the creation of jobs and economic stimulation, states cannot allocate federal stimulus money into any "rainy day" funds or use it to pay off state debt.

"We know that the stabilization money has to be used for general purposes, and (it) identifies school construction and public safety and etc.," NCSL higher education policy analyst David Shreve said. "In regard to debt service and meeting existing debt, it's (the bill) pretty silent on that issue. We'll keep an eye on that issue, but it's just not spoken."

When Sen. Jason Crowell, R-Cape Girardeau, asked if there had been any debate in Congress about "what the states are supposed to do when the federal money goes away," laughter was heard on the other line.

"That is a very good question," said NCSL higher education policy analyst Robert Strange after stifling a chuckle. "No, there wasn't, and this certainly brings up some issues of falling off the cliff and sustainability once this money goes away, because the money certainly is not permanent."

"What is your advice?" Crowell then asked. "I mean, I see a real issue in three years if we take all this federal funding today."

"You're exactly right," Shreve said in response to Crowell. "Once we stop wading around in the weeds and the water here, we start thinking about some of the issues you just raised.

"If you do what normally happens with education money, you would hire more teachers and lower class size, hire teachers' aides," Shreve said. "Then two years from now, we walk off a cliff and fire them or lay them off. So it really begs the question of, 'How do you use this money?' This one shot over two years is a pretty big infusion into the system, to have results that are sustainable and have some effect on student achievement."'

But Luebbering said the federal stimulus funds intended for education are meant to stabilize funding. She said several states planned on cutting education funding, but because Missouri is not facing this problem, the state will have to determine how the $940 million allocated for education will be used.

"The governor is not interested in putting money into huge expansions that we can't afford," Luebbering said.