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Federal and State Budget Woes Trickle Down to Cities

Article Date: 
24 September, 2010 - 05:00

By Chuck Gates
Special Contributor for the Morgan County News
 
   SALT LAKE CITY — Local government leaders must brace themselves to withstand the coming budgetary collision of entitlement programs and funding obligations at the federal and state levels.
Sen. Dan Liljenquist, R-Bountiful, told an audience at 103rd annual conference of the Utah League of Cities and Towns last week that growing financial obligations for Medicaid and education represent "two huge forces crashing together" creating unprecedented pressures on the state.
Liljenquist, who helped broker legislation in the 2009 legislative session to help tame out-of-control pension costs in the state's retirement system, said the next 10 years will see a 30 percent increase in the state's student population. He further warns that Medicaid's current cost arc is "absolutely unsustainable."
He said Medicaid, which represented 9 percent of Utah's general fund expenditures in 1999, now represents 18 percent of the general fund pie. More worrisome are projections placing that figure at 40 percent of the general fund budget a decade from now unless action is taken soon. The general fund is the only discretionary spending freedom the state has, currently representing 17 percent of the overall Utah budget.
    Utah House Speaker Rep. Dave Clark, R-Santa Clara, told the same gathering that even in the short term Utah is going to be budget-challenged. He said that come next July, state government is looking at a $313 million shortfall just to maintain current funding levels for fiscal 2012.
"It's not just next budget year but well into the future," Clark said, adding that general and education funds have been decreasing since 2008. "The good news is that it's not as bad as I looked several months ago; the bad news is that it's still not good."
Clark told local leaders that the pressures being felt at the federal and state levels will "trickle down" to local government in the form of, among other things, decreased funding for roads and enforcement of whatever immigration reform legislation is ultimately adopted during the next legislative session.
   Tapping his southern Utah roots, Clark said, when the horse you're riding dies you dismount and find a new horse, but that's not what is happening in Washington, D.C. these days. He said it's beyond irresponsible that 41-cents of every dollar spent by congress is borrowed.
Morgan City Attorney Gary Crane said his city faces the typical personnel issues that accompany an economic slowdown as the pot of revenue monies — sales taxes, impact fees, along with federal or state funding — shrinks. Meanwhile, demand for services and the need for employees to deliver those services remains the same.
Crane said Morgan City has chosen to approach things a little differently from other municipalities by borrowing with an eye on the future to take advantage of today's cheaper labor, materials and bonding costs for some projects.
"We're trying to make things last; doing some work now to make things last. And we're not planning any major capital programs, although federal and state mandates sometimes make that difficult to do, said Crane.
Liljenquist said healthcare costs in general have formed a classic bubble. Medicaid is also out of control, he said, having been turned into a hammock — a destination. It's no longer merely a safety net as folks are now looking to find their way onto Medicaid because it's so generous.
Liljenquist argues that the system needs to be recalibrated to curb spending. But it needs to reflect, "how much can we afford and how much does that buy?"
Clark, who's been a player on the national stage for healthcare and Medicaid reform in recent years, said Utah is definitely on the right track. Others have pointed out that healthcare costs for the nation would drop by one-third if other states delivered healthcare the way Utah does. "But even then, it's financially unsustainable," admits Clark, acknowledging major overhauls to Medicaid like those pushed by Liljenquist and others for the retirement system need to be a key part of the solution.
Clark said he's buoyed because Utah has always shown a willingness to address future obligations before they become a crisis.
   Says Liljenquist, "Reality is not negotiable. It'll be difficult, but we'll be able to get through this."