Budget Interruptus: States’ FY2021 Spending Plans Diverted for COVID-19 Emergencies and Healthcare

In mid-February, lawmakers in 44 state legislatures were in session drafting Fiscal Year 2021 budgets when news emerged that a novel coronavirus outbreak in central China was now sweeping across the globe.

Four weeks later, for the first time in United States’ history, all 50 states were under federal disaster declarations simultaneously, and every state and territory had declared public health emergencies, granting governors extraordinary executive powers.

With those declarations, governors in all 50 states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands activated National Guard units to assist, issued “stay-at-home” orders of various degrees, shut down “non-essential” businesses and schools, banned public gatherings, and, in many cases authorized expansions in paid leave and unemployment benefits, temporarily prohibited evictions and utility cut-offs, and imposed harsh penalties for price-gouging.

At least 22 state legislatures adjourned sessions early without adopting FY 2021 budgets. Many plan to re-convene in May or June, once the economic fallout from the pandemic-paralyzed economy is clearer, and before the fiscal year begins July 1. Many will do so in teleconferences if the COVID-19 pandemic has not been contained.

Other states adopted what amounts to “wait and see” budgets. Florida lawmakers, for instance, moved $300 million from the state’s general fund, boosting state reserves to $3.8 billion, and approved a $93.2 billion FY21 budget knowing the projected revenues built into the spending plan would likely fall far short in actually funding the plan.

Florida Gov. Ron DeSantis has suggested a special session may not be necessary because he could simply veto some expenditures in the budget, but most lawmakers want to reassemble, whether in person or virtually, to work through many emerging issues, including proposals to hold businesses harmless from lawsuits should they comply with still-evolving protocols but workers and customers still contract the disease.

BUDGET ADJUSTMENTS

Virtually every state is now operating under emergency powers that allow governors and other state executive officials to utilize budget stabilization funds and other reserves for pandemic response without legislative approval.

At least 37 states, the District of Columbia, Guam, and Puerto Rico plan to introduce legislation to support state action related to COVID-19. Most were adopted before Congress approved the first of four federal assistance packages in March and April.

Among them:

Massachusetts’s lawmakers on March 1 authorized $15 million in supplemental funding “to support the commonwealth’s monitoring, treatment, containment, public awareness and prevention efforts against COVID-19.

The New York Assembly has adopted a series of emergency funding measures beginning with the March 3 appropriation of $40 million from the State Purposes Account to the general fund “for responding to the outbreak of coronavirus disease.” On April 15, lawmakers adjusted the State Operations Budget and Aid to Localities Budget to allow Gov. Andrew Cuomo to direct money as “necessary to respond to a state disaster emergency.”

In Maryland, the Legislature on March 9 adopted a measure allowing the governor to transfer up to $50 million from the state’s Revenue Stabilization Account “to fund costs associated with the coronavirus.” Lawmakers subsequently passed bills pushing the limit to $100 million and boosting funding for the state’s Department of Health by $10 million. Neither have been signed by Gov. Larry Hogan. 

The Minnesota Legislature on March 10 transferred $20 million from the general fund to the public health response contingency account and on March 17 transferred another $50 million to the contingency account and $150 million to the healthcare response fund.

In Arizona, lawmakers on March 12 appropriated $55 million from the state’s budget stabilization fund to “pay the expenses of public health emergency responses” and on March 23 allocated $50 million from the general fund to a newly established Crisis Contingency and Safety Net Fund.

Florida lawmakers on March 13 agreed to transfer $300 million from the general fund to boost state reserves to nearly $4 billion and appropriated $25.15 million to the state’s Department of Health “to address the coronavirus outbreak.”

The California Assembly on March 17 appropriated $500 million from the state’s general fund “for purposes related to the COVID-19 Proclamation of Emergency.” The bill allows funding to increase in $50 million increments up to $1 billion. On the same day, state lawmakers earmarked $100 million for public school districts to purchase protective equipment and supplies and labor related to cleaning school sites.

The Georgia Legislature on March 17 transferred $100 million from the state’s Revenue Shortfall Reserve “to combat the spread of the coronavirus.”

The Iowa Legislature on March 17 adopted an emergency measure that provides $91.2 million in supplemental appropriations across state agencies “to combat the spread of COVID-19,” including $88.98 million boost for Medicaid. Lawmakers also allocates 10 percent of the Economic Emergency Fund (EEF) to the state’s Department of Management through August 31.

Idaho lawmakers have passed four coronavirus emergency funding measures, including one adopted on March 17 that transfers $3.5 million transfer from the state’s general fund to Catastrophic HealthCare fund and another that gives emergency authority to the Governor and Cabinet to utilize the Budget Stabilization Fund to adjust the state’s budget to “avoid a costly emergency legislative session.”

The Vermont Legislature on March 17 authorized appropriation of $175 million from the state’s budget stabilization account to the state’s disaster response account. On April 3, lawmakers transferred $41.5 million from the general fund to emergency response.

Maine’s Legislature on March 18 approved the use of $17.43 million in state’s reserves to “address funding needs related to the novel coronavirus.

Alaska lawmakers adopted three appropriations bills between March 18 and April 7 totaling $102 million “for the purpose of responding to the COVID-19 public health disaster emergency.”

Pennsylvania lawmakers on March 19 approved a $45 million supplemental appropriation to the Executive Budget Office for use by the Department of Health and Environmental Control for the state’s response to COVID-19.

The Tennessee Legislature on March 19 appropriated $150 million for a COVID-19 emergency response fund.

Michigan lawmakers have passed a series of emergency funding measures, including the March 20 allocation of $125 million from the general fund “to combat the coronavirus COVID-19” and March 30 supplemental appropriations, including $25 million from the general fund to its coronavirus public health emergency and response fund.

Nebraska lawmakers on March 25 transferred $83.6 million from the state’s reserves to the Governor's Emergency Cash fund for use in “carrying out the goals for the Governor's Emergency Program.”

The Arkansas Legislature on March 28 transferred $173.61 million from the state’s general fund to a newly established ‘COVID-19 Rainy Day Fund’ to “offset revenue reductions and address needs created by the coronavirus” and on April 20 approved a state income tax exemption for “recovery rebates.”

In Kansas, lawmakers have appropriated $65 million to coronavirus response funding with $50 directed to “coronavirus expenditures” and $15 million for emergency COIVID-19 management.

In Utah, lawmakers on April 1 appropriated $24 million from various general fund accounts “for the purpose of disease response.”

Missouri’s Legislature on April 8 appropriated $11 million from the state’s Coronavirus Emergency Supplemental Fund (CESF) to the Department of Public Safety.

In Oklahoma, lawmakers in a special session on April 9 appropriated $201 million from a Constitutional Reserve Fund to the state’s revenue stabilization fund and authorized state agencies to withdraw up to half the stabilization fund to combat the pandemic. On April 13, they agreed to transfer another $302.3 million into the stabilization fund.

HEALTHCARE BUDGETS

The Families First Coronavirus Response Act, the first assistance package adopted by Congress on March 18, temporarily raised the Federal Medical Assistance Percentages (FMAP) by 6.2 percent, funneling millions into state Medicaid programs for COVID-19 response.

The National Governor’s Association (NGA) is requesting the FMAP be increased by 12 percent, as it was in the 2009 Recovery Act. The NGA wants the 12 percent FMAP increase to be retroactive to Jan. 1, 2020, and remain in effect until Sept. 30, 2021. Afterward, it would remain in effect t until the national unemployment rate falls below 5 percent.

Meanwhile, states, either by governor’s executive actions or legislation, have adopted measures to help healthcare systems combat the COVID-19 pandemic. Among them:

Alaska lawmakers between March 18 and April 7 allocated approximately $94 million for the state’s Department of Health & Human Services “for the purpose of responding to the COVID-19 public health disaster emergency.”

Alabama lawmakers on March 12 approved a $5 million supplemental appropriation from the general fund for the state’s Department of Public Health “to be used for coronavirus preparedness and response activities” and passed a resolution calling on the governor to expand Medicaid coverage for new mothers in response to the current COVID-19 pandemic.

Florida was the first state to receive a Section 1135 Medicaid waiver allowing local and state health agencies to expand Medicaid services following the March 18 Families First Coronavirus Response Act. One of 14 states that have not expanded Medicaid under the Affordable Care Act, Florida Democrats have called for a special session to do so.    

The Iowa Legislature on March 17 approved an $88.98 million boost in Medicaid funding.

Kansas lawmakers allocated $1 million to the state’s Division of Public Health for coronavirus prevention.

Maine lawmakers on March 18 adopted a bill directing the state’s Department of Health and Human Services to amend rules to provide for reimbursement of case management services delivered through telehealth to targeted populations, among other provisions