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States Unlikely to Get Extra U.S. Funds, Rendell Says

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July 15 (Bloomberg) -- There is “less than a 50-50” chance Congress will approve the $11.6 billion in extra federal Medicaid assistance U.S. states have included in their current budgets, Pennsylvania Governor Ed Rendell said.

Rendell, 66, called the denial of funding “a disaster” in an interview with Erik Schatzker on Bloomberg Television’s InsideTrack today. He said he spoke about the issue last night with Senate Majority Leader Harry Reid, a Nevada Democrat.

The additional money that states have been receiving for Medicaid, the health-care program for the poor, is set to lapse at year-end. Governors have urged Congress to extend the assistance, saying the failure to do so would force them to cut tens of thousands of public-sector jobs and threaten the economic recovery.

“We’re seeing real momentum starting to build” in Pennsylvania’s economy, Rendell said in the interview, citing 80,000 new jobs created in his state this year. “It would be a disaster not to do this.”

Pennsylvania, the sixth-most-populous U.S. state, is among the 31 that assumed the proposed six-month extension of enhanced Medicaid aid would pass when they put together their budgets, according to data compiled by Bloomberg. With that extension now in doubt, states forced by law to balance their budgets will have to cut spending and find new revenue to close the gap.

200,000 Jobs

The loss of the funds will cost more than 200,000 government jobs, according to Mark Zandi, chief economist of Moody’s Analytics Inc.

In Pennsylvania, Rendell said, 20,000 teachers, police and government workers will be fired if the $848 million in extra federal aid included in his $28 billion budget isn’t approved. Michigan Governor Jennifer Granholm said last month the loss would put a $560 million hole in her state’s budget, which could force cuts to spending for public safety, mental health and college programs.

The increased Medicaid payments, which states received under the federal economic stimulus program, helped them defray the cost as unemployed residents sought medical assistance. Medicaid enrollment jumped more than 3 million in June 2009 from a year earlier, a record increase, to 46.9 million recipients, according to the Kaiser Commission on Medicaid and the Uninsured.

Prospects Dim

Faced with concern that the federal deficit is swelling, the U.S. Senate twice has failed to generate the 60 votes needed to bring proposals to extend the funding to a vote. The aid was initially coupled with an extension to unemployment benefits, though it has been removed from the bill that may be considered next week, according to Regan Lachapelle, a spokeswoman for Reid.

The prospects for securing the state assistance is growing more remote, said Chris Whatley, the director of the Washington office for the Council of State Governments.

“It’s dimming by the day,” he said. “Anything with a multibillion price tag right now is a tough lift.”

To contact the reporter on this story: Dunstan McNichol in Trenton, New Jersey, at dmcnichol@bloomberg.net; and William Selway in Washington at wselway@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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