State should have prevented budget cuts

The recent decline in stock market prices has prompted the state to decrease its projected revenue by $96.1 million, as reported in the Hartford Courant. Governor Dannel Malloy subsequently “announced $103 million in new budget cuts Friday, including $63.4 million in reduced Medicaid payments to hospitals.

While sometimes governments cannot predict with accuracy the amount of revenue they will raise and sudden cuts are at times necessary, state governments should avoid making large unexpected cuts, especially to health care services.

Of course the stock market is quite volatile and sudden corrections in prices have far-reaching consequences throughout our financial system. Obviously, the decrease in income caused by this drop will similarly reduce state revenues. However, the provision of social services by the state should not share the volatility of the stock market, but should have greater stability and predictability.

This would likely require the state to avoid running large deficits in the future, as the necessity of paying down our debt has forced the state to continually make cuts such as these. Private sector actors should not have to continually adapt to the volatility of the state fiscal policy. This strain fosters an atmosphere of uncertainty, and therefore risk, hampering economic growth and development.

The most worrisome of these cuts is the enormous portion of Medicaid payments reduced. Given the proportion of Medicaid spending comprises of the state, it is not surprising that it was an attractive target for cuts. Yet this does not justify the sudden burden placed on hospitals and Medicaid patients.

The Hartford Courant quoted Malloy’s budget aide, Benjamin Barnes, as saying that the cut in Medicaid would be a “40 percent cut in net operating profits” for hospitals and reports that “the Connecticut Hospital Association predicted the cuts would have a devastating impact on patients who rely on Medicaid.” It is not fair to hamstring health care providers and in all likelihood reduce care for Medicaid recipients so suddenly.

Given the state’s budgetary situation, it had to make a lot of cuts in this situation. Perhaps the cuts could have been made more intelligently, but perhaps not. What is certain is that the state should have avoided having to make this choice in this first place. It could have prepared for potential revenue decreases by providing a safety cushion in the budget. More fundamentally, it should not have accumulated so much debt in the past so that it has no flexibility in situations like this.