Recently, Treasurer Ken Miller shared data from the Council of Governments showing that Oklahoma ranked 7th in the percentage of state expenditures from federal funds, with more than two-fifths (43 percent) of all dollars spent by the state spending coming from Washington. Federal grants account for a large share of state spending on health care, human services, roads, education , public safety, environmental protection, and other core services.
The ten states with the highest reliance on federal dollars all have Republicans controlling both the Governor’s office and legislature (see chart), and seven of these states, including Oklahoma, are refusing to accept federal funds to expand health care coverage to low-income adults under the Affordable Care Act. Governor Fallin contends that accepting these federal funds is “unworkable and unaffordable,” and would “put Oklahoma on a fiscally unsound path.” However, an in-depth study by the Leavitt Group found that extending coverage would have a $14 – $17 billion positive economic impact on the state over a decade, and would reduce spending of state dollars by $450 – $485 million.
The unwillingness of states that rely most heavily on Washington for a whole range of programs and services to accept billions in federal funds to cover the uninsured has created some confusion. OK Policy offers the following modest proposal to sort things out:
FOR IMMEDIATE RELEASE, Washington, D.C. – In an effort to help state governments distinguish between good federal money and bad federal money, the Treasury Department this week announced that it will begin printing U.S. dollars in two different colors.
“Until recently, it was believed that all money coming from Washington was the same,” said Treasury spokeswoman Jennifer Argent. “But now we are hearing from states that some money being offered them by the federal government is tainted. Printing dollars in two different colors will help states keep things straight.”
Good federal dollars, which will retain their traditional green color and be known as “G-bills”, will continue to flow into states to pay for road construction, military bases, disaster relief, environmental cleanups, agricultural subsidies, food stamps, immunizations, Head Start, health care for veterans and Natives, and many other programs. In addition, funding for traditional Medicaid, in which the federal government foots some two-thirds of the cost to provide health insurance for low-income children, pregnant women, seniors and persons with disabilities, will still be paid in G-bills.
“Federal grants alone accounted for 35 percent of all state government revenue in 2011, according to the Census Bureau,” said Argent. “States can rest assured that they can continue to line up for good old G-bills.”
The new federal dollars, to be printed in orange and known as “O-bills”, will be issued exclusively to cover the cost of extending Medicaid to low-income adults under Obamacare. O-bills will carry a warning label stating, “CAUTION: Use of this money may contribute to out-of-control spending and socialism.”
In a statement, the National Governors Association welcomed the move to issue a new-colored currency: “Some of our members were having real trouble explaining to their constituents their decision to turn down billions of dollars of Medicaid expansion money while continuing to accept federal money for all kinds of other purposes. Now they can explain that the federal dollars for traditional Medicaid and programs like Insure Oklahoma are paid in G-bills, which are good, while Obamacare dollars comes in O-bills, which are bad.”
Some states are already calling on the Treasury Department to expand O-bills to cover other programs that support the poor.
This is a modified version of a column that ran in the Journal Record in June 2013