We're in for a big shock soon

From the Times Union:

For the past two years, finance experts as well as some politicians have warned that once the generosity of the 2009 American Recovery and Reinvestment Act winds down, New York would face even worse budget problems.

That's because the stimulus money acted as a crutch that allowed the state's two major expenses, education and Medicaid, to grow despite the recession.

With the stimulus ending next summer, those rising costs will have to come from state taxpayers -- unless cuts are made.

The deficit for the current fiscal year could run from $315 million to $1 billion, depending on which branch of state government is doing the analysis. And the 2011-2012 fiscal year, which starts April 1, could begin with a $10 billion deficit -- $1 billion more than previously predicted.

The stimulus program, launched by the Obama administration after the 2008 financial meltdown, included public works money and support for state government functions such as Medicaid and education.

Megna noted that when it ends, New York will be on track to spend an additional $4 billion in Medicaid and $1 billion in education expenses.

Medicaid may be the hardest area in which to control spending because it's so closely tied to the ongoing economic slump. As more New Yorkers lost their jobs or became impoverished during the recession, the Medicaid rolls mushroomed: By the end of the year, analysts expect almost 5 million New Yorkers -- nearly a quarter of the state's population -- will be on Medicaid.

The program was growing before the recession, as former Gov. Eliot Spitzer had initiated a program to get more people who were eligible for Medicaid to use it. All told, the Medicaid rolls have grown by 700,000 during the past three years.

In addition to a growing Medicaid program and the loss of federal money, New York's finances are still groaning under a record 7.2 percent drop in income among state residents last year, and the consequent dip in state tax receipts.