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UPDATED: Virginia to accept new federal aid for states

Rosalind Helderman

Virginia will reap a windfall from a $26 billion state aid bill signed into law by President Obama Tuesday. Included in the bill is $540 million for the Commonwealth, including more than $400 million in Medicaid funding that will plug a hole that had threatened to open in the Virginia budget.

When the General Assembly adopted a two-year budget in April, it included deep cuts in the state's Medicaid program. At the time, they promised they would put most of those cuts aside if Congress approved the boosted federal aid. Back in April, it appeared approval was likely. Gov. Bob McDonnell (R) had signed a letter, along with other governors, supporting the federal aid.

But in recent months, Republicans had come out against the state aid package and the funding was appeared in jeopardy. Virginia had been facing a problem because the cuts the legislature agreed would go into effect without the federal funding -- including reducing eligibility for various Medicaid programs. But the new federal health care law forbids states from tightening the eligibility of their current Medicaid programs.

That left the Virginia budget with a $20 million to $25 million hole in its current year budget and a $142 million to $152 million hole in next year's budget, which the McDonnell administration and the legislature would have had to fill in other ways. But now that Congress has approved the state aid, the cuts can be put aside, as the Assembly had originally envisioned.

Congress has also agreed to extend enhanced Federal Medical Assistance Percentages (or FMAP), by six months. It first boosted the amount the federal government paid for program, whose costs are shared by the states and the federal government, in the stimulus bill. but those enhanced match rates had been scheduled to end Dec. 31. They will now be extended for six months.

McDonnell spokeswoman Stacey Johnson said Virginia will not turn away the newly approved funds. But she didn't exactly cheer the bill's passage either.

"Virginia's budget was passed by making tough spending cuts and not raising taxes. It did not rely on the potential passage of additional federal funds," she said in a statement. "The additional FMAP funds appropriated today will be used consistent with the federal requirements, and the contingent allocations already made by the Virginia Assembly. This 6-month temporary extension provides short term budget support, but there is much to be done to curtail the explosive growth in Medicaid costs, which is becoming the largest budget driver in Virginia's budget."

UPDATE Aug. 11, 1:40 p.m.: As state-by-state breakdowns of aid contained in the bill have emerged, it seems clear we overstated the portion of Virginia's funding in the bill for Medicaid. Updated charts show the bill contains about $539 million for Virginia, $289 million of which is for Medicaid and $249.5 milion of which is for education.

By Rosalind S. Helderman  |  August 10, 2010; 5:40 PM ET
Categories:  Robert F. McDonnell , Rosalind Helderman  
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