Shortly after President Obama signed the healthcare reform legislation into law, several states have filed lawsuits because the new Medicaid requirements will potentially bust their budgets.  So, what does this have to do with Infrastructure?

To begin with, anything that strains the state or municipal budget will limit their ability to fund new projects.  That’s not good news.  But, there is another tie in here that will severely limit localities access to capital.

As I mentioned a few days ago, Florida suspended its issuance of Build America Bonds (BAB) because of the potential that the IRS would reduce their subsidy amount by any amounts owned from other programs.  The new healthcare reform will significantly increase the costs to the states for Medicaid expenses.  If they are unable to cover the increased costs, the IRS will start taking from their BAB subsidy to get whole.  That puts even more pressure on the states and compounds the issue.  Florida estimates that the new healthcare reform law will add $1.6 billion of Medicaid expenses and force them to hire an additional 1,000 employees.  That’s $1.6 billion that they won’t have available to build schools, maintain roads, or repay bonds.

In a time when the states and municipalities are being hit financially as hard as ever, I struggle to understand the rational behind increasing the burden on them.  Maybe someone can explain it to me…