Expanding S-CHIP: Let’s Skip the Middlemen In Washington

There’s nothing stopping states from expanding the State Children's Health Insurance Program (S-CHIP). New Jersey’s S-CHIP currently costs $480 million - $312 million from federal taxpayers and $168 million from state taxpayers. If the people of New Jersey want to extend the benefit to more citizens, all the state need do is fund it to whatever level of expansion desired.

So, why isn’t the state expanding NJ Family Care, its S-CHIP program? To fund an expansion the state would have to cut spending elsewhere in its budget or raise taxes (which is exactly the same thing the federal government will need to do to expand the program nationwide).

Given these options, Governor Jon Corzine and state legislators have decided not to fund an S-CHIP expansion, but would be thrilled to take credit for it if some other taxpayers could be found to pay for it. They’ve set their sites on federal taxpayers, who just happen to live in New Jersey.

For every tax dollar New Jerseyans send to Washington, New Jersey receives just 55 cents in return, the lowest return of the 50 states. This is to be expected because poorer states send fewer tax dollars to Washington and receive more help from the federal government. New Jersey is the first or second richest state in the nation and therefore, its citizens are taxed more heavily by the federal government and receive fewer benefits in return.

It doesn’t make financial sense for New Jerseyans to send additional tax dollars to Washington to expand a healthcare program for New Jersey - especially when 45 cents on every dollar is lost in the process. That would be a heavy price to pay merely to allow state lawmakers to take credit for extending a benefit while avoiding blame for raising taxes to pay for it.

If the goal is to double the number of people covered through NJ S-CHIP, the state will need $480 million. This can be achieved by earmarking one-half of last year’s sales tax increase to pay for expanding the program rather than using it for “property tax relief”. Or other state taxes can be increased by $480 million.

If the expansion is funded through the federal government, New Jersey taxpayers will need to send Washington an additional $696 million to receive $480 million in return. There are better ways to make healthcare insurance more affordable in New Jersey, but if we must expand NJ S-CHIP, let’s skip the middlemen in Washington.