Yesterday, the United States Senate passed legislation to extend the federal Medicaid support established under the American Recovery and Reinvestment Act (Stimulus), causing House of Representative leadership to contemplate a recall of house members for a vote in the coming weeks, during a previously scheduled recess. This development is substantial for Maryland State government, as the State’s FY 2011 budget relies on $389 million in federal support for Medicaid that, without such federal action, would (by State law passed this year) require a draw-down of the Local Income Tax Reserve Fund.

From the Washington Post coverage of the federal legislation:

An emergency plan to save the jobs of tens of thousands of public school teachers and other government workers overcame a key Senate hurdle Wednesday, and House Speaker Nancy Pelosi said she would summon lawmakers back from their August break to finish work on the measure.

Two Republicans crossed party lines to advance the $26 billion package, handing President Obama a victory in his campaign to bolster the shaky economy. With many governors struggling to close gaping budget deficits, administration officials feared a fresh round of state layoffs or tax increases could knock the nation’s wobbly recovery off-course.

The aid package would not entirely close those budget gaps. Hampered by election-year anxiety over the mounting national debt, congressional Democrats were forced to slash Obama’s original request for state aid nearly in half and come up with a plan to pay for it. Meanwhile, lawmakers in both parties signaled that the measure probably marks the end for spending bills aimed at boosting economic activity.

See also coverage from the Baltimore Business Journal.