In my column today, I discuss the growing reliance of state governments on federal funding.

In 2008, before the stimulus act, federal funds accounted for about 26 percent of total state spending. With the stimulus, that share rose to nearly 35 percent in 2010, returning to pre-stimulus levels next year, long before state revenues recover. Remarkably and unreliably, a federal government borrowing more than 40 percent of the money it spends will pay for more than one-quarter of state spending.

Nearly half of the federal money going to states is for Medicaid. Clearly, when the feds get around to cutting the trillions (trillions!) that bipartisan leaders, including the president, agree must be trimmed, state and local governments won’t be spared.

A related story in today’s Washington Post cites testimony by Maryland’s chief budget officer, who envisions three possible outcomes from the current debt ceiling discussions, none of them good for the states. I think his third scenario is likely.

Ending 3: The two sides in Washington reach agreement on a broad deal to raise the debt ceiling and reduce the deficit.

“This may be perceived as a happy ending for the federal government – no downgrade, no defaults, and agreement reached on a big deficit-reduction plan,” [Warren] Deschenaux [director of the Maryland Department of Legislative Services] said. “That should keep the market happy, but it’s very likely to be at the cost of putting additional costs to state governments.”

Why?

“Remember, most of what the states receive is in discretionary [funds] – Medicaid, entitlements, etc.,” Deschenaux testified. “Anything [budget] ‘reform,’ in theory, will be touching both discretionary spending and entitlements.”

Eventually unavoidable.