Budget Challenges Grow This Week – As Lapses Shrink and Medicaid Spending Rises

Wednesday, May 25, 2011 at 2:04 AM by

The task of balancing the biennial budget became slighlty less onerous a week or two ago when the Legislative Fiscal Bureau announced that state revenue collections in the current fiscal year and next biennium would be $636 million more than previously estimated. Unfortunately, the news this week isn’t nearly as upbeat; in fact, several developments are cutting into the balance created by the improved revenue forecast.

Three pieces of news chip away at that balance:

  • The Fiscal Bureau estimated (in Budget Paper #340) that the state share of Medicaid related spending is likely to be about $63 million (GPR) higher than the Dept. of Health Services projected;
  • GOP leaders released the summary of a new budget adjustment bill that, among other things, will reduce anticipated agency lapses to the General Fund by $54 million, presumably because agencies haven’t been able to find the full amount they were directed to lapse; and
  • The new budget adjustment bill would also make it official that the state won’t realize the anticipated $29.8 million in savings in the current fiscal year from increase state employee contributions for health care and retirement benefits, since the bill requiring those changes is stalled in the courts.

The Joint Finance Committee was considering Medicaid issues today, and Fiscal Bureau Paper #340 estimated that the amount of money needed in the next biennium to maintain the status quo (i.e., the “base reestimate”) is likely to be higher than the budget bill projected by about $63.6 million in state GPR funding (or an increase of $180 million from all funding sources). The JFC approved a comprehensive motion this evening that adds most of that funding to the bill. (It appears to be an increase of $154 million “all funds.”)

Republican leaders unveiled a new budget adjustment bill today that would use a portion of the increased revenue announced earlier this month to pay various bills the state owes. We’ll elaborate on that topic later, but one aspect of the proposal is that it reduces (for a second time) the amount that agencies are required to lapse to the General Fund in the current fiscal year. The last biennial budget bill directed agencies to lapse a total of nearly $642 million over two years, with about $342 million of that coming due in the current fiscal year. The last budget adjustment bill, Act 13, reduced the total by $79 million, and this proposal would reduce it by an additional $54 million.

The proposed bill would also repeal the provisions in Act 10 that would lapse $29.8 million to the General Fund from the increased state employee contributions to their health insurance and retirement benefits. Because of the potential violations of the open meetings law, Act 10 has been enjoined by the courts and won’t be implemented in time to yield savings in the current fiscal year.  The possibility that this portion of the potential Act 10 savings wouldn’t materialize before the next biennium (which starts July 1) has been assumed for a while, but the new budget adjustment bill would make it official.

In a subsequent post, we’ll examine how the latest budget adjustment proposal would use more of the increased revenue.

Jon Peacock

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