State plugged budget hole with Medicaid money
State Budget Director Mary Lassiter and Gov. Steve Beshear
By Beth Musgrave – bmusgrave@herald-leader.com
FRANKFORT – The state was in the black for the fiscal year that ended June 30, but only because it received a loan from the Medicaid program, which had additional money from the federal stimulus program. Now state officials are trying to determine how much money state agencies will have to cut from this year’s budget, which began July 1.
For the fiscal year that just ended, the state was $55.7 million short in general fund dollars and nearly $37 million short in Road Fund money — which funds transportation projects.
To balance the general fund shortfall – which funds the bulk of state government – Kentucky used unspent general fund money that was allocated to its Medicaid program. Medicaid, an insurance program for the poor and the disabled, is paid with federal and state dollars. In general, the state picks up about 30 percent of the tab and the federal government pays 70 percent. However, the federal government retroactively increased its share of Medicaid dollars this year to nearly 80 percent of the cost.
That means the state had additional state money in that program that could be used to cover the shortfall, said Mary Lassiter, the state budget director. Moving money from Medicaid to the general fund will not affect the Medicaid program. It is fully funded for the coming fiscal year, which began July 1, Lassiter said.
But some in the social services sector questioned whether it was wise to borrow money from a program that will likely need those dollars in the future.
Steve Shannon, director of the Kentucky Association of Regional Mental Health – Mental Retardation Programs, which represents community mental health centers, said the increase in the federal share of the Medicaid program is supposed to sunset in December 2010. Yet the number of people eligible for Medicaid will likely remain the same while the state’s portion of the bill will increase, Shannon said.
“Then what are we going to do?” Shannon said. “Where do we find money to plug that shortfall?”
The shortfall in the state’s Road Fund was plugged using savings from the restructuring of debt and other cost-cutting measures such as restricting travel and cutting other expenses at the Transportation Cabinet, Lassiter said.
“We’re not cutting any projects,” Lassiter said of saving measures at the Transportation Cabinet.
The state had to balance its books from the last fiscal year before it could determine how how much to cut from this year’s budget. If the state had had to use money set aside for this year’s budget, there could have been additional cuts in programs, Lassiter said.
Gov. Steve Beshear had originally proposed plugging a potential $1 billion shortfall for this fiscal year with $741 million in federal stimulus dollars and a 2.6 percent cut to most state agencies with a few exceptions. The exceptions included the state Medicaid programs and the main funding formula for k-12 education.
But in a special legislative session in June, the General Assembly approved a budget reduction plan that included $45 million in spending that was not in Beshear’s original proposal. Some of that $45 million included an income-tax credit for active-duty military personnel and an increase in the budgets for public defenders and prosecutors. Legislators also approved a tax credit of up to $25 million for people who purchase newly built homes.
The additional spending means that the cuts to agencies will likely be deeper than 2.6 percent, Beshear has said.
Over the past 18 months, state agencies have cut more than $600 million as the state repeatedly adjusted its budget to account for falling revenues. “This is the fifth budget reduction in 19 months,” Lassiter said.
Lassiter said Monday that the state has asked all agencies to show how a three and four percent cut would effect the delivery of services. Those plans are due this week.
Lassiter said the agency proposals will be reviewed and discussed with Beshear. But it will likely be several weeks before agencies are told how much to cut.
There is some good news. The state didn’t need to use any funds set aside for this year’s budget to balance last year’s books. Also, the state still still has more than $300 million in federal stimulus dollars to use in the next fiscal year, which begins July 1, 2010, Lassiter said.
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Interestingless | Jul 20, 2009 | Reply
Oh My Gosh!!! Sounds like more shell games or how “home owners” got into the mess they are in now with more debt than they can afford!!!
Xstateworker | Jul 20, 2009 | Reply
The amount of government spending is unsustainable. A cut in the Commonwealth of Kentucky budget is necessary to keep our budget balanced. I know that means that we have to cut jobs at the state. The usual people on here will say, cut the non-merit “fatcats.” Unfortunely, there are far more merit employees than non-merit employees. A tax raise is out of the question, the sin taxes are tapped out and gambling is a non-starter. So, do the right thing and cut the budget. The government must do what all americans are doing right now, tighten their belts.
Taser Hasbro | Jul 20, 2009 | Reply
The federal stimulus has been a lifesaver for bloated and broke states and cities. Can’t shrink government now can we? Hey, let’s do it again next year, suckers.
blevins | Jul 20, 2009 | Reply
Sin taxes thats a laugh I have never read gambling is a sin but lying is!!
shockie | Jul 20, 2009 | Reply
the crows will come home to roost on using these 1-time stimulus funds to plug large gaping holes in the budget.
u12bravo | Jul 20, 2009 | Reply
Sounds like the Retirement System funding that our wonderful leaderless did and then slashed state workers to fix it.
WHAT IS WORST IS THAT THE SAME KNUCKLEHEADS WILL CONTINUE TO VOTE FOR THE SAME CORRUPT PUS BALLS AND WONDER WHY WE HAVE A PROBLEMS
Confused | Jul 20, 2009 | Reply
We MUST have comprehensive tax reform!!! The poor in this state pay a higher percentage of their income in taxes than the wealthy and until we address this issue, the problems will never go away. Moving money (aka shell games) are not going to solve problems. The day of reckoning is here and if Beshear isn’t careful, he is going to pave the way for Richie to move right into the mansion – Lord help us all! Please – leaders in charge – grow a spine and deal with these issues head on!
Iamme Youare? | Jul 20, 2009 | Reply
“Robbing from Peter to pay Paul” schemes never work! Hello…
bubbleup | Jul 20, 2009 | Reply
If I can transfer my American Express balance to my Visa card I’ll have a balanced budget this month too. I wonder if I can transfer them back the next month and just keep on keeping on?
Mike | Jul 20, 2009 | Reply
Remember this when Medicaid starts having shortages later in the year, and the poor and disabled have to suffer. Also remember this during the next election!
jimbo | Jul 20, 2009 | Reply
This state deserves our current agricultural commissioner. But who will tell him that he needs to live in Frankfort and he has to go to work every day? Bummer, Dude!
Pointless | Jul 20, 2009 | Reply
I’m sure a number of you believe that reducing state government (AKA take it to zero) will resolve the problem, we’ll play the 6-seperations game and I bet your paycheck is funded directly or indirectly by state funded/private enterprise partnerships (AKA state pays for private services)…
We keep cutting state government like we have for the past 4 years and today is what you get… Quit putting money in the elite few who DO NOT spend money like middle and definitely lower incomes…
Wake up!!!
Jim Anderson Stivers | Jul 21, 2009 | Reply
Beshear must have extended gambling before he runs in 2010. At this time is rather apparent that voo doo economics do not work. Where is the state goiing to get that stimulus money used to balance the budget. There are too many PETER and PAULS in this budget. May Beshear should call in , whats his name, BERNIE MADOFF. This guy is KING of money schemes. Maybe he can find the extra millkons we need. Oh, forgot, this chisler is in the Country Club Jail in North Carolina.
IMO there exist to MIRACLE FOR REVENUE. TAX REFORM is the ONLY alternative. Beshear won’t do that, think he will loose votes. What say, . . .?
Jim Anderson Stivers | Jul 21, 2009 | Reply
Governor has new job application for a funding person. House Speaker Stumbo would not considor it. Too confining.
Dear Governor,
Times sure are tough, right? I can tell you from personal experience that is true. It has been reported to me you are in need of a financial expert for some kind of miracle in Kentucky. That is my specialty, I work miracles!!!
Last time out, I raised billions. If you need some original ideas, no if you need any ideas on how to improve revenue, please, I would be pleased to work for you.
Sincerely,
Bernie Mad,
North Carolina Inmate
Look at today's news | Jul 22, 2009 | Reply
Use Medicaid money for jaunt to Philly!!!
Gotta love good Kentucky fiscal policy!!!