The Jindal administration’s plans to plug a Medicaid budget hole appear to be plagued with problems, some state officials said.
A number of issues are surfacing as legislators prepare to gather Thursday afternoon at the State Capitol to review Gov. Bobby Jindal’s plan for handling a shortfall caused by congressional action. The governor’s plan includes a combination of cuts and hope that a state government budget surplus surfaces.
Several state officials question whether the needed money will materialize, and even if it does, whether it can be spent on health care.
“You don’t resolve (a problem) by using funds that you don’t have permission to use,” state Rep. Jim Fannin, D-Jonesboro and the state budget bill’s sponsor, said Wednesday.
State Treasurer John Kennedy criticized the Jindal administration for relying on what he called a fairy godmother to produce the needed dollars to fill the revenue shortage in the program that provides health care for the poor. He said a surplus seems unlikely.
“The fairy godmother’s died and she’s not coming back this time. We’ve got a spending problem. We’ve got a priority problem. What we need to do is stop living from paycheck to paycheck,” Kennedy said.
At issue is an $859 million funding shortage that recently surfaced in the Medicaid program that provides health care coverage for the poor.
Congress created the problem by unexpectedly changing the rate the federal government will pay toward the state’s Medicaid program. Federal and state governments share the program’s cost.
Jindal slashed $523 million from the program, but that only took care of part of the funding shortage. The administration still needs to find $94 million in state funding to generate enough federal dollars to erase the rest of the shortfall.
The Jindal administration hopes the needed dollars materialize this fall through a budget surplus when the books are audited for the fiscal year that ended in June. That approach banks on revenue collections exceeding economists’ estimates by nearly $100 million.
However, legislators adopted language earlier this year directing much of any leftover money to the state’s “rainy day” fund. Constitutional restraints also limit how a surplus can be spent.
Formally known as the Budget Stabilization Fund, the “rainy day” fund serves as a savings account to tide the state over during financial difficulties.
House Bill 822 directs state Treasurer John Kennedy to deposit the difference between the state’s official revenue forecast and actual collections up to $205 million in the “rainy day” fund. Jindal signed the legislation into law earlier this summer.
Commissioner of Administration Paul Rainwater, the governor’s chief budget adviser, declined Wednesday to be interviewed on the issue.
In a prepared statement, Rainwater said the legislative provision does not impact the administration’s plans for filling the Medicaid hole.
The Jindal administration’s argument centers on accounting terms and calendar dates. The governor’s position is that any money recognized after the fiscal year ended is available.
“We feel confident that any savings will be available to mitigate the health care reductions as the provision applies only to dollars recognized before the end of the fiscal year,” Rainwater said.
Fannin, who shepherded HB822 through the legislative process, disagrees that the governor can divert any surplus from going into the “rainy day” fund.
“I’m saying he can’t. That’s not what the intent of the resolution was and it don’t follow the law,” Fannin said.
Fannin said he tried to strongly indicate to the Jindal administration that the Legislature did not intend for leftover dollars to be used in the $25.6 billion state operating budget for the fiscal year that started July 1.
Any leftover dollars up to $205 million belong in the “rainy day” fund, Fannin said. Any money over that amount, he said, can only be spent in specific ways, such as reducing the state retirement systems’ debt, funding construction projects, restoring the coast, building roads and lowering debt.
State Sen. Jack Donahue, R-Mandeville and chairman of the Senate Finance Committee, did not return a call for comment Wednesday. His assistant said he is on vacation.
State Treasurer John Kennedy said he will confer with Fannin, Donahue and the Legislative Fiscal Office before deciding how to direct any leftover money.
“As I always do, I’m going to follow legislative intent,” he said.
Kennedy said his initial interpretation of the law is that leftover dollars must be placed in the “rainy day” fund.
However, he questioned whether a surplus will materialize once accountants finish with the books.
Kennedy said the state is allowed to borrow money from funds for cash flow purposes but those dollars must quickly be repaid.
“First, we don’t know if there’s going to be any excess money. In fact, right now, we’re running a deficit in the sense that we have borrowed money that we have to pay back. We’re pretty deep in the hole right now,” he said.