Medicaid increase the straw that breaks the budget’s back

The joy of a healthy budget surplus in state government that has reflected an enviable status for West Virginia’s financial position during the last several years has come to an abrupt end. Secretary of Revenue Charles Lorensen informed many state agencies last week that they must come up with reductions in spending of 7.5 percent to balance the state general fund budget for the next fiscal year that begins July 1, 2013.

A major reason is the state-federal Medicaid program that now provides insurance for an estimated 420,000 low-income West Virginia residents. That program alone will need an additional $180 million in the 2013-2014 budget year to keep up with its anticipated financial demands.

This program received funding of $860 million in the current year’s budget, which ends next June. But that $180 million jump for the new fiscal year will push the total over $1 billion. That’s why Gov. Earl Ray Tomblin has ordered many state agencies to come up with their plans to reduce spending for the next fiscal year.

He wants to free up at least $85 million via a 2 percent reduction in spending by many state agencies. These cuts are the most dramatic in nearly a decade, dating back to when Bob Wise was governor from 2001 to 2004. But State Budget Director Mike McKown has been predicting this trend for the last couple of years.

The state’s spending on public schools and the budget for the prison system will not be required to make cuts along with the Medicaid program. That’s why the rest of state government will be expected to come up with the 7.5 percent reduction.

The Legislature has been taking advantage of recent budget surpluses to reduce taxes. The consumer sales tax on food was most recently cut to 1 percent on July 1 and will be completely eliminated on July 1, 2013, unless the 2013 Legislature should decide to repeal that move, which seems unlikely. And the idea of any tax increases to help cope with the problem isn’t going to be mentioned — at least until after the November general election.

Indeed this state has been able to avoid tax increases and worker layoffs that many other states have encountered during the recent national recession. In fact, during the most recent budget year that ended June 30, 2012, overall state spending turned out to be $12 million less than the amount approved by the Legislature.

Another critical piece of the state’s fiscal puzzle is West Virginia’s $13 billion investment portfolio which only earned 2.5 percent during the budget year that ended June 30, 2012. State officials had hoped for a return to the 7.5 percent range from this fund, which gets 78 percent of its money from the state’s pension programs.

The state budget also counts on nearly a half billion dollars from the state’s lottery operation and most of those involved expect that source to decline by about 4 percent next fiscal year because of the expected opening of competing facilities in Ohio, Maryland and other nearby states.

Meanwhile, three senior officials in the Department of Health and Human Resources were placed on administrative leave by Secretary Rocco Fucillo and mysteriously sent home during the week of June 16. And the department apparently has spent more than $14,000 already on salaries and benefits for these individuals, according to an article in the Charleston Daily Mail.

The officials are Susan Perry, deputy secretary for legal affairs at DHHR, assistant secretary John Law and general counsel Jennifer Taylor. Each of these three were paid more than $70,000 last year, according to the state auditor’s office.

Fucillo has indicated he doesn’t comment on personnel matters but a spokesman for state Auditor Glen Gainer said there is no provision in state law to suspend employees with pay. Actually, it is illegal to draw money from the state treasury to pay the salary of any state employee before their services have been rendered. The governor’s office has indicated these three are “providing services” but did not reveal the specifics.

The dispute between Fucillo and these key members of his staff apparently is a result of the decision by DHHR to award an advertising contract for $473,000 to the highest bidder — Ohio-based Fahlgren Mortine— passing over three bidders who made lower offers.

Finally, the increasing cost of each state’s share of the federal Medicaid program is a major concern not only in West Virginia but in nearly half the states in the nation. And a lot of those states will have to come up with a lot more than another $180 million in the next budget year, which is the amount of the increase confronting our state.

So it’s understandable that state leaders here, along with their counterparts in several other states, are trying to decide if it can afford to expand Medicaid coverage for families with incomes up to 133 percent of the federal poverty level — now an option under the federal Affordable Health Care Act. West Virginia is expected to be one of only six states that hopes to reduce next year’s general revenue budget.

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