Gov. Asa Hutchinson proposed increasing state spending by about 3 percent for the fiscal year that begins July 1. Hutchinson said the proposed funding increase is $100 million less than what he originally proposed more than a year ago. The bulk of Hutchinson's proposed funding increase, nearly $138 million, would go toward Medicaid.
"This budget is conservative in spending, increases our savings and invests in the future," Hutchinson told members of the Joint Budget Committee. Lawmakers are set to return to the Capitol in February for a session focused primarily on the state's budget.
The Medicaid increase comes from the expected rise in the state's share of the cost for the hybrid Medicaid expansion under the federal health overhaul. The federal matching rate for traditional Medicaid has also decreased due to improvements in the state's economy.
The budget plan was presented days after Hutchinson said he was seeking less than originally planned in Medicaid funding after the program's enrollment dropped by 117,000 between 2017 and 2018. Hutchinson said the drop came from better reviews of the program's eligibility and participants finding work.
Republican Sen. Bryan King, a frequent critic of the hybrid Medicaid expansion, complained Hutchinson is touting the trimmed rolls after he and other supporters of the program said ending or winding it down could hurt the state's finances.
"Now you're taking people off and bragging about savings," King said.
State finance officials said they expected moderate job gains and rising wage income, predicting the state's net available revenue will rise by about 4 percent. Hutchinson projected the state would have a $64 million surplus, and proposed that nearly $48 million of that go toward a reserve fund that he said could be the foundation for future income tax cuts. A legislative task force is expected to issue recommendations this fall on tax cuts and other changes. Hutchinson proposed setting the roughly $16 million remaining from the surplus aside for highway needs.