Posted 1/14/2013 07:33 am
Updated 5 months ago
LITTLE ROCK — Leaders of the Arkansas House and Senate say most questions about the state budget, tax cut proposals or a possible special session depend on how legislators address a Medicaid program that already receives nearly one out of every five tax dollars the state receives in its general revenue budget.
"That issue is going to drive, in my opinion, almost every other monetary issue," incoming House Speaker Davy Carter, R-Cabot, told reporters last week.
Medicaid is the biggest issue facing members of the 89th General Assembly, who gather Monday. For the first time in 138 years, Republicans will control the state House and Senate. It's also the last regular legislative session for Gov. Mike Beebe, a Democrat who is barred by term limits from seeking re-election next year.
The most immediate question legislators face is how to fill a projected $138 million shortfall in Arkansas' Medicaid budget. State Human Services officials have blamed the shortfall partly on the program's growing costs and a reduction in the federal matching rate tied to the state's per-capita income.
The shortfall comes even after Beebe proposed $90 million in additional general revenue and $140 million from the state surplus to help the program.
To cover the deficit, DHS officials have proposed a series of cuts that include removing thousands of seniors from nursing home care, eliminating an insurance program for low-income workers, cutting reimbursements to providers and eliminating non-emergency dental care for adults.
Whether those cuts are necessary is up in the air. Carter and incoming Senate President Michael Lamoureux last week said they believe that the cuts can be avoided by using the remainder of the state's expected $300 million surplus and growth in revenues in next year's budget.
"My personal opinion is, 'No, the cuts to Medicaid are not going to happen,'" said Lamoureux, R-Russellville.
Beebe has said he's open talking with Carter and Lamoureux about whether to use more of the state's surplus, but said he's reluctant to rely on more one-time money for ongoing programs in Medicaid. He also noted that the more money that's used for Medicaid, the less would be available for economic development, construction projects and other items normally funded with the state surplus.
"Can we do some more? Of course you always can," Beebe said. "But you make trade-offs when you do that."
Legislators are grappling with the Medicaid shortfall while they're also weighing whether to expand its rolls by 250,000 people. Beebe is urging the Legislature to support expanding the program's eligibility under the federal health care law, but to do so will require a three-fourths vote in the House and Senate.
The health care law calls for the federal government to pay the full tab for the Medicaid expansion when it begins in 2014. After three years, states must pay a gradually increasing share that tops out at 10 percent of the cost. The U.S. Supreme Court in June upheld the health care law, but justices said the federal government could not take away states' existing federal Medicaid dollars if they refused to expand.
Beebe and state health officials have argued the expansion would help the state by cutting down the costs Arkansas hospitals face for uncompensated care. He's also noted that other states will take advantage of the expansion even if Arkansas doesn't.
"We're going to be paying for this Medicaid expansion, whether we take it or not," Beebe said.
Republicans in general have opposed the Medicaid expansion, especially after an election where many GOP candidates ran on a pledge to oppose the new federal health care law at the state level. But Lamoureux and Carter have left open the possibility of a compromise that would allow for expansion in exchange for changes to the program that Republicans believe would save money, such as drug testing and co-pays for some on Medicaid.
The federal government's directive to states that they can't opt for a partial expansion that would add fewer people to the rolls than the law envisioned while still receiving full federal funding has hurt that hope for a compromise, Lamoureux said.
"Hopefully, we could meet in the middle somewhere, where there's some degree of expansion that covers the people that maybe the Democratic members want to see covered in the bottom half of the total eligible pool and couple that with the conservative reforms that others wanted," Lamoureux said. "When you say it's all or nothing, you really take away that ability to have a negotiation."
The Medicaid debate could also determine how much room the state has for tax cuts, with Republicans pushing for more in reductions than Beebe has originally proposed. Beebe proposed reducing the state's grocery tax from 1.5 percent to 0.125 percent. The tax cut would be triggered if the state's obligations in several areas, including court-mandated desegregation payments to three school districts, decrease by $35 million over six months.
Carter has said House members are interested in cuts to the state's income taxes, while Lamoureux said interest in the Senate is more geared toward cutting the sales tax manufacturers pay for energy and other reductions aimed at helping businesses. They say the first step will be determining how much, if anything, the state can afford in cuts.
"I think there's still room to have that debate," Carter said.
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