Medicaid Trumps `Fiscal Cliff' as Top State Budget Concern

Medicaid Trumps `Fiscal Cliff' as Top State Budget Concern

The so-called fiscal cliff talks in Washington, D.C., might be getting all the attention, but for states, Medicaid is still the biggest budget worry for the coming year, according to a new survey of state legislative directors to be released soon.

Nowhere is the problem larger than in Texas, which faces a $4.3 billion Medicaid deficit. Nine other states likewise are reporting spending overruns for Medicaid and other health care programs for the current 2013 fiscal year, compared with six at this time last year, says the National Conference of State Legislatures. Maine, for example, is seeing Medicaid caseloads go down, but costs rising.

When it comes to budget busters, “Medicaid is the perennial issue that states mention,” says Arturo Perez, NCSL's fiscal affairs program director, who gave a sneak preview of the survey results during a recent NCSL conference in Washington, D.C.

And while Texas has some $8 billion in its reserve, Ken Levine, director of the Texas Sunset Commission, said at the same meeting that “political reluctance” made it unlikely that lawmakers would dip in that fund to make up the difference. “We are going to have to figure out how to pay for both the existing shortfall,” he says “and the future requirements of Medicaid” under Obamacare.

“We are not a Medicaid expansion state so we won't get those federal dollars that will be coming in the next three or four years,” he said.

Medicaid currently serves about 60 million low-income Americans, and the program's expansion of coverage to more people is a major component of the federal health care law. The Supreme Court ruled in June that states can reject the Medicaid expansion—and additional federal money that comes with it—without losing their current Medicaid funding. Texas and several other states are expected to formally do so in their 2013 legislative sessions.

When NCSL asked state legislative budget experts last month to name the top 2013 budget challenge, “we had 53 different responses and there was one that was mentioned over and over again and that was Medicaid,” Perez said. Federal-deficit reduction came in second.

Overall, state budgets have markedly improved, with just $32 billion in projected shortfalls for the current fiscal 2013, far below the nearly $98 billion of the previous year and the record peak of $174 billion in 2010, NCSL said.

Fifteen states are reporting that the level of personal income tax collections is on target, but nearly as many — 13 — are saying that revenue is below and another 13 report that collections are above estimates, NCSL said. Similarly, 15 states report sales tax collections are on target, but another 15 say that revenue is below their target with another 14 above.

This year was a relatively quiet year when it comes to raising or cutting taxes by 1 percent or more. Only six states had significant changes: Three cut taxes (Idaho, Kansas and New York) and three raised them. (California, Illinois and Maryland).

More state budget information will be released today (December 14) when the National Association of State Budget Officers and the National Governors Association report preliminary fiscal 2012 and enacted fiscal 2013 state budget data.

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