Fiscal '17 budget to hinge on overhaul

Governor’s plan set for unveiling

Gov Asa Hutchinson speaks at a press conference.
Gov Asa Hutchinson speaks at a press conference.

Gov. Asa Hutchinson said he will propose a fiscal 2017 general revenue budget Tuesday that depends on the Legislature approving funding for his proposed overhaul of the state's expanded Medicaid program.

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At right is House Speaker Jeremy Gillam, R-Judsonia. Senate President Jonathan Dismang, R-Searcy, center, answers a question about his tax cut bill from Sen. Jason Rapert, R-Conway, left, during the Senate Committee on Revenue and Taxation Wednesday at the State Capitol.

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Arkansas Secretary of State

Joint Budget Committee co-chairman Rep. Lane Jean, R-Magnolia

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Gov. Asa Hutchinson (left) talks with Sen. Jonathan Dismang, R-Beebe, before speaking Friday afternoon in Little Rock to the National Conference of Insurance Legislators.

Fiscal 2017 starts July 1.

The Republican governor's administration will present the budget proposal to the Joint Budget Committee on the first day of its pre-fiscal session hearings at the state Capitol in Little Rock.

"As previously stated, I directed [the Department of Finance and Administration] to prepare another budget that provides options for necessary cuts, in the event the Legislature fails to approve Arkansas Works," the governor said late Friday afternoon in a written statement.

Hutchinson wants to overhaul the state's private-option program that uses federal Medicaid dollars to purchase private health insurance for low-income Arkansans and rename the program Arkansas Works.

About 210,000 Arkansans are covered under the private option. Changes in the program are to be considered in a special legislative session starting April 6, and the funding for the revamped program is to be considered in the Legislature's fiscal session that starts April 13.

"In my judgment, there is a more favorable political environment for the passage of Arkansas Works as a result of last week's election," Hutchinson said, referring to the defeat of some legislative candidates who opposed the private option.

"As a result, the second budget has not been completed, but we will be prepared to answer questions as to the significant cuts that will be required in the event federal Medicaid expansion dollars are not available in Arkansas," he said in his written statement.

House Speaker Jeremy Gillam, R-Judsonia, said Friday that House leaders are drafting their own alternative budget proposal in case the Legislature fails to authorize funding for the state's Medicaid expansion.

Hutchinson said Friday that failure to authorize funding for the Medicaid expansion would create a budget "hole" of at least $100 million, and "any details will be provided at the budget hearing."

Hutchinson spokesman J.R. Davis has said that $100 million includes the cost of restoring Medicaid programs that were replaced by the private option and providing medical care to the uninsured. It also includes lost tax revenue from premiums paid on private-option insurance plans.

The Department of Finance and Administration has projected that net general revenue available to state agencies will increase by $106.8 million, or 2 percent, in fiscal 2017 to a total $5.33 billion. Last year, the Legislature enacted tax cuts projected to cut state general revenue by nearly $101 million in fiscal 2017.

In case the Legislature doesn't reauthorize the Medicaid expansion, Joint Budget Committee co-chairman Rep. Lane Jean, R-Magnolia, said Friday that one option being discussed by House leaders is a 3 percent to 5 percent across-the-board cut in state agencies' general revenue budgets -- with certain exceptions -- to fill the $100 million to $130 million "hole" in the state's Medicaid budget.

The exceptions to an across-the-board budget cut would include funding to provide an adequate education to public school students. They also could include programs for public safety and those for Arkansans unable to help themselves, such as the elderly, handicapped and mentally ill, he said.

The Legislature could decide how to "share the cuts throughout state government rather than rolling [them] up on a couple of entities and asking all of them to make all the sacrifices," Jean said.

Over the past three years, authorizing the private-option funding has required a three-fourths vote in the House and the Senate. Three-fourths of the 100-member House is 75 representatives. Three-fourths of the 35-member Senate is 27.

Some Republican and Democrats have questioned whether there is enough support in the House and Senate to reach that threshold in the fiscal session.

Gillam said House leaders are drafting the alternative general revenue budget for lawmakers "to look at if we have to go down that road.

"We felt like it was the right thing for members to see this going into the [fiscal] session, so no one is caught off guard when they go back to the district and see the negative effects of a vote," Gillam said.

He said he would still be developing this alternative general revenue budget even "if I knew I had 75 votes" in the House to reauthorize Medicaid funding.

If the Legislature rejects the private-option funding, Senate President Pro Tempore Jonathan Dismang, R-Searcy, said lawmakers would initially have to review the state's grant programs -- such as state aid to cities and counties -- and where the grant money is spent to see where budget cuts would be possible.

He added, "We are getting ahead of ourselves to even have that discussion."

Lawmakers haven't yet held their special session to consider the private-option program changes or met in the fiscal session, Dismang noted.

He said he hasn't polled senators to see if at least 27 favor authorizing the funding.

The Joint Budget Committee will focus Tuesday through Thursday on reviewing "the big six budgets" -- public schools, higher education, and the departments of Correction, Community Correction, Health and Human Services, said Joint Budget Committee co-chairman Sen. Larry Teague, D-Nashville.

Jean and Teague said they hope the budget hearings can be wrapped up in those three days this week and don't extend into future weeks.

"There is no guarantee that Arkansas Works will pass," Hutchinson told the Political Animals Club in Little Rock on Wednesday.

"It will continue to be a close vote because of the high margin that is required, but our chances increased because of the victory of those candidates that have voted for those common-sense solutions that are good for Arkansas," he said.

Hutchinson was referring to Tuesday's Republican primary wins by six lawmakers, who voted at his request last year to continue funding the private option in fiscal 2016.

The private-option program has divided Republicans ever since the Republican-controlled Legislature and then-Democratic Gov. Mike Beebe authorized it in 2013 to begin in 2014.

The House consists of 64 Republicans, 35 Democrats and one independent. The Senate has 24 Republicans and 11 Democrats.

The private option covers adults who have incomes of up to 138 percent of the poverty level: $16,243 for an individual, for example, or $33,465 for a family of four.

The state will pay 5 percent of the program's cost starting Jan. 1., and the cost will gradually increase to 10 percent by 2020.

Under Arkansas Works, Hutchinson has proposed charging premiums of about $19 a month for adults who have incomes of at least the poverty level; and referring unemployed, able-bodied enrollees to job-training programs.

Currently, private-option enrollees with incomes above the poverty level are encouraged to contribute up to $15 a month to "independence accounts" to help pay the cost of their medical care.

Private-option enrollees with incomes below the poverty level aren't required to contribute toward the cost of their medical care.

Hutchinson has said he doesn't plan to immediately change that.

Hutchinson has said he wants the Medicaid program to stop paying for up to three months of medical expenses incurred by private-option enrollees before they apply for coverage. Instead, he supports having the coverage start at the time of the application.

He's also said that his support for continuing the Medicaid expansion program is contingent on the state slowing the growth of spending in the state's traditional Medicaid program by enough to save about $50 million a year.

In addition, the governor has said he wants to find additional savings in order to provide services to at least some of the 2,900 Arkansans who have developmental disabilities and are on a waiting list for home-based services, such as help with daily living tasks.

SundayMonday on 03/06/2016

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