Raleigh, N.C. — An unusual open budget conference meeting appears to have broken a logjam over the new state spending plan – at least for now.
Senate and House budget leaders sat down Wednesday morning for a standing-room-only meeting to start a new round of exchanging offers, starting with the bottom line.
Senate Majority Leader Harry Brown said the meeting would deal only with differences between the two chambers on reversions, Medicaid and the lottery – the three biggest factors in determining how much money is actually available to be spent in the new fiscal year.
"We feel like it’s important that we get the starting number right, and that’s what we’re talking about today," said Brown, R-Onslow. "Everything else in the two budgets is still on the table for negotiations."
Brown said the House's most recent offer assumed too much money already on the bottom line and overestimated how much money was coming in from the lottery. But the biggest difference, philosophically and numerically, he said, is the different amounts the two sides believe the state will need to pay for Medicaid.
"I don’t think I’ve got to tell anyone how complicated Medicaid is, particularly in this scenario because of the new computer system that we’ve put in place in (the Department of Health and Human Services) and trying to get numbers," he said.
Because of the difficulty in getting an accurate Medicaid forecast, he said, the Senate feels it's prudent to budget for the "worst-case scenario." That means setting aside $150 million for unpaid bills from the 2013-14 fiscal year and $228 million for the current year's increased program cost.
The House proposed $118 million for unpaid bills from 2013-14 and $139 million for added costs in 2014-15.
Brown pointed out that the state has spent more than $2 billion in the past four budget cycles to back-fill shortfalls in Medicaid budgets.
"We take the worst case, and that’s based on the history of Medicaid," he said. "Look at the history. See where we’ve been for the past three or four years."
House Senior Budget Chairman Nelson Dollar presented a House counter to "meet in the middle" on reversions and Medicaid, and he hinted they could consider adjusting lottery figures as well.
"We decided it would be appropriate to make some adjustments there and also to do what we believe is our part to break the logjam and move forward," said Dollar, R-Wake.
The offer Dollar unveiled increased the 2013-14 Medicaid number to $136.5 million and the 2014-15 number to $186 million.
"We do not have a Medicaid forecast this year, unfortunately," he conceded.
But he argued that shortfalls in recent years were caused more by structural defects like off-budget debts and erroneous calculations than by out-of-control program costs.
"Those things have been paid for. They have been put on the books, cleared through and done," he told the Senate.
Dollar said House leaders would not be willing to consider additional cuts to Medicaid or education to help the two sides come to a numerical starting point.
"Our concern is, we do not believe it would be justified to take additional, serious cuts that would affect real lives and real people in need and would hurt access to health care," he said. "We also believe it’s critically important to keep our (teaching assistants) in the classroom."
The Senate's budget would eliminate funding for more than 7,000 classroom assistants statewide to help pay for teacher raises.
After an hour's recess, Brown returned to the table with big news: "We will accept your numbers" on Medicaid for this year and next.
The two sides also agreed on reversions – unspent money from 2013-14 that the state can put into the new budget, along with money the state grabs back from various programs – but still have to discuss lottery revenue.
"This kind of reminds me of selling a car a little," Brown joked.
"Senator Brown, you haven’t sold the car yet," Dollar replied, "but we do like some of the features."
After the meeting, Senate President Pro Tem Phil Berger defended the Senate's higher numbers as "right."
"Both sides made changes," Berger told reporters. "What we've done is settled on a number that's a midpoint.
"We still have concerns. We'd prefer to be at the worst-case," he said. "But at some point, you've got to try to move the process along, and that's what we're doing."
Berger stressed that everything else, from teaching assistants to Medicaid eligibility cuts, is still on the table, except the lottery. The Senate doesn't want to see increased advertising, and he pointed out that the House's second budget bill didn't include increased advertising, either.
Negotiators are likely to meet through the holiday weekend.