Raleigh, N.C. — Gov. Pat McCrory told state agencies Friday to limit their spending in the coming months so he could shift money to cover a Medicaid shortfall of as much as $262 million.
McCrory ordered State Budget Director Art Pope to transfer available state funds to the Division of Medical Assistance to cover the cost overruns and money that the division already owed to the federal government.
“It is time to solve this mess, not kick the can down the road and manipulate the budget as was done in the past. It stops now,” McCrory said in a statement. “If we stop this practice and get a handle on the Medicaid hole, we’ll have balanced budgets that fund our priorities, including education, and avoid mid-year shortfalls.”
In a memo sent to agency directors, he said Medicaid claims will outstrip the money lawmakers set aside for the program by $70 million to $130 for the 2012-13 fiscal year, which ends in June.
Also, he said, the state must repay the federal government $132 million that the Division of Medical Assistance wrongly kept last year. A recent state audit uncovered that money was still owed.
A $262 million shortfall amounts to about 2.6 percent of the $10 billion in state and federal money North Carolina spends on Medicaid in a year.
McCrory noted in his memo that the annual budget has a $200 million reserve and an extra $213 million in unappropriated money. Also, revenue officials have projected that tax collections are $100 million above forecasts, and state agencies have saved $125 million this year.
Combined, the savings and revenue mean that the governor won't have to invoke emergency spending cuts to cover the Medicaid shortfall, he said.
Still, he asked all cabinet agencies and Council of State members to adjust spending through the end of June by eliminating raises, except for promotions, limiting purchases and travel, collecting revenue as quickly as possible and re-evaluating contracts.
“Despite positive cash balances, we need to live within our budget and make sure everything is disclosed and accounted for," Pope said in a statement. "That is why the state needs to reduce spending now, rather than waiting until the end of the fiscal year or using accounting gimmicks to pass on the costs to next year.”
Dana Cope, executive director of the State Employees Association of North Carolina, said the budget-saving measures outlined in McCrory's memo are things state employees have been living with for several years.
“From the first glance of what I’ve read, we’ve been doing all that already," Cope said.
McCrory on Thursday signed a bill blocking an expansion of the Medicaid program under the federal Affordable Care Act. He has maintained that the program is broken and needs to be fixed before people are added.