@NCCapitol

@NCCapitol

Lawmakers headed for bad budget news

Posted October 26, 2011
Updated October 27, 2011

The legislature’s main oversight committee meets in Raleigh Thursday to hear progress reports on the state budget. They may not like what they’re about to hear.

According to sources within the Perdue administration speaking on condition of anonymity, four months into the fiscal year, the Department of Health and Human Services is $200 million short of the cuts lawmakers expected it to make.

Medicaid – an entitlement program the state can’t simply decide not to fund – is reportedly short on cash to the tune of $139 million.

Senior sources in the administration blame the bad news on unrealistic expectations by GOP budget writers. They say warnings from experienced executive budget staffers fell on deaf ears among new leaders at the other end of Jones Street.

Many of the Medicaid cuts GOP leaders relied on to balance this year’s HHS budget are subject to federal approval. Overall, the budget outlined 45 program changes that would save the state money, and it factored in projected savings from those changes from early in the budget year. To date, though, only 41 have even been submitted for federal approval, and only 21 have been okayed. The difference is $28 million in savings that hasn't yet materialized, and won't until the changes are approved and implemented.

Mental health facilities are already running $38M over budget. Projected savings from a managed-care program, CCNC, are expected to meet targets by 2013, but are currently running about $40M behind expectations.

Administration sources also say lawmakers failed to account for other expenditures they were warned the department would have to make. For example, the state owes Medicaid a $40 million annual installment on a repayment plan for $300 million in overdrafts in 2008. The budget doesn’t cover that scheduled expense.

Closing the gap

Speaking on background, senior sources say covering the net Medicaid cash gap of $139M could require draconian measures.

If the state cut out all “Medicaid-optional” services aside from pharmacy for the final quarter of the fiscal year - eye care, dental care, podiatry - it would only save about $60M up front. The other $79M, budget experts say, would have to come from double-digit cuts to provider rates for the final quarter of the fiscal year. Those cuts are also subject to federal approval, and it’s not at all clear they would get it.

There are other places lawmakers could look for money to cover the Medicaid gap. The rainy-day fund still contains $300M, and state revenues were more than $100M higher than expected.

But Medicaid isn’t the only budget line that may need to be shored up. Lawmakers are also looking for money for disaster relief after Irene, and Perdue is calling on them to find additional money for pre-kindergarten as well.

Another debt

And then there’s the state’s beleaguered Unemployment Insurance fund. According to administration officials, the state had to borrow about $2.5 billion from the feds because the money state employers were paying into the fund during the recession couldn’t keep up with the benefits the state was paying out of it.

There's a November 10th deadline for the state to repay that money in full to Washington. It almost certainly won’t be met, Perdue officials say, which will trigger a point-3% increase in the rates employers pay into the fund for their workers.

Administration officials say North Carolina isn’t the only state in this predicament – Ohio and Michigan are, too. But they say only legislators can decide how to cover that debt – unless Congress decides to forgive part or all of it.

State lawmakers approved a measure directing the Commerce Secretary to use Employment Security Commission funds to study the issue. But Commerce can’t use ESC money until the department becomes part of Commerce on November 1st, so the study hasn’t been done yet.

Tomorrow’s meeting starts at 9:00am in Rm. 643 of the Legislative Office Bldg. It’s likely to be a lengthy affair, given its five-page agenda. We’ll have coverage of the meeting here at WRAL.com.

11 Comments

This blog post is closed for comments.

Oldest First
View all
  • pbjbeach Nov 2, 2011

    HOW ABOUT THESE WORDS POLITICAL DEREGULATION/ AN OUT RIGHT FRAUD AN CORRUPTION WITHIN THE STATE GOVERNMENT OF NORTH CAROLINA THAT IS INTENTIONAL SET UP TO FAVOR THE COPORATE INSTERST AN SPECIAL INSTREST GROUPS AT GREAT EXPESNE TOO THE STATES TAXPAYERS AN THE STATES PUBLIC WORKFORCE IS BEING MADE TO HAVE TO BEAR THE BURDEN OF IT ALL WITH LESSER AMOUNTS OF RAISES TO NO RAISES AN EVER INCREASING COST FOR HEALTH CARE COSRT BECAUSE OF THE OUT FRAUD AN CORRUPTION THAT IS AN HAS BEEN TAKING PLACE WITHIN THE STATE GOVERNMENT FOR YEARS ON TOP OF YEARS AN A REPUBLICAN GOVERNOR IN THIS WOULD ONLY MAKE THING WORST . BUT AT THE SAME TIME BEV NEEDS TO GO COME 2012 FOR SHE IS IN COHOOTS WITHT HE REPBULCIAN OVER ALL OF THESE BUDGETARY ISSUES AN THE PASSAGE OF THE LAWS TO INFLICE HARM UPON THE STATE EMPLOYEES THANK YOU

  • pbjbeach Nov 2, 2011

    As longe as she anthe stategovernment allows for the payment of bad non speceficiations work an the use of privatized contractor to do what the state own state highway inspectors are supposely to be doing an then not allowing for these privatized inpsectors to allow contracting enitys to get away with the production of bad non speceficiation highway work project that have cost the states taxpayers untold millions of dollars in extrat work cost on hioghway projects . can anyone out there say I/440/15-501 OR I-795 OR US 17 PROJECTS THANK YOU

  • faperrigo Nov 1, 2011

    jlp: Nobody paid attention to the NCGA until last year. That's why the state is in a mess. No one paid attention. Pols did what they wanted when they wanted. Money was slushed and flushed. Now it is time to tighten the belt- and keep it tight.

  • josephlawrence43 Oct 28, 2011

    Well, lets see here: 140 years of Demo. rule that brought us to this sorry economic mess--including the continued shielding of 400,000 illegal aliens in NC who-thanks to the largess of the Demos-receive approximately $1.2 Billion dollars of taxpayer money each year. Hows that for intelligent spending??

  • PoBoy Oct 28, 2011

    Well, if the state officials that decide who gets the benefits and who don't would do a little more investigation into the recipients, a lot of this money could have been saved over the years! As a state employee and someone that works in law enforcement and the courts, I see so many of these n'er-do-wells that "get a check" every month who are able to commit hundreds of thousands of crimes, but are unable to get a job or are "disabled"! WHATEVER! Its time to start a weening-off process and get a grip on this system and give the funds to the ones that actually need them! NC needs to stop funding for bad behavior!

  • jlp Oct 27, 2011

    Amateur hour at the General Assembly continues. Maybe there is a reason the GOP has been irrelevant in this state for 140 years. Hopefully folks are paying attention and we can kick them out for another 140. These people talk a big game but have no idea how to govern.

  • jason19 Oct 27, 2011

    Hate to say this, but I would honestly take, say, a 0.25% hike on the sales tax (to a total of 7.25%) if it will help stabalize this junk. I hate taxes as much as the next person, but I think having *stable* revenue is even more important. Otherwise, we end up paying even more in taxes later. Just get it fixed and call it a day.

  • Obama 2012 Oct 27, 2011

    You do realize that unemployment went up when these nut bags took office, due to the number of layoffs they made?

  • hp277 Oct 27, 2011

    Republican budget writers - ignoring reality (and basic math), living in fantasy land.

  • ljohnson247 Oct 27, 2011

    Who was in charge in 2008 when there was a $300 million overpayments, the DEMS.

More...