2014 legislative update: Medicaid, prison funding challenges remain as Alabama House committee OKs barebones General Fund budget

Medicaid, mental health and other human services in Alabama would face yet another year of tight funding under the General Fund (GF) budget that cleared a state House committee Wednesday. The committee’s version was virtually identical to the one that Gov. Robert Bentley recommended last month.

The committee approved next year’s proposed $1.8 billion operating budget for Medicaid, public safety and other non-education services after little discussion or debate. The budget now goes to the full House, which could consider it as soon as next week.

Big challenges ahead for Medicaid, prisons

Medicaid and state prisons would get nearly half of the GF’s money next year under the House GF budget committee’s plan, continuing the recent trend of those agencies consuming an increasingly larger share of the budget’s dollars. Medicaid would receive a $70 million, or 11.4 percent, increase, while the Department of Corrections would face a cut of $6.8 million, or 1.7 percent.

The committee’s proposed funding level could make it a challenge for Medicaid to maintain current services. Medicaid would remain $15 million short of the $700 million that State Health Officer Don Williamson said last month that it needs from the GF. The agency, which insures about one in five Alabamians, already has cut reimbursements for dental services, dialysis and services from non-primary care doctors. Williamson said the agency could survive next year by looking for more ways to trim costs in the prescription drug program and other areas.

Funding challenges also would remain for the state’s prison system. The corrections cut would come even as state prisons face a shortage of guards and run at nearly twice their designed capacity. Alabama also faces growing demands to hire more female guards, install more cameras and make other prison infrastructure improvements. Rep. Steve Clouse, R-Ozark, who chairs the House’s GF budget committee, said he wants to work with lawmakers to find more money for corrections.

Flat funding the norm for many other services

Other critical social services would receive essentially the same amount of GF money next year under the committee’s plan. The Department of Mental Health would be funded at the 2014 level despite the increased demand for community-based mental health services following the closing of several state mental health hospitals.

The Department of Senior Services, which provides Meals on Wheels nutritional assistance to the homebound elderly, was similarly level-funded. State courts, which have cut hundreds of jobs in recent years, also would get much less money than they requested.

The Department of Human Resources (DHR) would receive 16.8 percent, or $11.8 million, less from the GF next year. DHR’s allocation in Bentley’s recommended Education Trust Fund (ETF) budget would nearly double to offset that loss. Between the two budgets, Bentley recommended about a 2 percent increase for DHR. Because the ETF budget has not yet won committee approval, it remains to be seen whether the Legislature will support this increase. DHR provides child welfare, child support collection and elder abuse services. The agency also administers the Supplemental Nutrition Assistance Program (SNAP) and the Temporary Assistance for Needy Families (TANF) program in Alabama.

A children’s health insurance program would get a substantial funding boost next year to help cover higher enrollment. ALL Kids, which insures Alabama children whose low- and middle-income families do not qualify for Medicaid, would receive 28.3 percent more from the GF.

General Fund’s long-term structural deficit remains

Alabama is one of the only states with two major state operating budgets. The ETF budget funds K-12 schools, two-year colleges and public universities, as well as other state and local services related to education. The General Fund budget provides support for all other state services, including public health, public safety and child welfare.

Alabama has the highest rate of “earmarked” revenue in the nation. That earmarking forces lawmakers to spend certain tax proceeds only for very limited purposes. For example, individual income taxes and sales taxes are set aside for the ETF and can be spent only on education. Revenues from sales taxes and income taxes tend to rise and fall with the economy, allowing the education budget to make up for bad years during good years and to save some money for years when the economy is not doing as well.

The GF budget lacks this flexibility because it is funded from a variety of revenues that are not as responsive to economic changes and that do not grow quickly enough to keep pace with cost increases. That leaves the GF with a structural deficit, meaning it often is strapped for cash even when the economy is doing well. Next year’s proposed budget once again illustrates Alabama’s chronically inadequate funding for core services, ACPP executive director Kimble Forrister said.

Time is getting shorter for the Legislature to pass GF and ETF budgets for next year. Lawmakers will return Tuesday for the 17th of 30 allowable meeting days during the 2014 regular session, which is expected to last until early April.

By Carol Gundlach, policy analyst. Communications director Chris Sanders contributed to this report. Posted Feb. 20, 2014.

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