Budget plan shows first Missouri savings from federal Medicaid changes

House Budget Committee cuts general revenue spending despite record fund surplus

By: - March 22, 2021 7:18 pm

House Budget Committee Chairman Cody Smith (photo by Tim Bommel/Missouri House Communications).

The first examples of what Missouri taxpayers will save in the coming fiscal year as the federal government shoulders a bigger share of Medicaid costs were presented Monday to the House Budget Committee.

One of the amendments prepared by Gov. Mike Parson’s administration for the committee recognizes $83 million in general revenue savings in the managed care and pharmacy programs. And the budget plan from Chairman Cody Smith, R-Carthage, identified $164 million from savings for a variety of medical services.

Overall, Smith cut $245 million of general revenue spending from Parson’s proposed operating budget that spends $34.1 billion overall and $10.6 billion in general revenue. But he warned other members of the committee that he’s not ready to spend that money elsewhere, despite a record state budget surplus.

“I have been very thoughtful, very careful about how we spend general revenue,” Smith said during the two-hour session Monday that gave the committee the first look at his spending proposals.

The committee met for about two hours Monday to get its first look at how Smith has incorporated changes suggested by subcommittees and the other changes in the proposed budget. 

The committee expects to vote on the budget bills on Thursday.

At times Monday, it seemed like the antagonism between Parson and lawmakers was being played out on budgetary items. Smith’s spending plan rejected Parson’s signature mental health initiative, $15 million for crisis stabilization centers, and also the governor’s proposal to sock away $100 million of general revenue in a state emergency fund.

“I would love to expand those services, but we just have to be very cautious with general revenue,” Smith said of the crisis stabilization centers. “This is strictly a budgetary measure. What I want to avoid is the impression I don’t value these individually or collectively.”

The budget plan does incorporate Parson’s amendments to spend $18.5 million, including $16.8 million general revenue, to implement legislation raising the age for accused lawbreakers to be considered adults from 17 to 18.

Just before the committee began its meeting, Parson issued a news release announcing he transferred $300 million in federal coronavirus relief funds to the state unemployment insurance fund. The transfer was needed, Parson said in the release, because the fund is being depleted and otherwise the state would have to borrow money that would be repaid through higher taxes on businesses.

“We have come a long way since the early days of this pandemic, and an increase in taxes is the last thing Missouri employers need as we continue our recovery,” Parson said in the news release.

The release did not mention the other major issue facing the unemployment fund – debts from overpayments. The Missouri House voted overwhelmingly March 4 to forgive debts for overpayments from federal programs but defeated an amendment to forgive debts to the state fund because.

The amendment would have used about $30 million of the money Parson transferred on Monday and was defeated because majority Republicans said they were uncertain whether it was legal.

The move infuriated state Rep. Peter Merideth, D-St. Louis, who has pushed to add state overpayments to the debt waiver.

Despite clear legislative support for the move, Merideth said, “as far as I can tell the governor hasn’t actually started forgiving any federal overpayments, either. Apparently he cares about protecting businesses from the unemployment problem with a tiny tax cut going forward, but isn’t as willing to protect actual unemployed Missourians. I don’t really understand what his plan is.”

The Medicaid savings incorporated into the spending plan so far are just a small fraction of what Missouri could expect from changes to federal law. The standard Medicaid plan is supported by state and federal funds, and absent the COVID-19 pandemic, Missouri would pay about 35 cents of every dollar used by the program.

The savings recognized by Parson’s amendment and Smith’s changes are from a reduction in the state share of 6.2 percent because of the national emergency. That reduction will continue until the end of 2021.

The $1.9 trillion pandemic relief bill signed earlier this month by President Joe Biden also includes help for states that expand Medicaid coverage. Missouri voters approved Medicaid expansion under the Affordable Care Act – with a state share of just 10 percent – in August, with services starting July 1.

For two years, the relief bill will cut the state’s cost for its existing Medicaid program by 5 percent.  That, along with a bigger federal share for home- and community-based programs, will mean savings of about $1.4 billion to the state general revenue fund, the Missouri Budget Project estimates.

Parson’s budget proposal estimated the total cost of Medicaid expansion, including administration, at $1.9 billion, with $130 million from general revenue, $1.65 billion in federal costs and the remainder from a variety of state funds.

Smith’s plan, put into a separate appropriation bill from the regular Medicaid program, pegs the cost at $1.7 billion, including $113 million from general revenue.

In the committee’s evening session, Smith and Merideth sparred over whether general revenue left unspent by Smith’s budget plan could be added back to the budget.

The House has a rule to limit overspending that requires amendments increasing general revenue items to be accompanied by an amendment making cuts in another area of the budget. It will be enforced during committee work this week and members can only move money spent in the proposals presented Monday, Smith said.

Merideth argued that the state’s financial strength, plus the expected $4 billion or more in federal aid from the stimulus plan, means the rule should be looser. The amendments should be allowed to use money Parson’s original budget, he said, not just move money in Smith’s smaller version.

“Why are we leaving all that money unexpended, especially when we know there will be $4 to $6 billion additionally that will be in an account that will cover a surprise if we have one?” Merideth asked.

That money is one-time funding and general revenue is ongoing, Smith replied, adding: “This influx of federal cash shouldn’t, to the degree that we can keep it separate, dictate how we spend general revenue.”

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Rudi Keller
Rudi Keller

Rudi Keller covers the state budget, energy and the legislature. He’s spent 22 of his 30 years in journalism covering Missouri government and politics, most recently as the news editor of the Columbia Daily Tribune. Keller has won awards for spot news and investigative reporting.

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