Federal aid, Medicaid expansion top issues for Missouri House Budget Committee

Lawmakers await rules for spending billions from COVID relief package

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

The House Budget Committee will submit its revisions to Gov. Mike Parson’s $34.1 billion state operating budget to the full House this week without the benefit of clear guidelines for spending new infusions of federal cash.

The committee must also decide whether and how it will use a record general revenue surplus. The fund’s cash balance reached $1.9 billion on Feb. 28, more than five times the amount on hand at the end of February in any of the past 10 years. Parson’s budget projects a $1.1 billion surplus on June 30 and asks lawmakers to set aside $100 million for a state reserve account. 

The $1.9 trillion American Rescue Plan signed by President Joe Biden will provide an estimated $2.8 billion for state spending needs, with the money available to cover revenue shortfalls and COVID-19-related spending such as hazard pay.

But that’s only the biggest allocation for the state. An analysis by the Missouri Budget Project, a liberal think tank focused on fiscal issues, shows other large amounts that will be available but must be included in the budget to be spent.

Those items include:

  • $2 billion for primary and secondary schools, delivered through the Department of Elementary and Secondary Education based on the formula for distributing Title I funds. Districts must use at least 20 percent of the money to make up for learning lost during the pandemic.
  • $1.4 billion from a change in the share of Medicaid paid from federal coffers to states that expand coverage under the Affordable Care Act and for home- and community-based services. MIssouri voters approved Medicaid expansion in August with services starting July 1.
  • $721.8 million for child care services, including $277.7 million to support child care for essential workers and $444.1 million for grants to child care providers to help them stay in business.

It is uncertain whether any of that money will be reflected in the budget when the committee finishes work this week. House Budget Committee Chairman Cody Smith, R-Carthage, did not return messages seeking comment on his plans, and state Budget Director Dan Haug did not respond to questions asking if the administration would have amendments ready this week.

On some items, it makes sense to wait, said Traci Gleason, spokeswoman for the Missouri Budget Project. The state needs guidance for the fiscal relief funds, she said, to know what is and is not allowed.

“Treasury guidance will get into more specifics, and the state will want to know that before we start appropriating the money,” she said. “The incentive for Medicaid expansion and other items like that, those are a little more straightforward. That is money the state can assume is coming in.”

For example, Gleason said, the state needs to know how to calculate whether it has actually lost revenue during the pandemic. The standard measure, which compares fiscal years, doesn’t work now, she said.

Early in the pandemic, before the state began receiving large amounts of federal aid, Parson predicted revenue losses “larger than those experienced in the Great Recession.” State revenues fell 13 percent over two years.

Instead, revenues have been so strong Parson on March 1 released all restrictions on general revenue appropriations, providing $123 million for schools and freeing $280.8 million overall

In the fiscal 2020, which ended June 30, general revenue receipts fell to $8.93 billion, down $634 million from the previous year. So far this year, general revenue has increased by $1.1 billion, according to a report on revenue through Thursday.

That increase is due, in part, to a change in the income tax filing date in 2020, to July 15, which pushed the final tax payments for 2019 into the new fiscal year.

Measured from March 1, 2020, to the end of February, general revenues are up $113 million, Gleason said.

“That is really where that treasury guidance is going to be critical,” she said. “That is going to outline some of the more specific uses and also how money can be supplanted.”

The committee, however, doesn’t have the option of waiting for guidance. The Missouri Constitution requires lawmakers to finish spending bills at least a week before they adjourn on May 14. 

At a March 11 news conference with Republican House leaders, Smith laid out the schedule for House action. The budget will be finished in committee this week, he said, with floor debate set for the following week.

That will leave five weeks for the Senate to make its changes and resolve disagreements with the House.

The schedule, Smith said, “gives the Senate adequate time for their consideration.”

When Parson presented his budget in January, the biggest new spending item was Medicaid expansion. The proposal estimated the total cost, including administration, of $1.9 billion, with $130 million in general revenue, $1.65 billion in federal costs and the remainder from a variety of state funds.

In the committee’s budget plan, Smith separated $1.6 billion for services to the expected 275,000 new Medicaid recipients into a standalone appropriation bill. He has not explained the move publicly. Medicaid is usually funded through line items in the budgets for the Mental Health, Health and Senior Services and Social Services departments.

The ranking Democrat on the committee, state Rep. Peter Merideth, D-St. Louis, said Smith has also not explained it to him privately.

“Procedurally there are a lot of problems with this,” Merideth said March 11 at the Democratic news conference closing the first half of the session. “What seems to be happening is an effort to separate Medicaid expansion with a different vote and try, potentially, to not fund Medicaid expansion through the legislative process.”

If the intent is to block funding by defeating the bill, it won’t work, Merideth said. Medicaid expansion is part of the constitution and funding lines for existing Medicaid services would have to bear the cost.

The extra federal funding for expansion in the relief bill, and other federal actions to reduce state costs during the pandemic, mean less in state funds will be needed overall, he said.

The result would be a massive supplemental spending bill to use the federal funds matching state spending, Meridethh said.

“It is irresponsible gamesmanship and it needs to stop,” Merideth said. “If the legislature or the department decides not to go forward with that, it will end up in court.”