Rep. Cody Smith, R-Carthage, speaks during a press conference on the first day of the 2022 legislative session. (Photo courtesy of Benjamin Peters/Missouri House Communications)
With Gov. Mike Parson promising state employees a pay raise by Feb. 1 and the state’s Medicaid program likely to run short of money sometime next month, one of the first items on the legislature’s agenda this year is a supplemental $5.3 billion spending bill.
The House Budget Committee will meet at 11 a.m. Monday for its first look at the bill, which includes $1.9 billion in federal coronavirus relief funds for public schools and $1.6 billion for Medicaid.
The only sure deadline for passing the bill is March 24, when federal law requires the state to have appropriated at least 75 percent of the school funding. But the Medicaid program, which was expanded last year to cover working-age adults, is likely to need money sooner.
“So, initially, we thought that was Feb. 1, and that has since been relaxed a little bit because of the Medicaid expansion take up rate,” House Budget Committee Chairman Cody Smith said in an interview. “So there have been fewer people coming on the rolls in the beginning in the early phases of Medicaid expansion than they had anticipated.”
Exactly when the bill must be passed is uncertain, but the quicker, the better, said Senate Appropriations Committee Chairman Dan Hegeman.
“We just need to get it done,” Hegeman said.
If we run out of Medicaid money, obviously, we risk not paying Medicaid providers, and bad things happening
– House Budget Chairman Cody Smith
But with the Republican Senate majority fractured, and members of the conservative caucus promising amendments that would bar using any money to pay for Medicaid expansion coverage, Hegeman was quick to add that he wasn’t trying to shove the bill through.
“We need to go through the process and have the discussion,” he said. “I mean, I am not wanting to, you know, short circuit the proper debate and considerations.”
When voters approved Medicaid expansion in 2020, supporters estimated that up to 250,000 people would receive coverage. While Parson’s budget for the current year funded the coverage, Republican majorities in the legislature cut the money.
That sparked a lawsuit and a ruling from the Missouri Supreme Court that the initiative set eligibility standards for Medicaid and the state had no choice but to use funds already appropriated to provide care.
Anyone aged 18 to 65 who has an income less than 138 percent of the federal poverty guideline is eligible for coverage.
The Parson administration began accepting applications on Oct. 1, and only 51,513 people have enrolled.
Any attempt to stop paying for the expansion group is doomed to fail, Senate Minority Leader John Rizzo said Thursday during a news conference.
“I think at this point the courts have spoken and spoken and spoken again,” Rizzo said. “If they choose to go down that path again and bang their heads against a wall, it will get resolved in the courts, again. It is just a matter of how far they want to take that and continue to take that and embarrass themselves.”
The Medicaid supplemental spending does not touch the state’s massive general revenue surplus, well over $2 billion and growing. Instead, it pays the state’s share from a fund set up to hold money the federal government sent to Missouri because of the COVID-19 pandemic.
Not all of the $1.6 billion for Medicaid is to cover the expansion group. Each year, Medicaid requires supplemental appropriations because of uncertainty in estimating the care it will be required to provide.
The way the bill is structured, the state is essentially using cash it saved because of federal COVID policy to match the federal money that will pay the bulk of the Medicaid expense for the traditional program and for the expansion group.
The bill uses $429.8 million from the “Medicaid Stabilization Fund,” leaving $209 million in the fund. In his budget request last year, Parson estimated the general revenue cost of Medicaid expansion at $120 million.
The main elements of the bill, in addition to Medicaid, are:
- $72 million, including $41 million in general revenue, to fund a 5.5 percent pay raise for all state employees and increase the minimum state employee wage to $15 an hour.
- $3.1 billion, including the $1.9 billion that must be appropriated by March 24, to the Department of Elementary and Secondary Education. Much of the money, including 90 percent of the funds under the deadline, will go directly to local school districts.
- $370 million more from federal coronavirus funds for various programs, including $100 million for the State Emergency Management Agency and $12 million to supplement Victims of Crime Act funds distributed to domestic violence shelters, child advocacy centers and other victim services.
The money spent by the bill is to cover the state’s anticipated costs until June 30, the last day of the fiscal year. Parson’s annual budget message will be delivered Jan. 19 when he makes the State of the State Address.
The pay raise has broad support, and continuing it into the next fiscal year will cost the state $218 million, including $123 million in general revenue.
The labor market is very competitive right now, Hegeman said.
“That’s really just to make us competitive with the market so that we can retain employees to do take care of veterans in the nursing homes and take care of our developmentally disabled population, and fully staff in corrections and other facilities,” he said.
Parson has unprecedented amounts of money to use, if he chooses to do so. The budget will include his proposals for using all or part of $2.8 billion the state will receive from the American Rescue Plan Act, signed by President Joe Biden in March.
It is not just federal funds that are available in previously unimaginable amounts. The consensus general revenue estimate for the fiscal year starting July 1 is for $11.4 billion in tax collections, the most in any year.
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The general revenue fund surplus should exceed $2 billion when the new fiscal year begins. The surplus from fiscal 2021 was just over $1 billion, and the current year’s budget is based on revenue estimates that were $1.3 billion below current expectations.
And other funds, totaling more than $500 million, are available and can be spent as if it were general revenue.
That amount of cash is a magnet, Hegeman said.
“There’s just a lot of work because it is a rather large budget this year,” he said. “I think there’s just a lot of requests and a lot of interest in different ideas and programs, so all the various ideas that will come through this year.”
In the House, state Rep. Doug Richey, R-Excelsior Springs, chairs the Subcommittee on Federal Stimulus Spending.
In hearings before his committee, colleges and universities in November asked for $435 million for labs, classrooms and athletic facilities. In April, the panel heard requests from local governments and other agencies that included $88 million for a new training academy for the Missouri State Highway Patrol.
Parson in August proposed using $400 million for a massive broadband initiative.
“I think we’re looking at all those things,” Hegeman said.
To get a piece of the federal funds, Richey said in an interview Thursday, projects will have to show a long-term benefit either as infrastructure or supporting state objectives without creating a large ongoing cost. The money is from federal deficit spending, he noted.
“So for us, at least for me, I’ll just speak for myself in this capacity, as long as I have the ability to put fingerprints on the lever, I think it’s important to say we will spend everything necessary that can be defended as being worth that debt,” Richey said. “And if it doesn’t, we may end up saying no to some really good projects.”
The state has until Dec. 31, 2024, to appropriate the money and until the end of 2026 to actually spend it.
“I don’t think we need to race to spend every dime possible because these are tax dollars that are yet to be collected,” Richey said.“This is a line of credit that the federal government has given us, right?”
Democrats will support a well-conceived plan to use the federal funds and state surpluses to address needs in education, infrastructure and other areas, Rizzo said.
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“We have the funds to make a dent in being last in a lot of things and I hope the Republican majority uses that to our advantage,” he said.
But work on the budget for the upcoming year will wait while the supplemental bill is pending. The House is planning Friday floor sessions, if necessary, to speed up work.
The conservative caucus hopes to undo Medicaid expansion may hinge on sending a constitutional amendment to the ballot, Smith said. Any move to cut off funds to people already enrolled would generate another court battle, he acknowledged.
But if the Senate conservative caucus wants to propose a plan, he said, it should wait for the upcoming fiscal year. Time is precious to get the supplemental bill through, he said.
In the current year, it “is more of a matter of paying our bills now that we have expansion,” Smith said. “And then you’ve got (fiscal year 2023), which is the departure from one fiscal year to the next. I think that’s a different calculation.”
A big fight that delays the bill would hurt everyone on Medicaid, Smith said.
“If we run out of Medicaid money,” he said, “obviously, we risk not paying Medicaid providers, and bad things happening.”
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