Shumlin Administration Says It Won't Seek New Revenues To Close Budget Gap

Nov 12, 2015

The administration of Gov. Peter Shumlin says it hopes to avoid asking lawmakers for additional funds for the 2016 fiscal year in the annual budget adjustment and will instead seek authority to shuffle spending within state government.

Finance Commissioner Andrew Pallito, who took over the post on Nov. 1, will update the Legislature’s Joint Fiscal Committee Friday on the administration’s budget adjustment progress and its plan to address a $35 to $40 million gap in the Medicaid program. Pallito said Thursday the administration will seek “spending authority manipulation across state government” to help close the Medicaid gap and address additional budget pressures in state government.

“We’re going to zero it,” Pallito said. “We aren’t going to ask for anything. We’re going to look at how the moving pieces fit together.”

The Department of Vermont Health Access, or DVHA, which oversees the state’s Medicaid program, has the largest budget pressures. The state drastically expanded the Medicaid program under the federal Affordable Care Act. The additional caseload has increased the cost of the program and must now be paid for.

“We have this great system and we are providing a lot of benefits to people. We need to work out how to pay for it,” Secretary of Administration Justin Johnson said. “The challenge for the state is if it’s not a payroll tax then it’s something else.”

Last January, the Shumlin administration proposed a 0.7 percent payroll tax in an effort to create a sustainable funding source for the Medicaid program. Lawmakers rejected the proposal so the administration must find alternative ways to pay for the program until a funding source is created.

About $8 million remains from a surplus in the 2015 fiscal year and will be applied to Medicaid.

Despite the large Medicaid gap, Johnson said he believes the state can absorb the additional costs within the budget passed by lawmakers in June.

“We can probably tweak within the budget,” he said.

DVHA faces other budget challenges, too, including the cost of a drug used to treat cystic fibrosis that has proven to be “quite effective,” Johnson said.

“We have a relatively small number of people in the state who would access that drug but it’s quite expensive,” he said. “We certainly want to make sure that they get the treatment they need. We’ll work out how to build that in.”

The state must also find funds to pay Blue Cross Blue Shield of Vermont about $1.6 million in premiums that it has not been paid due to technological issues with Vermont Health Connect, the state’s online health insurance marketplace.

The administration will seek legislative authority to syphon funds from other departments and agencies to help cover the Medicaid costs and other budget pressures. That involves “looking in places where your expenses are not as high as you thought they were going to be,” Johnson said.

“We always have pots of money that have more in them then we thought they would,” he said.

The Department for Children and Families will need additional funds to address its ongoing needs, too. The department has experienced several tragedies in recent years, including the deaths of two toddlers in its care and the killing of a DCF worker.

“We recognized that there’s a need to sort of look at the resources there and see what we can do,” he said.

Both Johnson and Pallito declined to provide specific details surrounding the budget pressures outside of Medicaid ahead of Friday’s Joint Fiscal Committee meeting. However, Pallito said they are about “10 percent” of the Medicaid needs.

“The pressures from all of the other parts of state government are significantly lower than Medicaid needs,” he said. “We don’t have a final plan for the rest of the pieces around this.”

The administration will finalize its budget adjustment request in mid-December.

Johnson said the administration does not anticipate a need for budget rescissions because both the budget and revenues are mostly on track. The state has seen some expanded economic activity that is contributing to state revenues. Johnson said corporate income tax receipts were ahead of projections last year and continue to exceed projections this year.

“Corporate income has certainly become a bigger part of our revenue over the last 10 years than it was in the past,” Johnson said.

The administration’s goal is to avoid seeking additional funds from the Legislature and it appears that is possible, according to Pallito.

“I wouldn’t say comfortable. We are in the process of working through that,” he said.