Lawmakers look for savings in Medicaid to help with budget hole

SEEK could be at risk in second year, corrections costs keep growing

By RONNIE ELLIS

FRANKFORT — As lawmakers struggle to put together a two-year state budget, they appear to be resorting to tried and true methods.

No tax increases. No expanded gambling. Juggle spending among areas of the state budget while depending on the federal government to come through with a second round of extra money for Medicaid as part of a second stimulus package. Medicaid is paid for by both the federal and state governments. As part of the federal stimulus, the feds upped their portion to 80 cents on the dollar from 70 cents. But whenever those increased federal dollars go back to the usual level, the state will have to reduce Medicaid payments or make up the a larger Medicaid deficit than it started out with.

“We believe it’s prudent to assume there’ll be a second extension that’ll cover our entire first year of our Medicaid program,” said House Speaker Greg Stumbo, D-Prestonsburg, Tuesday. He said he thinks there “at least – at least - $200 million” potential savings in better management of such Medicaid programs as prescriptions drugs. He said Oklahoma, a state which mirrors Kentucky in many ways, spends a billion dollars less on Medicaid prescription drugs.

Even with the shift of $220 million from Medicaid to other programs, lawmakers will still face about $170 million in cuts in the General Fund, said House budget chairman Rick Rand, D-Bedford.

Both Stumbo and Rand said they still hope to spare SEEK, the funding formula for the state’s public schools. But House Education Chairman Carl Rollins, D-Midway, said that may not be possible in the second year of the budget.

Asked if there is anyway without new revenue to spare SEEK in both years of the budget, Rollins responded: “In the second year? I’d be surprised,” Rollins said. “I don’t see how you can do it without everyone taking big cuts.”

Told of Rollins’ comments, Stumbo said, “Maybe. I think we can.”

One area where it’s not likely to come is from corrections. The Department of Corrections’ budget is one of the fastest growing pieces of the state budget pie with projected spending this year of $469 million to house 21,293 inmates. Of those, 8,700 are in county jails for which the state pays $31.30 a day for state inmates, plus medical expenses. On top of that the state pays jails money to help support the costs of county inmates. Those costs are expected to total about $14.6 million this year – on top of the $31.30 per diem.

DOC is requesting less money for the counties in the next two years - $14.3 in each – while telling members of the budget review committee for the Judiciary they expect to house more state inmates in those county jails. Those will receive the $31.30 per diem.

DOC Commissioner Ladonna Thompson said she expects the total inmate population to increase to 22,552 inmates by the end of the current fiscal year which ends June 30; to 23,190 by the end of FY 2011; and to 23,946 by the end of FY 2010. Many of those new prisoners, she said, will be housed in county jails.

Part of the reason for the growth – which will completely eradicate the reductions from an early parole program enacted two years ago – is longer sentences. Several critics of the growing costs of corrections have pointed to Kentucky’s multiple sentencing enhancing laws which often lengthen sentences for non-violent drug crimes. But efforts to reform those persistent felony offender and drug enhancement laws have run into stiff opposition and even Stumbo said last week he “is not an advocate of penal code reform.”

With a growing population and longer sentences, it’s inevitable prison populations will continue to rise. Two years ago, the Pew Center for the States released a study which indicated Kentucky has the fastest growing incarceration rate in the country – although the crime rate has remained relatively steady.

Rep. Jesse Crenshaw, D-Lexington, who chairs the budget review subcommittee for the judiciary, asked Thompson an identical question he posed to Kentucky State Police Commissioner a week ago: how can lawmakers make changes to reduce costs? He pointed out – as he did a week ago – that, “I asked you in August to give us some ideas by January And we’re now well past January.”

Crenshaw conceded his frustration after the meeting.

“What I need greatly are innovative ways to reduce costs and we’ve only got about two months to solve this budget problem we have,” said Crenshaw.

Stumbo said he expects lawmakers to get some idea of the direction of the budget by the end of this week or next. But originally, the House leadership planned to share those ideas with the rank and file last week.

So far, those tried and true methods aren’t providing any easy answers.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.