State deficit projected to grow $300M
Plagued by higher-than-projected Medicaid costs, Connecticut officials now say the state is on pace to end its 2013 fiscal year with a $365 million budget deficit, according to a Nov. 15 report.
The new report comes in stark contrast to a Nov. 1 estimate by state Comptroller Kevin Lembo that Connecticut’s government was facing a $60 million deficit for its current fiscal year, which ends June 30, 2013.
With additional data now available relating to the expansion of the state’s Medicaid program, the Office of Policy Management (OPM) and the legislature’s Office of Fiscal Analysis are predicting a $260 million shortfall for the Medicaid portion of the budget.
The projected deficit has been attributed in part to a sharp increase in enrollment in the state’s Medicaid for Low-Income Adults – or Husky D – program.
In 2010, Connecticut became the first state in the country to receive federal approval to expand its Medicaid program to low-income adults under a provision of the Affordable Care Act.
The shift allowed the state to transfer recipients of the former State-Administered General Assistance (SAGA) medical program for low earners – which was entirely funded by the state – to its Medicaid program, where the costs are split by the state and the federal government.
With the shift, however, more residents became eligible for coverage under the Husky D program, causing enrollment to increase from 45,000 individuals in June 2010 to 83,827 in October 2012.
The Connecticut Department of Social Services had previously projected enrollment would not approach the current levels until at least August 2013.
According to a Fiscal Accountability Report released Nov. 15 by the OPM, part of the reason why Medicaid is being used more than was anticipated is because the economic recovery has been slower than expected. Many citizens are still without jobs and therefore are without medical coverage.
“Demand for government services remains significant,” the report says. “(By design) the need … comes at a time when it is hardest for the state to pay for it.”
The pace of the economic recovery in Connecticut has likely contributed to the projected deficit, said Joseph McGee, vice president for public policy and programs of The Business Council of Fairfield County.
“We had all hoped for a faster economic recovery than we are experiencing here,” McGee said. “As the economy picks up, it will improve. We’re just not performing now as we hoped.”
McGee said he anticipates that Medicaid will continue to have an “enormous squeezing effect” on the state’s budget, forcing tough decisions on schools, roads and municipal budgets.
However, with an aging population and the cost of care increasing, McGee said the state would be hard pressed to cut Medicaid spending. Instead, he said, the state will have to continue to look for sources of revenue growth.
“It’s disappointing,” McGee said of the deficit. “We thought we had fixed it.”
The OPM report notes that while significant fiscal progress has been made over the last two years through tax increases and other measures, a slow economy, the looming fiscal cliff and uncertainty abroad make for further challenges lay ahead.
“The governor understands the challenges we face and is committed to meeting them head on,” said Roy Occhiogrosso, senior advisor to Gov. Dannel P. Malloy. “That means Connecticut state government needs to live within its means. We’ll get there by cutting spending and continuing to make state government leaner, cheaper and more effective. And there will be no new taxes.”
In preparation for the governor’s biennial budget proposal in February 2013, a “long” list of potential cuts is being prepared by administration officials and state agency commissioners have been asked to make requests under the understanding that their appropriations are likely to decrease by roughly 5 percent.
Though some cuts are less likely than others, Occhiogrosso said just about everything is on the table when it comes to potential cuts. No decisions have been made yet on the state budget.
“The governor is committed to stabilizing the state’s finances,” Occhiogrosso said. “That’s something he heard over and over again from the business community when he was a candidate: ‘We need stability.’ He’s working hard to provide it.”