Crunch Time for the State Budget

The Missouri Constitution requires the General Assembly pass a state budget by May 5. Meeting this deadline seemed increasingly unlikely for several reasons. First, we started late due to a change in administration and the swearing-in of many new House and Senate members. And second, there’s been robust and healthy debate about priorities and substantive policy.

Three policy areas have dominated budget debate this year. Inside the Capitol, most of the talk centered on shifting all of our state’s Medicaid system to managed care. Under current law and budget appropriations, Missourians on Medicaid who reside in counties within approximately 50 miles of Interstate 70 currently receive their coverage through an insurance company in an arrangement that approximates how people with private health insurance receive care. (Caveat: the current system still does not have sufficient financial incentives for Medicaid recipients to choose their own care.)

Two years ago, the Missouri Senate added language in the budget to transition the rest of the state from a fee-for-service system where taxpayers write checks directly to health care providers in Medicaid to managed care, where a third-party oversees services (and the public fisc). The transition process is not quick. Medicaid is a massive program. A public bidding process is required before a change like this can occur. The Department of Social Services has worked on the transition for the past two years and will complete the shift in just a few months.

With this time frame in their mind, managed care opponents understood that this year’s budget was likely the last good opportunity to prevent its spread outside the I-70 corridor. Led by the indefatigable Sen. Rob Schaaf, the opponents battled. They attempted to amend the budget in Senate committee to ban expansion of managed care, and it narrowly failed. Next they attempt to amend the bills on the Senate floor, but the amendments failed again. As a result, Medicaid managed care will be expanded from its current footprint in the I-70 corridor (which includes Cole County) to every county in the state. I believe this is a positive change for taxpayers over the long-term.

The second major issue is education funding. The House fully funded the elementary and secondary education “foundation formula” for the first time in our state’s history. However, as the bills came out of Senate committee, there had been a reduction of $45 million. It appeared that the House and Senate would have to work out such a large difference in conference committee. On Tuesday, in a surprise move, the Senate voted to fully fund the formula as well. As a result, the item is no longer “conference-able” in Capitol-speak, meaning full funding is almost guaranteed to remain in the budget.

The more interesting thing about the Senate’s foundation formula amendment was that it did not include a corresponding decrease somewhere else in the state budget.  Instead of making a hard choice about priorities, those who voted for the amendment simply added $45 million to the state’s spending total. This creates an interesting issue for budget conference committees because the Senate’s budget is not balanced. Based on this education amendment alone, the Senate budget spends $45 million more than the consensus revenue estimate.

The third major issue is nursing home eligibility. The House restored nursing home funding from Gov. Greitens’ proposed budget because those cuts might have led to short-term savings, but increased long-term costs as persons who would previously have been eligible for nursing homes or in-home care would instead seek more costly care in hospital emergency rooms. The House restored some eligibility by passing legislation to eliminate the circuit-breaker tax credit. The Senate has not passed the circuit-breaker tax credit, but followed the House with restoring some eligibility.

The budget conference committee will meet next week to hash out the differences. With K-12 education funding no longer conference-able, the first and key question will be how to deal with the money the Senate’s budget deficit.  A cynical move by the legislature would be to send the bills to Gov. Greitens out-of-balance. That would force the governor to take the oft unpopular step of choosing which programs to cut through his power of withholding and line-item veto. It also gives away a fundamental power of the legislature: the power of setting government priorities through the appropriation process.

The fact is that when the legislature over-appropriates, it avoids the tough votes, but also essentially gives away its constitutional powers to the executive branch, literally “passing the bucks.” I am confident that the budget conference committees will defend the legislature’s powers and send a balanced budget to Gov. Greitens.