Tuesday, April 12, 2011

Round up on State Budget & Monthly Receipts

Over the past few weeks there have been several news items of interest regarding Kentucky's budget and economic situation and we thought we would just combine them all into one post.  

March Receipts
State Budget Director and Secretary of the Cabinet Mary Lassiter released the tax revenue receipts for March 2011. The news for the General Fund and Road Fund was good and followed the trend of 11 consecutive months of increasing revenues. We always caution by saying that most of this revenue growth was budgeted for, so any surplus for FY 2011 will be minimal. Here are the highlights:

- General Fund revenues were up 3.7% and Road Fund revenues were up 6.9% over March 2010.
- In order to meet the budgeted General Fund revenues of 4.5%, revenues would need to increase 2.2% over the next 3 months. Based on internal estimates Lassiter believes revenues will hit 4.9% for FY 2011 and there will be a small General Fund surplus.
- The General Fund growth is being lead by the sales tax, up 4.3% YTD, and individual income tax, up 6.2% YTD.
- The Road Fund continues to exceed the budgeted estimate for FY 2011, which was 4.9%. Revenues could actually decline 14.6% and still meet that estimate. The Road Fund is up 12.3% YTD for FY 2011.

You can download the full report HERE.

Here is a story from the Herald-Leader on March receipts: Small surplus likely as state revenues continue upward trend: "FRANKFORT -- Kentucky tax revenues increased in March for the 11th consecutive month, leading officials to predict a small surplus when the fiscal year ends June 30...State Budget Director Mary Lassiter said the nearly year-long growth in General Fund receipts shows that Kentucky may be inching its way out of one of the worst recessions in decades."

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More on State Revenues
Ryan Alessi, CN2 had a good interview with James McCabe, one of the economists that makes up the Consensus Forecasting Group, who look at economic indicators and predict the revenues the state bases its budget on. The full article can be accessed by the link below or you can watch the video clips:

Kentucky should meet revenue projections for 2012, economist says: "

Barring any unforeseen bottoming out of the economy, Kentucky should be on pace to reach the roughly $8.8 billion in tax revenue economists predicted for 2012, said economist James McCabe...




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Kentucky's Bond Rating 
During the recent Special Session much was made of Kentucky's debt levels and particularly the issue of debt restructuring. House and Senate leaders in the Budget Conference committee during the 2011 regular session and in the House and Senate versions of HB 1 during the session limited the Governor's ability to restructure debt. When two rating agency's recently downgraded Kentucky's bond rating this has lead to more discussion about Kentucky's overall financial condition. 

This Herald-Leader article provides more insight: Downgrades in Kentucky's bond rating ignites partisan debate: "FRANKFORT — Two financial rating houses — Moody's and Fitch — have recently downgraded Kentucky's bond rating, citing increasing costs in the state's pension systems and too much reliance on one-time money to balance the state's books.On March 30, Moody's downgraded Kentucky's ability..."


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State Budget Deficits
This Stateline article does a good job of giving some basics on state busgeting and how budget deficits are calculated.  State budgets explained: Why deficit figures don't always add up: "In some states this year, disagreement over how to calculate budget deficits has made for confusing debates. Here’s a primer on what budget shortfalls are, the math behind them and why those calculations have become controversial."

Wednesday, April 6, 2011

Fwd: 2011 Special Session Update

2011 Special Session Ends

The Kentucky State Senate convened today on what was the final day of the 2011 Special Session. The Senate ended the Special Session by adjourning Sine Die this evening a move made by the House on March 24. The House did not convene today. 

As you will remember, Governor Beshear called legislators into a special session after they adjourned the regular session without reaching agreement on how to deal with a deficit in the Medicaid budget.  The Governor and House proposed shifting funds from FY 2012 to FY 2011 in order to make up the shortage.  Those funds would then be replaced by savings found after the state enters into contracts with managed care companies to manage the Medicaid program. The Senate approach involved across the board cuts rather than shifting funds. 

During the special session, the House chose to concur with the Senate approach with an understanding that Governor Beshear would veto the cuts to state government.  Following that action, the House adjourned the session sine die.  The Senate however chose to adjourn until today, April 6th, in order to have the ability to override the vetoes. 

The House, in keeping with how they chose to end the special session, did not return today to look at veto overrides.  Therefore, action could not be taken by the Senate to officially address the vetoes. However, the Senate Republicans introduced and passed 19 resolutions - one for each veto that Governor Beshear issued - expressing their desire to override the vetoes.  The Senate Democrats passed on the block vote of the resolutions.
 
We also want to note, that thus far, the RFPs for Medicaid Managed care have not yet been released.  We anticipate that will happen sometime this week.

2011 Special Session Update

As the Dust Settles

Here is a quick update on where things stand on the 2011 Special Session:

Beshear Issues Veto
Governor Beshear issued his veto statement on House Bill 1 from the Special Session, get a copy HERE. As you are aware the Governor used his line item veto on significant portions of House Bill 1 to remove cuts to education, veterans affairs and other agencies, as well to remove numerous language provisions related to everything from debt restructuring and furloughs, to provisions specific to Medicaid like face to face enrollment and analysis of Medicaid managed care savings.

The implications of his vetoes are this:

- After the significant vetoes, very little is left of the Senate or House versions of House Bill 1. Basically, the Governor has vetoed the bill back to his original plan to move $166 million from FY 2012 to FY 2011. There is no mechanism for cuts to government to be triggered if the administration is unable to generate the savings necessary to make up the $166 million in FY 2012. There are also no special mechanisms for legislative oversight, other than the usual interim committee meetings, to monitor whether the predicted savings are being realized.

- The Governor's plan for filling the $166 million shortfall that now exists in FY 2012 in the Medicaid program is to utilize savings generated by instituting Managed Care and from "other" efficiencies in the Medicaid program, yet to be identified. However, without the forced cost savings triggers, that existed in both the House and Senate versions of HB 1, Medicaid and Secretary Miller have a little more flexibility in their timeline for instituting managed care, because there are no statutory deadlines to meet.

Special Session...Is it Over?
As you will recall, the House and Senate both passed House Bill 1 last Thursday, March 24. After delivering the bill to the Governor, the Senate adjourned until April 6 at which time they plan to return to consider the Governor's veto message on House Bill 1. The House adjourned Sine Die, a procedural motion to end the session, and in essence ends the session because the House does not plan to return. This has brought up several questions including: can one chamber adjourn a Special Session, are legislators being paid during this time, and most importantly is the session over?

Our interest is less on the legislative pay and constitutional questions, but whether the session over. Based on information provided by the Legislative Research Commission it doesn't appear that the Special Session is over until the Senate also adjourns Sine Die, which we will anticipate will happen on April 6. House Minority Leader Hoover and others have asked House Speaker Stumbo and other House Democrat leaders to return to Frankfort on April 6 and consider overriding the Governor's vetoes. At this point that doesn't seem likely.

Medicaid Managed Care
In many respects by addressing this issue, last of the three items we are writing about is in essence burying the lead. The long-term implications of the Beshear administration's move to managed care for Medicaid will have long-term and far reaching implications for virtually all, if not all, health care providers in the Commonwealth. Here are a few main points on Medicaid Managed Care:

1.   The Governor's plan to manage the Medicaid budget through managed care will begin with the issuance of RFPs on April 1, this Friday.  Responses will be due on May 15 with contracts signed by July 1, the beginning of the new fiscal year.
2.   At this point there remain many unanswered questions about the managed care that will be implemented:  How many vendors will be involved?  How will the managing vendor(s) get services in place under the short timeline?  To what extent will providers in rural areas cooperate?  Will the Passport region stay intact or be expanded?
3.   There will be other unidentified efficiencies will be implemented as well.
4.   The renewal of the Passport contract with the Cabinet is now under negotiation.  In testimony, Sec. Miller indicated changes to the Contract.
5.   Systematic scrutiny of billing practices and service provision by providers will occur.

Once the RFP's are issued we will provide further analysis.