Special Session - Day 7 Update

Special Session Day 7 Recap

(Curious to how we got here, see all of our special session updates at blog.govplan.com)

 The day was light on official legislative activity, which is detailed below. Of most interest is that the Senate Majority Leadership and Senate Republican members of the Appropriations & Revenue Committee met this morning and we believe are meeting again this afternoon to discuss the House version of HB 1 and how the Senate plans to approach the legislation.

The Senate Appropriations & Revenue Committee has scheduled a meeting for tomorrow, Wednesday at 10:00 a.m. to take testimony on House Bill 1. We are not anticipating that the bill will be up for a vote at tomorrow's meeting.

The two items of major speculation at this point are:

1. The Senate Approach: Has the House satisfied the Senate's need to make further cuts and reduce the Governor's ability to restructure debt? How substantive will the Senate's changes to the bill be?

2. Timeline: Will the House and Senate try to resolve their differences before the Senate amends the bill and sends it back to the House? If they did, then the House could simply concur in those Senate amendments without the need for a conference committee. How does the Governor's veto factor into this? Will the legislature extend the session and wait to see if the Governor utilizes the veto before adjourning the special session?

Senate Daily Action

The Senate briefly convened this afternoon and gave House Bill 1 its 2^nd Reading and referred the bill to the Senate A&R committee for action. Now that HB 1 has two readings it can be voted from committee and considered on the floor the same day.

The Senate adjourned until 2:00 p.m. on Wednesday.

House Daily Action

With House Bill 1 over in the Senate the House took no action on the floor today and adjourned until Noon on Wednesday.

Drop Out Bill

The Senate Minority caucus took testimony from First Lade Jane Beshear and Rep. Jeff Greer to urge the Senate to take action on House Bill 2, legislation to raise the drop out age to 17 by 2015 and to 18 by 2016. The legislation has passed the House three times in different sessions, but has yet to be considered by the Senate. This media report of the meeting provides more details. Herald-Leader

Special Session - Day 6 Update

House Takes Action on HB 1

House Bill 1 took a big step forward today, as the House passed an amended version of the bill containing a "bi-partisan" plan to resolve the Medicaid budget shortfall. A copy of the House Committee Substitute to HB 1 is available HERE. Here are a few of the highlights:

- Moves $166 million from FY 2012 to FY 2011 to balance Medicaid budget.

- Governor has to certify to the General Assembly by August 15, 2011 that he can achieve the $139 million in savings necessary in FY 2012 through Medicaid managed care.

- If the Governor can not meet those savings projections then the Governor is directed to make across the board cuts beginning October 1, 2011. However certain agencies are exempted from cuts including: all levels of education except the Council on Postsecondary Education, veterans affairs, local government economic development and assistance funds, and teachers retirement.

- The House plan also re-opens the mandated budget reductions that passed as part of the 2010 budget related to $169 million in FY 2012. It further restricts the Governor's options to achieve that savings and forces him to make cuts to government contracts and to reduce non-merit personnel.

- Further the House restricts the Governor's use of furloughs in FY 2012.

The House Appropriations & Revenue Committee met and the committee substitute was adopted without a dissenting vote. Then within a few minutes the full House approved the bill by a vote of 94-4. The four No votes were from House Republicans: Rep. Stan Lee, Rep. DeCesare, Rep. Kerr, and Rep. Fischer.

The legislative process now turns to the Senate for them to review the House version of HB 1, and to begin to formulate their position on the House bill and their approach to solving the Medicaid budget shortfall. During the Regular Session and in a letter they sent to the House last week, the Senate has favored across the board cuts to most state agencies including education to achieve the needed savings.

The House adjourned until 10:00 a.m. on Tuesday. The Senate took no action on the floor today and adjourned until 2:00 p.m. on Tuesday.

House A&R Committee

The House Appropriations & Revenue committee had another informational meeting today and heard testimony from Sec. Miller regarding Medicaid managed care and how they would achieve the needed savings. A copy of that presentation is available HERE. In the committee meeting, Secretary Miller discussed how the administration is limited in how they can handle the Medicaid deficit, and that if they are not allowed to shift funds and implement managed care, then the only way to deal with the shortfall is either to reduce benefits or cut provider reimbursement.  She said that reducing the benefits is not an option that this administration is comfortable with.  From December of 2007 to December of 2010, KY Medicaid enrollment increased by 95,000 members.  Miller discussed that Kentucky is one of 20 states looking at expanding managed care and then touched on various independent studies that show savings can be achieved.

A good amount of time was spent discussing the timelines for implementing managed care.  The timeline is as follows:

• RFPs Issued - April 1
• RFP Responses Due - May 15
• RFP Contract Awards - July 1

We will continue to keep you updated as the attention turns to the Senate.

Medicaid Resources from CSG

The Council on State Governments put out this handy resource regarding Medicaid match rates and how states will fare with the expiration of the enhanced ARRA (Federal Stimulus) match rate.

This is timely for those of us closely watching the Kentucky General Assembly grapple with filling the $166 million Medicaid deficit in special session. This deficit was caused mostly by the gap in ARRA expected funding and the reduced amount that Congress actually sent the states including Kentucky.

Some of the most helpful information in the CSG post was this spreadsheet showing the match rates by quarter, here are Kentucky's:

                           2008                  2009                               2010                                                        2011                             2012
                                                Q1   Q2   Q3    Q4                  Q1    Q2    Q3    Q4                   Q1    Q2    Q3    Q4   
Kentucky  69.78     77.8 77.8 79.41 79.41    80.14 80.14 80.14  80.14    80.61  77.78  75.9 71.49   71.18


The other interesting chart was this one showing Kentucky as one of only 17 states that will have a better match rate in 2012 than in 2008.

More resources to come and thanks to CSG for the info.

Special Session - Week 1 Update

Time Marches On...

As we end the first week of the 2011 Special Session, called by the Governor to address a $166 million shortfall in Medicaid and to consider legislation to raise the drop out age, things look a lot different than they did at the beginning of the week. Monday and Tuesday the Governor traveled around the state waging a campaign against the Senate's plan to cut state government and education to balance the Medicaid budget. Senate President Williams countered by challenging the Governor to a statewide televised debate of the issue, which the Governor declined. Needless to say the political rhetoric was at a high point.

As the week progressed, the House held a series of hearings from Medicaid providers and state agencies that detailed the impact possible cuts to Medicaid provider reimbursements and further state budget cuts would have on these various groups from Hospitals to Corrections. These hearings provided informational testimony, but also had the effect of taking the "air out of the ball" and dampening the political environment.

But as we look back now, the legislature has used 5 legislative days and House Bill 1, the vehicle for making changes to Medicaid, has yet to be considered by the House Budget Committee and though Speaker Stumbo and Minority Leader Hoover have been working on a compromise plan to solve the Medicaid budget shortfall, no concrete details have been released and it doesn't appear the Senate has been briefed on the plan.

The Senate released this letter mid-week, which was a restatement of their position during the Budget Conference Committee at the end of the Regular Session with the exception of allowing revenues above cuts to be given back to the agencies that were cut. Since this is a budget issue, HB 1 must originate in the House, so the Senate has been left to wait on the House to act. Majority Leader Stivers alluded to that on the Senate Floor on Friday wondering: "why we're here in the capitol since it has been 9 days and there is nothing from the house that has consensus."

House Plan

The little that Speaker Stumbo has shared publicly regarding the House plan is summarized best in this article by Ronnie Ellis in the Daily Independent:  "Stumbo's plan sets target dates for Beshear to report on progress toward achieving his savings – dates in advance of next January's budget session so cuts could be made early enough in the fiscal year to reach established spending targets."

The action should pick up next week when the House Appropriations & Revenue Committee meets at Noon on Monday to hear "important testimony" regarding House Bill 1 and what is likely further details of the House plan. The House and Senate both plan to convene at 2:00 p.m. on Monday.

What to Watch For

1. Speaker Stumbo may have to gig the Governor next week when the House plan is unveiled. The Governor has asked specifically for the legislature to give him the ability to manage the Medicaid shortfall by moving funds from FY 2012 to 2011. However, it is likely that the House plan is going to impose budget cuts if the Governor can not produce the Medicaid savings.

2. The Governor to appear before the House Appropriations & Revenue Committee Monday. Pure speculation on our part, but it would seem like a nice gift from House Democrats for the Governor to at least get some face time next week after they unveil a plan that isn't exactly what the Governor was hoping for. That being said, this Special Session has been a lot about the 2011 Governor's race so the Governor may appreciate the face time. 

3. How will the Senate react? Will they stick to their guns on across the board spending cuts and if so will this Special Session run through the end of next week for the legislature to work through another budget conference committee? It seems like the Senate is pretty dug in on making across the board cuts, so it isn't clear the House and Senate are any closer than when the Regular Session ended.

Legislative Activity

Neither Chamber took any significant action on the floor on Friday.

Special Session - Day 4 Update

Day 4 Highlights

House

Today the House Appropriations & Revenue committee met but took no action on HB 1, the bill addressing the Medicaid budget shortfall. However, on the floor today the House Leadership announced that all House members were encouraged to attend an A&R Committee meeting on Monday at 2:00 p.m. where "important testimony" would be provided on HB 1. The House plans to convene at 4:00 p.m. on Monday and 9:00 a.m. tomorrow.

A&R Committee:
The House Appropriations & Revenue Committee met today and continued their testimony regarding the potential impact further budget cuts would have on state agencies.

Today's testimony was provided by State Budget Director and Secretary of the Cabinet Mary Lassiter. Her presentation was focused on providing a perspective on the history of budget cuts and the economy over past 4 years, impacts of future cuts, and to further discuss debt restructuring. A copy of the slide presentation is available for download, here are the highlights:

- History of cuts and revenues - Still not back to 2008 revenue levels although they may reach that and beyond in 2012. The administration has made eight budget reductions with two more to come in 2012 that will total $250 million.

- 83% of general fund has been held without cuts, because SEEK, Medicaid, and others have been held harmless. However, those that have been cut which is most other state agencies have had
cuts of 25-30%.

- Addressed state employee hiring numbers. They have declined on trend, low point in 2009 when the  retirement window closed, Beshear has added some people, mostly funded with federal funds, in the areas of workforce development and unemployment insurance or at Revenue where additional auditors were allowed for in the budget.

- Probably the most interesting point was in regards to the impact of future cuts. Due to the already mandated $169 million in cuts provided in the 2010 enacted budget, a scenario like the Senate has discussed would be an additional 2% across the board cuts on top of that. However, if the same programs like Medicaid and SEEK were exempted like they were in 2011, the 2% across the board cut turns into 9.5%.

- Because of the use of $565 million in one time monies in the 2010 enacted budget there will be a $565 million structural imbalance going into 2013-14 budget cycle.

The next meeting of the committee will be Monday at 2:00 p.m.

Senate

The Senate convened briefly today and took no action on the floor. They plan to convene tomorrow at 9:00 a.m.

Dustin Miller
Government Strategies, LLC
229 Shelby Street
Frankfort, KY 40601
Work: (502) 226-3975
Cell: (859) 227-5800