Dunleavy asks for $128.7 million to cover Medicaid cuts legislators said were unrealistic. AKLEG Day 16 Recap

The Alaska Capitol Building. (Photo by Alaska Senate Majority/Flickr)

The Legislature continues to churn. On Wednesday, we finally got a look at the supplemental budget request everyone’s been dreading and legislators continued to drill the administration on everything from university cuts to pending regulations. Here’s the highlights from Day 16:

Supplemental spending and Medicaid

Gov. Mike Dunleavy finally submitted his supplemental budget request to make up for holes in the current year’s budget. The total in Wednesday’s proposal is $262.5 million in undesignated general fund spending with a vast majority of those funds going to covering unachievable cuts to Medicaid and higher-than-expected firefighting expenses.

Last year, legislators and health care industry members repeatedly warned the Dunleavy administration that its proposed Medicaid cuts wouldn’t be achievable in a single year. That’s because Medicaid spending is largely driven by agreements with the federal government and cuts require negotiation of waivers, which can take years, or a reduction in eligibility, which would require changes in state law.

Still, Dunleavy pushed ahead and vetoed additional money out of the program, bringing the one year cut to $166.7 million, a goal that OMB Director Neil Steininger told the House Finance Committee was “ambitious.”

Almost immediately, the governor began to backtrack on cuts to social safety net programs like its “emergency” reductions to payments to providers and the elimination of adult dental benefits.

Only $38.4 million in cuts were actually achieved, even less than what legislators believed could be attainable in one year, and now Dunleavy is asking the Legislature for $128.7 million to keep the program operating through the rest of the year.

Without the money, the state would not be able to pay Medicaid providers even though those providers would be required to keep providing services to beneficiaries. The state ran into the same problem last year when funding nearly ran out (that was under the final budget approved under Gov. Bill Walker, so Dunleavy is not the first to underfund Medicaid).

The state officials told the House Finance Committee that without the additional money, funds for Medicaid would begin to run out by the end of March or early April.

House Finance Committee Co-Chair Rep. Jennifer Johnston, R-Anchorage, said she hoped everyone learned their lesson with the Medicaid cut.

“We have also, I think, learned a very valuable lesson with formula program: It’s not one that we can cut our way out of, it’s one that we have to negotiate with our partners to make changes. I know that the department knows this now, I know OMB knows this now,” she said. “With our big supplemental, we have to acknowledge that you can’t do it with a budget cut.”

Johnston and several other members of the committee also highlighted that since Medicaid expansion under Walker the Medicaid program is serving far more Alaskans without significant growth in state funding.

“The story that it’s telling that is relevant here is that actually the state is serving more people at the same cost, and we just felt that we needed to have the full picture between UGF and federal receipts,” Johnston said. “The population has grown, but the state’s cost has not.”

Ferries

If legislators and coastal communities hoped that $12.05 million in supplemental funding for the Alaska Marine Highway System would go to increasing service beyond what Ketchikan Rep. Dan Ortiz called a “significantly reduced schedule,” then they’re going to be disappointed.

After much back and forth with the administration on Wednesday, transportation and budget officials told the committee that the money is only intended to cover unexpected shortfalls in the ferry system’s budget due to last year’s strike and higher-than-expected maintenance costs. Nothing about the current lack of service, said Steininger, was caused by Dunleavy’s budget cuts.

“So, by adding this money, we’re not getting added service,” Ortiz stated, asking for clarity. “We’re getting the ability to meet that reduced service schedule?”

Correct, the administration said.

A few hours after the meeting, the state announced that it had canceled all sailings through March 1 on the M/V Matanuska, which broke down in Juneau and stranded dozens, due to new issues that have been discovered on the ferry. The ferry, which was the state’s last operating mainline ferry, will have to be moved to a drydock in Ketchikan.

“AMHS is aware of travel needs for upcoming school and community tournaments in March and is exploring options for alternative service in the event Matanuska is unable to return to service as planned,” the state said in a statement.

Paying for the supplemental

The big problem with the supplemental is that there’s no clear path to pay for it. The state last year only approved $250 million in additional draws out of the Constitutional Budget Reserve to cover the shortfalls in this year’s budget. This proposal exceeds that, requiring another politically difficult three-quarter vote that gives significant power to Dunleavy-aligned minority Republicans.

There are also several items that are not included in the supplemental that the Legislature might consider adding like a $30 million payment to the community assistance fund.

Taxes

The administration is also requesting $350,000 to stand up a tax team over the next three years, signaling for the first time that the administration might be interested in engaging the Legislature on new revenues. Revenue Deputy Commissioner Mike Barnhill, hot off his job as interim Revenue Commissioner and raffle emcee, suggested that they’re particularly interested in a sales tax.

We have a full write-up on it over here: ‘Perhaps we could talk about sales taxes.’ Dunleavy administration seeks money for tax team

The University

The Senate Finance Committee held a committee of the whole meeting on the University of Alaska on Wednesday. The main takeaway from the meeting is that legislators don’t be particularly keen on abiding by the agreement the governor cut with the University of Alaska on a stepped approach to the budget. Legislators made it clear that they weren’t included on the negotiation of the contract, that they aren’t bound by it and that they–not the governor or the regents–hold the power of appropriation.

Perhaps it’s best summed-up in this tweet (which, hey, let’s make this Tweet of the Day):

Labor regulations

The House Labor and Commerce Committee held a hearing reviewing the Department of Labor and Workforce Development’s proposed regulations that would overhaul/skirt the state’s training requirements for electricians and plumbers.

The regulations were roundly opposed by legislators, unionized labor, non-union labor and even the federal labor regulators. Each said that the proposed “trainee” program would create a largely unregulated pathway to undermining in the established rigorous apprenticeship program utilized by both union and non-union labor.

“The registered apprenticeship system produces highly skilled and qualified license holders for Alaska with significant economic and social benefits. The proposed 12,000-hour pathway to licensing is not a training program. It does not level the playing field as stated by Mr. (Labor Deputy Commissioner Grey) Mitchell,” said John Hakala, the director of the U.S. Department of Labor’s Alaska Office of Apprenticeship.

Hakala was deeply critical of the proposed regulations, noting that there was no requirement for what kind of on-the-job training would qualify in the 12,000-hour pathway as proposed by the state. He and other said it could end up being things like sweeping the floor, shoveling gravel or assembly PVC pipes. There’s no guarantee, they said, that the training would get into the important—and potentially dangerous—work that electricians and linemen regularly face.

“That’s another area where the 12,000-hour just scares the heck out of me,” he said. “You’re not just going to get proper training in the 12,000-hour OJT program.”

The administration indicated that it would be changing some of the regulations but, in general, would be pushing ahead with them still. The regulations are an administrative function so the Legislature doesn’t have the ability to stop them outright.

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