When Gov. Mike Dunleavy rolled out his surprisingly light-on-cuts budget last week, he conceded that despite all the frenzy over red pens he cannot, in fact, cut everything by veto.
“Our formula-driven programs account for over half of the operating budget so over half of the operating budget is not really in my control to change,” he said.
Those formula-driven programs are K-12 education, which is mostly driven by the base-student allocation formula, and Medicaid, which has its eligibility and benefits embedded in state statute. The two programs account for about $1.8 billion of the $3.89 billion in undesignated general fund spending for agency operations in his budget proposal.
Medicaid, in particular, has already caused the administration plenty of problems. The governor ignored warnings that cuts beyond the $72 million approved the Legislature would not be achievable in one year and vetoed an additional $90 million from the program.
As predicted, Medicaid is expected to appear in the spring supplemental budget, which covers holes in the current year’s budget. The governor’s office estimates that it’ll request $120 million from the Legislature to cover not just the Medicaid cuts that were unachievable but cuts that the administration ultimately reversed course on, including the adult dental benefits program.
Education spending was ultimately spared from the budget cuts this year thanks to the Legislature’s forward funding of education in 2018, but Dunleavy had proposed a 25 percent cut to education in last year’s budget that would have required a change to statute.
Dunleavy stopped short of offering his own plan to rework either program other than to say that it would be part of the conversation at a series of yet-to-be-announced budget townhalls slated to start sometime in January. After Dunleavy’s early departure from the meeting, a budget official said that there’s currently no plans for the administration to introduce legislation on either.
But when speaking to a conservative D.C. audience hosted on Monday by the Heritage Foundation, Dunleavy said he plans to make a serious run at changing the laws for both.
“Over half of Alaska’s budget consists of formulas and obligations embedded in statute,” he said, later adding, “I’ll be doing my best to change laws that are crippling our budget. As alluded to a few minutes ago, 55 percent of Alaska’s operating budget is now on auto-pilot spending. In other words: Statutes and laws are driving this spending and unless those laws are changed spending will continue.”
Why it matters
A change to the base-student allocation formula would be a difficult lift, but there’s been some appetite from legislators to go after Medicaid. Republicans have recently been pushing for work requirements to Medicaid, but significant cuts would likely require a bigger overhaul that goes after eligibility.
It appears that the work will fall to conservative legislators to carry what will likely be a flashpoint for the upcoming legislative session, particularly because the issue cuts more along traditional partisan lines than it does the battle lines that have been drawn in opposing Dunleavy’s cuts.
Senate President Cathy Giessel supported the Medicaid work requirements bill in committee with a “do pass” recommendation and the House version of the legislation is carried by Rep. Chuck Kopp, an Anchorage Republican who joined the bipartisan House majority coalition.
“We are going to have a discussion on our statutory items that we need to spend money on: Education, Medicaid, etc,” Dunleavy told the Heritage Foundation audience. “This is spending that keeps spending pushing against the ceiling and, obviously, creating an issue that I have no control over unless the Legislature acts on it.”
However, some changes to Medicaid seem to be coming without legislative change. Enrollment in Alaska’s Medicaid program fell by about 8,000 between July and November of this year. Alaskans who are covered by the Medicaid expansion program fell by about 3,000 during that time.
Alaska has seen a sharp uptick in Medicaid spending in recent years, coinciding with the state’s economic downturn, but it could be easing off as the economy makes its recovery. That recovery, though, was largely based on growth in the medical industry and largely focused in the conservative Mat-Su Valley.