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A look ahead at coming budget
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The Executive Branch is in the process of gathering data to build the governor’s FY 2013 budget to be presented to the Legislature in January 2012. It might be easy to think that because state revenues are trending upward, the state is flush with cash to spend.

Actually, that is not true. As the state grows and different programs are increased, it is apparent that there is a hole for every new dollar and then some hole left over. There is a growing list of priority state services that are facing operational deficits. Senate budget writers have been monitoring state agency needs and it is becoming apparent that we will be looking at an approximately $1 billion deficit for the FY2013 budget.

It is important to understand that revenue growth will probably not be sufficient to cover all of the needs out there. Over the next few weeks we will discuss the components of this billion dollar deficit, priorities in funding these needs and the role new revenues will play. 

Revenues and agency reductions

The FY2012 budget was built on approximately 5-6 percent growth in collections. We are currently collecting at that level though some of the categories are showing signs of volatility. The $1 billion deficit in FY2013 will need to be covered by revenue growth, or through agency reductions, or not be funded at all. The governor has called for 2 percent reductions in FY12 amended and FY13 general recommendations. With the exclusion of Medicaid and QBE, this will only generate approximately $130 million.

Covering the remaining amount of $870 million will require approximately 6 percent growth on top of the 6 percent growth expected in FY12. With the unemployment rate stuck at over 9 percent, the housing market as it is, and the looming threat of federal cuts, this type of growth rate could be difficult.

Department of Community Health

FY12 Amended Need: $262 million

FY13 General Need: $400 million

The Department of Community Health (DCH), which administers Medicaid, PeachCare and the State Health Benefit Plan, will once again be a main topic during budget discussions this upcoming session.

As you may remember, the legislature this past session immediately faced a shortfall in the State Health Benefit Plan that was not accounted for in the Governor’s Recommendation. Part of the solution was an underfunding of Medicaid to divert funds to the immediate need in SHBP. Also, due to the budget situation, a FY2012 care management organization (CMO) payment was delayed which will impact both the FY12 and FY13 budget.

In short, these deficits will require $160 million in the FY12 budget AND again in the FY13 budget. Enrollment and utilization growth in Medicaid and PeachCare will require the addition of $39 million in FY12 and $112 million in FY13.

Every year, the percentage that Georgia is reimbursed for Medicaid and PeachCare expenses is recalculated based on the per capita income of Georgians in relation to the national per capita income. Georgia will receive 65.29 percent reimbursement of Medicaid expenses (down from 65.95 percent) and 75.7 percent of PeachCare expenses (down from 76.17 percent). These adjustments of fractions of a percent might seem small, but you must realize that these programs account for billions of dollars. In FY13, $47 million will be needed due to these fractional changes.

Federal health care law changes now allow Georgia state employees earning under 235 percent of poverty level to enroll their children in PeachCare if they qualify. Projections of this shift indicate savings to the State Health Benefit Plan but will require new state funding in PeachCare. Because of the federal match in this program, this shift will require $17 million in new FY13 state funds to PeachCare. Other deficits in DCH will account for $8 million in FY13.

The State Health Benefit Plan is facing substantial pressures as it deals with lower numbers of current retirees making less in salary while the number of retirees is increasing. DCH is investigating various changes to the program but it is predicted that $48 million in state funds will be required in FY12 and $55 million in FY13. More on SHBP later.

Next week: Other state needs for 2013 budget.

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