Analysis: Nixon faces tough road restoring cuts to Medicaid

Monday, November 10, 2008

JEFFERSON CITY, Mo. -- Democratic governor-elect Jay Nixon campaigned on a pledge to reverse Missouri's Medicaid cuts. But that is likely to be easier said than done.

Republican lawmakers who passed those cuts three years ago, and who still control the legislature, have essentially shot down Nixon's main campaign pledge before he can even try to make good on it.

"To do a restoration of Medicaid cuts at this point would just flat be irresponsible -- it's not doable," likely Senate president pro tem Charlie Shields said in an interview last week. "My gut [instinct] is he knows that in his heart of hearts."

Nixon said he hasn't had an opportunity yet to study the state's finances. One of the first acts of his transition team will be to select a budgetary adviser. But less than a week after his lopsided election, Nixon has tempered his campaign promises with a dose of fiscal reality.

"We will attempt to implement those priorities at whatever level is affordable within the confines of the dollars we have," Nixon said during a Friday news conference announcing his transition team leaders.

Missouri began its 2009 fiscal year in July with an operating fund balance of $833 million -- the largest amount on record dating back 20 years. At the time, Missouri was projected to end the fiscal year with a $340 million balance.

But last Thursday, the Office of Administration said "that estimate will not hold up," and the ending balance now is projected to be "substantially less than that."

Instead of the 3.1 percent revenue growth assumed by the state budget, Missouri's net revenue was down 1.1 percent through the first trimester of its fiscal year.

That raises the question of whether Nixon might have to make budget cuts shortly after taking office Jan. 12.

House Budget Committee chairman Allen Icet said he hopes that can be avoided. But if state revenue continues to worsen over the next eight months, it might be necessary for the governor to withhold some of the money appropriated to state agencies and programs, Icet said.

Eight years ago, Democratic Gov. Bob Holden faced a daunting situation during an economic downturn. Just weeks after taking office, Holden had to make the first of several rounds of state spending cuts. After declaring education his No. 1 priority, Holden ultimately ended up withholding money from public schools and state universities to balance the budget.

When he succeeded Holden in 2005, Republican Gov. Matt Blunt also discovered a budget with spending demands exceeding revenue. Blunt and the Republican-led legislature responded by eliminating Medicaid health care coverage for some low-income adults and reducing benefits for others.

Nixon began planning his gubernatorial campaign shortly thereafter. His campaign platform declares: "Jay Nixon's first order of business will be to restore health care to those who had it slashed by the Blunt administration."

To restore Medicaid coverage to about 110,000 people and replace the lost benefits for an additional 280,000 would cost the state about $265 million, according to the Department of Social Services.

Nixon's other major campaign proposal -- a scholarship program providing four years of free tuition to certain students with good grades -- would cost the state an estimated $61 million.

"We do not have the money" for either Nixon's health care or higher education plan, Icet said. He added: "New programs in tough budget years, for the most part, they never get off the ground."

Although Shields dismissed the restoration of the Medicaid cuts, he said Senate Republicans may be open to a plan encouraging people to continue their education beyond high school. But Shields did not specifically commit to Nixon's higher education plan.

Newly chosen Senate Majority Leader Kevin Engler stressed his ability to work with Republicans and Democrats alike -- something Nixon also has emphasized.

Yet when it comes to Nixon's health care and higher education plans: "It's obvious we can't afford it," Engler said.

During the campaign, both Nixon and Republican gubernatorial rival Kenny Hulshof "made promises they knew we couldn't keep financially," Engler said. Now "we're going to have to work with the governor, figuring out what we can financially afford as we move forward."

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