High court hears challenge to governor's nursing home cuts

JEFFERSON CITY, Mo. -- In a case that could set a precedent on how Missouri governors handle budget shortfalls, the state Supreme Court heard arguments Wednesday on whether Gov. Bob Holden violated the constitution by withholding nearly $21 million in nursing home grants.

The Missouri Constitution gives governors the power to make budget cuts. At issue is when that power is triggered and what appropriations can be cut.

The nursing home industry, which lost its legal challenge before a circuit judge in September, is appealing on grounds that a governor's budget-cutting power should be triggered only by shortfalls in specific funds -- not the budget as a whole.

Holden, following the practice of previous governors, withheld the nursing home money last May as part of $230 million in spending cuts, which he said were necessary to keep the budget in balance.

"The constitution gives the governor authority to go and redirect funds" when revenues -- as a whole -- fall short of estimates, said Assistant Attorney General Chuck Hatfield, representing Holden before the Supreme Court.

But attorney Harvey Tettlebaum, representing nursing homes and their trade group the Missouri Health Care Association, said the constitution should be interpreted to allow cuts only from the specific funds for which revenues are short of estimates.

In this case, the Legislature had appropriated $133 million for grants to improve quality and efficiency at nursing homes during the fiscal year that ended June 30. Most of that already had been distributed when Holden withheld the remaining $20.8 million to cover other budget shortfalls.

Mix of funds

The nursing home money had been appropriated as a mix of federal Medicaid funds and intergovernmental transfers, or IGT funds -- a category of state money obtained from the federal government through an accounting gimmick that is being phased out.

Because the IGT money was not less than expected, nursing homes contend that Holden could not withhold the money and use it for other purposes. The lawsuit seeks payment of the money to nursing homes.

But Hatfield said nursing homes aren't entitled to the money, even if the industry is right about budget cuts being limited to funds with specific shortfalls. That's because Medicaid revenues were below expectations, thus justifying budget cuts, Hatfield said.

Since Holden withheld the nursing home grants, three nursing homes have closed -- one each in Lathrop, Louisiana and St. Louis, said Earl Carlson, executive director of the Missouri Health Care Association.

"They were in trouble, but this was the key," Carlson said.

Regular state Medicaid payments to nursing homes that house low-income patients fall short of covering actual costs by $13.43 per patient per day, according to Department of Social Services figures cited in court documents filed by nursing homes.

Last year's appropriation of $133 million in one-time grants was intended to help make up that difference, Carlson said.