State budget, deep breath, state budget, deep breath, rinse and repeat

This past Wednesday, Commonwealth North presented the Annual Alaska’s Assets review. Former Lt. Gov. Mead Treadwell led the program. One of the guest speakers included Bruce Tangeman, Commissioner of Revenue.

Tangeman gave an overview of the Dunleavy administration’s proposed 2020 State budget.

“A lot of the things that are in the paper right now… there is a lot of shock and awe. This is a good opportunity to explain a lot of this and put it into perspective,” he said.

The shock and awe is provided by the governor’s team with a budget proposal that turned every subsequent budget across the state on its head. But one thing to keep in mind as we take our collective deep breaths is that we have a long way to go before we have a final version.

Tangeman explained to the audience that the core programs for the governor is public safety, management of natural resources and preserving maintenance of our transportation infrastructure. His number one issue is expenditures cannot exceed revenue.

“Our revenue streams are quite limited. Our reserves are limited and we’ve been spending down our means. We’ve run out of time,” Tangeman expanded.

He went on to explain that the administration had no choice but to rip off the band aid with a budget that if passed as is would represent tremendous cuts across the board. We’ve been living outside of our means for so long someone had to be the adult in the room. And as his supporters are quick to point out the governor is delivering on his campaign promises. The problem is that few put to paper what it would look like to actually balance a budget without tapping into any reserves and paying a full PFD.

Does anyone really believe that this is the budget or anything close to the final result?

We know that the House and Senate will begin to work on their versions of the budget. The Republican led Senate already is showing signs of not supporting the governor’s budget.

During the Feb 22 Senate Finance committee meeting Lacey Sanders budget director for the office of management and budget along with Sana Efird administrative services director for the department of health and social services presented the Department of Health and Social Services budget. It was met with much skepticism.

The governor is proposing to cut the department’s budget from $3.25 billion to $2.47 billion representing a 25 percent cut. The details of these cuts and how soon they can be cut was the subject of much of the questions from the finance committee to Efird and Sanders.

Sen. Lyman Hoffman asked if the $450 million reductions in federal funds require federal approval. The answer is yes. The state would have to request a 1115 waiver from the Centers for Medicaid and Medicare Services. This can take up to two plus years to get approval.

“Again, I think the administration has put the cart before the horse in several cases but this is a huge one. It would seem you would get those waivers before the reduction. My question to the administration is, what happens if you don’t get the waivers and the funds aren’t in the budget? It seems as though we’re taking a major gamble here and I don’t believe that people’s health care in the state of Alaska should be gambled with, this is a very, very serious issue,” Hoffman opined.

Efird replied that in Senate bill 20 there is a request to use the funds in the statutory budget reserve which is around $172 million as a back stop if CMS does not approve the request. Efird stated that it is not the intention to harm Alaskans that are currently on the Medicaid program. But with the policy direction of the current administration that expenses have to match the revenues, Medicaid is one of the largest expenses for the state hence the cuts.

Committee Chair Sen. Bert Stedman questioned the use of the statutory budget fund and promised a deeper dive from the sub-committee lead by Co-Chair of the finance committee Senator Natasha Von Imhof who is Chair of the sub committee looking into the DHHS budget.

“What we’re talking about here is federal funds. You can not balance this budget with federal funds. Your comments are not apropos to the question of balancing this budget with federal funds. You say this may not affect people’s lives but it may effect peoples lives and this is the flip side of this question. You are with this budget playing with people’s lives,” Hoffman added

Senator Von Imhoff stated, “Looking ahead into your slides, a general comment as you go forward and explain each of the bullet points. I think it’s going to be important for you to explain the timing of these different roll outs. I don’t think many of these things can occur by July 1. There are several steps and critical components that need to occur first. Please include with each bullet point why you chose that item and what was the basis of your decision. What was the rational on each of these bullet points because right now I look at it and it looks like a Zorro cut. I don’t see a rational.”

Later in the presentation a discussion concerning the Pioneer Retirement homes took place. The proposal is to increase the rates to the residents which would be implemented July 1,, 2020, according to Efird. Also, there will be a $15 million grant to help with assistance for low income current residents and future residents.

“I have two family members who have passed away in the Pioneer Home due to advance age and I have two family members that are in the Pioneer home right now. My mother who is on the assistance program and my mother in law will soon to be on the assistance program. I write two checks to the home. If you are in level 2 you pay about $4500 a month so you are looking to double that,” Stedman stated.

Although Efrid did not have the new rates in front of her she believed that Stedman had the rates correct.

There were many other items in the presentation that drew scrutiny from the committee which shows there is a lack of faith that the budget proposed is sustainable. Ripping off the band aid or flipping the state on its head with the reality of a budget that is strictly based on expenses matching revenue is logical in theory but as Efrid showed in her responses the administration is a long way away from doing their due diligence to justify the ability to actually implement this budget. Suffice it to say the state budget will have an entirely different look by the time the House, the Senate and the Administration come to an agreement. Are we taking odds on how many legislative sessions it will take to come to an agreement?