Dunleavy proposes Medicaid, fire funds in supplemental plan

A supplemental spending bill released by Gov. Mike Dunleavy Wednesday centers largely on firefighting and Medicaid costs, with planned cuts to Medicaid not panning out.

Supplemental budgets typically include unexpected costs. The package introduced Wednesday is about $500 million, which includes $262.5 million in unrestricted state funds and about $225 million in federal funds, according to Dunleavy’s budget office.

Lawmakers last year approved drawing up to $250 million from the constitutional budget reserve to help cover costs in case the budget they passed left holes. Staying within that amount would be the best-case scenario, said House Finance Committee Co-chair Jennifer Johnston, an Anchorage Republican.

Money drawn from the reserve beyond that would require additional support from three-fourths of each the House and Senate, lawmakers have said.

Dunleavy’s request seeks $110.5 million for firefighting costs, including $16 million for potential costs through June, the end of the fiscal year.

He also seeks $263 million for Medicaid, of which $120 million would be state funds. That is on top of $27 million, of which about $8 million would be state funds, sought for adult preventative dental services under Medicaid, which Dunleavy last year proposed eliminating.


The Legislative Finance Division has said there was an error in Dunleavy’s veto of funds for the dental program as well as legal issues that prevented the program from ending July 1, which was the start of the current fiscal year.

The administration and Legislature sought to cut Medicaid. But documents from Dunleavy’s budget office say that after working with the federal Centers for Medicare and Medicaid Services and getting input from interested parties, some of the steps aimed at reducing costs were dropped or could not be implemented as quickly as originally thought.

Budget office director Neil Steininger told a House committee the state health department found in working with the federal agency that some services thought to be optional were not. He said the health department set an ambitious savings goal and had some success though “not every effort” was successful.

Johnston told reporters budgeting is a compromise and that the House had concerns with the level of cuts that could be made to the formula-based program. Dunleavy vetoed Medicaid funds beyond the Legislature’s cut.

Office of Management and Budget documents state that unless changes to laws affecting Medicaid are passed, the state health department “will continue to face obstacles in its efforts to reform” the program.

Dunleavy has said formula programs should be looked at as the state seeks to limit spending. The administration, however, has not introduced legislation this session proposing specific changes.

House Speaker Bryce Edgmon, in a statement, said he hopes “the lesson has been learned that deep cuts carry significant consequences and require careful analysis.”

Last year was chaotic, with Dunleavy proposing deep cuts that prompted public outcry and helped fuel an ongoing recall effort. Lawmakers, unable to override vetoes to the budget they passed, instead passed legislation that sought to restore many of the cuts. Dunleavy agreed to reverse or moderate some cuts, including the size of the reduction to the University of Alaska system.

The supplemental budget also includes $350,000 for tax expertise and legal and economic analyses to assist the Department of Revenue over the next several years. Steininger said the department currently does not have the expertise at the level it believes will be necessary.

Deputy Revenue Commissioner Mike Barnhill told the House Finance Committee the department hopes “that folks here in the Legislature would like to take up the subject of new or incremental changes to existing taxes, in specific, perhaps we could talk about sales taxes.” The experts sought could review proposals or weigh in on impacts, he said.

Dunleavy has proposed a constitutional amendment that would give voters a say on new or increased taxes.