Extra federal Medicaid money could solve SD state budget problem

Extra federal aid could solve SD budget problem

PIERRE, S.D. — The South Dakota Legislature’s plans to cut state spending next year were thrown into question Thursday when lawmakers learned the state might get an extra $36 million in federal aid.

The Legislature had planned to pass a state budget before the main run of this year’s session ends Friday. But the Joint Appropriations Committee might delay completion of the spending plan until March 29, when lawmakers are due to return to Pierre to consider any vetoes by Gov. Mike Rounds.

Legislative leaders said they want to find out whether Congress gives final approval by the end of March to a measure that would provide states with extra federal money for Medicaid, the state-federal program that pays the medical expenses of poor people.

“I don’t see how you can ignore seeing what transpires,” Senate Republican Leader Dave Knudson said.

The delay in finishing work on the state budget will give South Dakota officials time to find out if the expected extra federal aid can be used to patch holes in the state budget, said Senate Appropriations Chair Jean Hunhoff, R-Yankton.

Hunhoff said the Joint Appropriations Committee might start work to amend the budget measure on Friday, but would postpone a final vote until March 29 to find out if the extra federal money is available.

Jason Dilges, the governor’s budget director, said federal rules indicate South Dakota could not get the extra federal Medicaid money if it has already balanced its budget by cutting spending. If the budget has been written to depend on using reserves, however, the federal money would be available to balance the budget and replace those reserve funds, he said.

Rounds in December proposed using $32 million in reserves to balance the state budget for the year beginning July 1. Nearly all spending increases recommended by the Republican governor are for Medicaid, which has provided medical services to more people as unemployment has grown in the past year.

Republican members of the Legislature a week ago proposed more than $50 million in spending cuts and other actions to avoid using reserves next year. They are worried about even larger budget problems looming in following years.

Lawmakers on Thursday gave final approval to part of the GOP budget-balancing plan. That measure would increase state revenue by $11 million or more by reducing the size of tax refunds given to large industrial and agricultural-processing projects.

Lawmakers and state officials were surprised when the U.S. Senate on Wednesday moved quickly to pass a bill that would extend key pieces of last year’s economic stimulus measure. It includes money to continue unemployment benefits to people unable to find jobs as the nation’s economy recovers slowly, and it extends extra federal Medicaid help to states for six more months.

The federal government pays roughly two-thirds of the cost of Medicaid, with the state picking up the rest.

Dilges said last year’s stimulus measure increased the federal share of Medicaid funding through Dec. 31, 2010, to help states deal with budget problems. The bill passed by the U.S. Senate would extend the extra federal funding for Medicaid through June 30, 2011, providing South Dakota with an extra $28.8 million, he said.

South Dakota also is getting an additional $6.7 million in federal money tied to a calculation of how much the jobless rate increased during the recession. State officials learned recently that South Dakota would receive an additional $6.5 million in federal funds as part of a change in prescription drug coverage for people in both Medicaid and Medicare.

In all, South Dakota could get $42 million in extra federal money, which would save an equal amount of state funds.

Analysts in Washington expect the House and Senate to agree on the funding measure by the end of the month because members of Congress do not want the unemployment benefits to expire at the end of March, Dilges said.

Dilges said he would prefer that the Legislature wait to pass a budget at the end of March, when state officials will know what Congress has done.