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Edwards outlines cuts to close budget gap

Governor John Bel Edwards has announced that the $70 million in cuts necessary to close the current year’s budget gap that legislators left unresolved in the special session will come solely from the Department of Health and Hospitals (DHH).

Gov. John Bel Edwards
Gov. John Bel Edwards

These cuts include $30 million in savings from expenditures coming in lower than projected. DHH has just completed its first full year funding private insurance plan coverage for most Medicaid clients.
The cuts also include $10 million in more efficient administration of the department implemented since Governor Edwards took office.

Finally, the cuts include $30 million in end-of-year cuts divided as follows:

Prioritizing children who truly need Pediatric Day Health Care Program services:  $500,000

Reducing rates paid to Bayou Health managed care companies:  $10,300,000

Reducing DHH contracts:  $1,900,000

Reducing each Public-Private Hospital contract by 1.5% (impacts 10 hospitals):  $6,900,000

Making hospital payments under a better Medicaid expansion federal match rate:  $10,400,000

The Governor proposed a budget stabilization package to legislators during the special session that directed more than $170 million in cuts which the legislature approved and another $340 million in non-revenue raising measures legislators passed. The legislature approved an additional $300 million in revenue measures that will help solve the budget deficit for the current fiscal year, ending June 30, 2016.

Bond refinancing will provide another $81 million in savings this year. These measures combined left nearly $70 million in cuts that still needed to be made to close this year’s budget deficit.

“Higher education has suffered the deepest budget cuts of any higher education system in the country over the last eight years – more than $700 million. In addition to that, we are asking them to fund $28 million for TOPS scholarships this year that will come directly out of campus budgets,” Governor Edwards said. “Therefore, at my direction, DHH has taken a sharp pencil to its budget, scrutinized its spending patterns closely under our first full year of our new private-insurance style Medicaid program, and found ways to make some very painful cuts. We are grateful, too, that our public-private safety net hospital partners came to the table, willing to work with us for the good of our Louisiana citizens during this difficult time.”

State Treasurer John Kennedy simply said “it’s about time.”

“Some of us have been recommending this for years,” Kennedy said. “Given the fact that Medicaid spending in Louisiana has exploded in the last eight years, it’s good to see that the governor is getting serious about cutting some of the waste in Medicaid, including the fraud. I also applaud him for cutting unnecessary contracts. He needs to do more, but this is a good first step.”

In a new and bold step, Governor Edwards also announced last week that he has taken a radically different approach to developing this year’s Capital Outlay bill – the bill that sets out the state’s construction project priority and funding list.

“I made a commitment during the campaign to get realistic with our state’s construction dollars, to focus on fixing our roads and taking better care of our state buildings, and to stop over-budgeting our capital outlay bill with projects we tell people back home are “in line” to be funded, but which in reality have little hope of ever being funded.”

The capital outlay bill (House Bill 2) list of projects which the Governor and the Commissioner of Administration are recommending this year will recommend $1 billion less in projects for reauthorization in Priority 5 funding. New projects the governor is recommending be added to Priority 1 (cash lines of credit) and Priority 2 funding will remain within the bounds of what realistically can be supported by bond sales.

The state will issue (or sell) bonds in the fall of 2016 and then again in the spring of 2017.  Estimated future annual bond sales are greatly limited due to the recent negative revenue forecasts for Louisiana and credit rating reductions. This impacts the number of building projects the state can realistically afford to fund.

As for the capital outlay budget, Kennedy said setting priorities based on the needs of the people of this state instead of the needs of the politicians is long overdue.

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