The state agency that oversees programs that deliver health care to about a quarter of Georgians isn’t ruling out job cuts to meet Gov. Brian Kemp’s edict to slash department budgets over the next two years.
Kemp wants agencies throughout state government to cut spending 4 percent this fiscal year, which began July 1, and 6 percent next year. But he exempted big, enrollment-driven programs like Medicaid — which funds health care for the poor and disabled — and schools. He also exempted transportation and some other programs.
So while the Department of Community Health will have to figure out how to cut about $10.4 million in administrative costs in fiscal 2020 and 2021, its board on Thursday approved a request for an increase of about $250 million over that period to pay for health care programs like Medicaid, where funding is based on how many people are enrolled.
Some other agencies — outside of education — won’t be able to ask for increases. They will be submitting budget plans in the next few weeks filled with spending cuts.
DCH Commissioner Frank Berry told board members that Kemp’s call for a leaner state government was part of the governor’s campaign pledge last year when he was running for office.
“We prepared a very, very cautiously optimistic budget, but it is very, very tight,” Berry said. “It’s a lean budget. We will always look at administration before we look at any kind of program cuts.”
Lisa A. Walker, chief financial officer of DCH, said the agency will cut about $4.2 million out of administration this year and $6.3 million next fiscal year, which begins July 1, 2020. The agency has about 1,050 employees, but handles medical programs — Medicaid, PeachCare for Kids, the State Health Benefit Plan for teachers, state employees and retirees — that spend more than $15 billion a year in state and federal funds.
When asked about possible job cuts at the agency, Walker said department leaders haven’t yet figured out specifically how the administrative spending reductions will be made.
“We have to explore all those different scenarios to determine how we will take that cut at the end of the day,” she said.
The fact that state agencies don't have details about how they will make the cuts isn't surprising, since the Kemp administration only put out budget instructions a few weeks ago. Agencies weren't necessarily expecting the governor to ask them to make reductions in budgets that only went into effect in July.
State agencies were told to expect to get 4% less to spend in their monthly allocations as of Oct. 1.
Kemp’s decision marked the first time since the Great Recession a governor has told agencies to cut their budgets. But the governor is concerned about an economic slowdown and wants to have the money available to meet some of his top priorities, such as increasing teacher pay.
State lawmakers didn't help the budget situation by voting to lower the top income tax rate in 2018 — an election year. A second cut will be voted on by lawmakers in January. It will cost the state — and save taxpayers — about $550 million next year. A recent report said most of the savings will go to top earners.
Kemp knows what an economic downturn could mean for state services. He served in state government — first as a state senator and then as Secretary of State — when recessions forced leaders to make serious budget cuts.
The state cut deeply into budgets for everything from k-12 schools and colleges to parks during the Great Recession. Many state and school employees lost their jobs, and most were forced to take furlough days without pay.
Danny Kanso, a budget analyst with the Georgia Budget and Policy Institute think tank, said he expects job losses this time as well if Kemp forces agencies to cut 4 percent this year and 6 percent in fiscal 2021.
“Unless state leaders choose to make broad exemptions to the agencies facing 10 percent budget cuts over the next year and a half, the proposed cuts will almost certainly require significant cuts to agency personnel and services,” he said.
But the governor’s budget office exempted big areas of the budget. The largest chunk of state funding goes to health care and school programs, and most of that was exempted from cuts.
In all, only about 23 percent of the state-funded portion of the budget was not exempted, but that still leaves several agencies on the hook for cuts, including the departments of corrections, public health, driver services, agriculture, public defenders, state patrol, Georgia Bureau of Investigation, most of the Department of Natural Resources and the administration of k-12 schools and colleges.
House Speaker David Ralston, R-Blue Ridge, last week announced that his chamber's appropriations committee will hold hearings this fall to review the budget cut proposals ahead of the 2020 session, which begins in January.
The Kemp administration's budget directive came only a few months after it cut spending by suspending for a month contributions into the State Health Benefit Plan, which provides health coverage for more than 660,000 teachers, state employees, retirees and their dependents. The one-month "holiday" saved state agencies and school districts about $235 million.
The move was made because administration officials wanted to make sure the state was able to make its budget for fiscal 2019, which ended June 30.
DCH officials are projecting the plan will run deficits this year and next, but said that there is plenty of money in reserves to absorb the losses.
The Department of Community Health oversees several programs which, combined, provide health coverage to about one in four Georgians.
Enrollment in July
Medicaid for poor, aged and disabled
State Health Benefit Plan for teachers, state employees, retirees and their dependents
PeachCare health insurance for children
Budget for the agency for fiscal 2020, which began July 1:
$15.6 billion total (including state and federal) funds
$3.5 billion state funds
Source: Department of Community Health
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Credit: Georgia Department of Economic Development
Credit: Jason Getz / Jason.Getz@ajc.com