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Borrowing from tomorrow to pay for today is wrong

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By Sen. Jimmy Higdon

The State Senate adjourned Thursday night having signed the Senate Committee Substitute to House Bill 1, legislation to resolve the Medicaid budget shortfall. Without even a need for a conference committee, the bill passed the House of Representatives overwhelmingly with only two no votes.
The Senate proposal trusts, but verifies. Our plan, which credits the governor for savings already achieved, is a responsible proposal that fully funds Medicaid services this year while protecting the taxpayer and holding the governor accountable. The governor and the secretary of health and family services have been adamant in press conferences and committee testimony that they can come up with $139 million in efficiencies and managed care cost savings to fill the Medicaid budget shortfall in fiscal year 2012. They want to move next year’s dollars to pay off today’s bills.
But what happens if these savings aren’t achieved? During the last budget, the General Assembly asked the governor to achieve certain cost savings, but he was unable to fulfill that commitment. In addition, private companies have yet to be solicited for managed care plans that have to be implemented by July 1.  
Who will be left holding the bag?  Failure to achieve these savings can lead to a $750 million cut in Medicaid services next year. To ensure that both our most vulnerable population is protected as well as the taxpayer, the Senate proposed small reductions of .355 percent to most state agencies during the final three months of FY 11 and 1.74 percent reductions in FY 12.  There would be no cuts to the basic school funding formula or SEEK and postsecondary education during FY 11. But on Jan. 30, 2012, if the governor doesn’t make his cost targets, SEEK funding would be reduced by .812 percent and universities by 1.74 percent.  
It is important to note that if the governor achieves even 82 percent of his cost savings targets, the proposed education cuts would be fully restored. Agency reductions would apply to the Legislative Branch as well as the Judicial Branch and the governor is prevented from furloughing any more state employees. The governor’s cost savings would be evaluated and verified by an independent accounting firm working in conjunction with the Consensus Forecasting Group, an independent group of economists charged by the state to make budget and economic forecasts. This is a common sense plan.
Here is the problem, however. It appears that there has been some agreement struck between the governor and the majority party in the House of Representatives. The House passed the bill with the understanding that the governor will now veto all the safeguards in the legislation with the end result that the governor will now be free to borrow from tomorrow to pay for today’s debts with no accountability whatsoever.  This is wrong. The state will face even deeper cuts next year if the state cannot adjust our budget now, much like every other family out there in these difficult economic times.
It is my hope that the governor will think long and hard before bringing out his veto pen. What he does now will impact all of our futures.
In  addition, I understand that many of you have been concerned with the costs of a special session.  For the record, the Senate asked the governor not to call the General Assembly back until there was agreement between the two chambers. He didn’t do this and the session lasted 11 days. However, the State Senate adjourned the regular session 12 days early since we had finished our business.  So now, as the Senate is scheduled to return April 6 to consider any vetoes, I am pleased to report that the special session did not cost the people of Kentucky any additional dollars.
Please call me toll-free at 1-800-372-7181 or TTY 1-800-896-0305 with any questions, concerns, or comments.  You can also reach me at home at 270/692-6945. You can find us on the Web at www.lrc.state.ky.us.

Senator Jimmy Higdon (R-Lebanon) represents the 14th District including Marion, Mercer, Nelson, Taylor, and Washington counties.  He serves on the Appropriations and Revenue Committee, the Education Committee, the Program Review and Investigations Committee, the Tobacco Settlement and Oversight Committee, and the Transportation Committee.  In addition, he is also the Chairman of the Budget Review Subcommittee on Transportation.