The State House and Senate were uncharacteristically in session last Friday and yesterday mulling over a budget proposal reached by the senate president Petersen, speaker Toma and the Hobbs team. A lot of the discussion among members appeared to be behind closed doors and in caucus meetings. As I write this on Saturday afternoon there was not yet a final vote on the bills.
The bottom line is that our elected officials are trying to both balance the current fiscal year budget (which ends June 30) and develop what they think will be a balanced budget for the next FY.
One of the main ways they’re trying to do it is to claw back some of the spending from last fiscal year (to help erase the $729M current year deficit) and come up with ways to make up for the projected gap between spending and revenue for the coming fiscal year (an estimated $690M gap).
I say estimated because, while there’s relative certainty about spending (except for off the grid and out of control private school and homeschool voucher spending), the revenue side is really just a projection.
Opioid Fund Sweep
A point of major controversy in the negotiations is a plan to sweep $75M from AZ’s opioid lawsuit settlement fund to help fund the state prison system. It’s unclear whether that’s legal as the Attorney General is the Plaintiff in that suit – giving her rather than the legislature primary control of the money.
Agency Lump Sum Cuts
On the health side of things, I didn’t see anything that was a catastrophic cut. Yes – both AHCCCS and ADHS were slated to get about a 3.5% ‘lump sum’ cut to their operating budget, which for ADHS only amounts to about $700K. This is a manageable figure, as there are clever ways to switch staff funding sources and find unused other funds to contribute.
I say manageable because I lived through cuts far more drastic than this. For example, in early 2009 we were given a $20M lump sum cut and a few months later an addition $30M cut… so, while not desirable, a $700K cut is entirely manageable. Hopefully the agency leadership takes the funds from their operating budget and not other line items like their loan repayment program etc. That’s what we need to watch out for.
Drug Rebate Fund
AHCCCS got a similar percentage operating fund cut (manageable). The big contribution from AHCCCS in the negotiated proposal is a $33M sweep of their drug rebate fund. The drug rebate fund is seldom discussed, as AHCCCS has generally liked to keep the existence of the fund quiet, and for good reason.
AHCCCS collects rebates from pharmaceutical manufacturers based on the volume of drugs dispensed to Medicaid members. The beauty of the rebate fund and (and why previous AHCCCS didn’t discuss it much) is that it’s:
- Not part of the general fund;
- Doesn’t need to be appropriated by the legislature, and (best of all);
- Fungible, meaning AHCCCS can decide how and when they spend it.
The legislature also worked through several languishing bills on Friday and Saturday include the one that will charge ADHS with developing a regulatory program for magic mushroom (psilocybin) service centers where people could receive the psychedelic in a medically supervised setting
I’ll write up a summary of the final budget once it’s passed and signed.