The increase would eat up all of the state’s growth for the next fiscal year, according to long-term predictions issued last spring.
“We’ve already eaten up every single state dollar. Clearly, that’s not going to fly,” Department of Health and Human Services director Tony Keck said.
But Keck said he needed to be forthright with lawmakers in his report jumpstarting the budget process, which he’ll discuss Wednesday during his quarterly update to a Senate panel. Gov. Nikki Haley will use it and other agencies’ submissions to create her executive budget proposal, which Keck says will represent his official request. Her office did not immediately comment on his report.
The additional $193.5 million detailed in Keck’s report is due to the federal health care overhaul, general inflation and the loss of tobacco taxes. The money would represent an 18 percent increase over the state’s current match for the joint state-federal program.
The Legislature must decide next year whether to expand Medicaid coverage in 2014 to embrace more low-income adults, as called for in the federal law known as “Obamacare.” The U.S. Supreme Court upheld the law in June but ruled the federal government can’t penalize states for opting out, making the expansion a choice instead of a mandate.
Keck’s budget submission doesn’t include expanding eligibility for the government program for the poor and disabled.
His agency expects the law to add roughly 205,000 already-eligible people to Medicaid rolls over the next two years, as people learn of the option, enroll to avoid fines, lose insurance through their jobs or are unable to afford premium hikes.
The agency must make up $60 million in lost tobacco revenue. For the first year after the state’s cigarette tax increase, all excess was side aside. But that money is gone after using the reserves to bridge deficits.
“We knew we’d be in this spot, but we thought it was the responsible thing to do to get us out of the deficit without causing too much pain,” Keck said.
The agency also expects the state’s Medicaid rolls to grow by 2.8 percent, to 1.1 million children and adults by summer 2014. That normal growth of newly eligible – outside of the federal health law – along with inflation in health care costs is projected to increases costs by $64 million, according to Keck’s report, submitted Sept. 27.
Inflation is the only piece of the increase the agency can do anything about, Keck said.
“If the economy turns around, we won’t need as much,” he said. “But we’re not betting there will be a massive turnaround that we can plan into the budget. We have to be conservative.”
But he noted much can change before the budget is approved next June. For example, he said, the day after he turned in his report, he learned the federal government is providing South Carolina a slightly higher match, reducing the state request by $10 million, effectively bringing it to $184 million.
The Board of Economic Advisors’ long-term forecast, presented to lawmakers in April, called for state revenues to grow by 3.5 percent in 2013-14, which equates to an additional $187 million in recurring revenue.
The board meets Wednesday with regional advisers. It will make an official forecast next month that lawmakers will use to write the next budget.