LITTLE ROCK — Arkansas’ public schools and prisons would get funding boosts under a $5 billion budget plan Gov. Mike Beebe unveiled Tuesday. But his administration warned that the state could face a sizable hole in the budget if lawmakers follow through with a plan to halt an expansion of Medicaid.
Arkansas Department of Finance and Administration officials detailed Beebe’s spending proposals as lawmakers opened budget hearings ahead of the legislative session that convenes Feb. 10 that will focus on the budget.
Beebe’s budget proposal for the fiscal year that begins July 1 calls for $105.8 million in additional spending, with $65 million of that going toward the state’s public schools. Beebe also proposed increases in funding for the prison system to address crowding as a result of the state overhauling its probation policies.
State budget officials, however, warned that $89 million of the state’s budget is based on the state’s "private option" plan to expand insurance coverage to low-income residents under the federal health care law. Under the private option plan, Arkansas is using federal Medicaid money to purchase private insurance for thousands of low-income workers. The program was approved as an alternative to expanding Medicaid’s enrollment under the federal health overhaul.
"If the private option weren’t done, we would have to do a completely new budget," State Budget Administrator Brandon Sharp told members of the Joint Budget Committee.
The Medicaid plan sharply divided Republicans who control the Legislature last year, and opponents have said they’ll push for its defunding during next month’s session. The $89 million in savings comes primarily from reduced uncompensated care costs for the state.
Beebe, a Democrat, has warned lawmakers would need to either repeal a package of tax cuts approved last year or cut the budget if they don’t continue the private option. The package includes capital gains and income tax reductions and is estimated to cost the state $85 million in the coming year under the budget proposal.
Rep. Duncan Baird, co-chairman of the budget committee, said the budget proposal may help define the private option debate but that the program will likely be judged on its overall performance.
"The dollars are important, but I think at the end of the day we’re going to look at it in very broad terms," said Baird, R-Lowell, who supported the private option last year.
A lawmaker who opposed the private option acknowledged that defunding the expansion plan would affect the state’s budget but said he believed the state could look at reductions elsewhere to make up for it.
"That money wasn’t there when we grew government, and I think we’d be ok if we cut it back," said Sen. Bart Hester, R-Cave Springs.