In a decision that will preserve the state’s cash position, the federal government has decided to only partially defer reimbursements for a portion of Connecticut’s Medicaid population.
More than two months ago, the state learned that the federal government would be deferring a $249 million payment for the first quarter of the year. It has since decided to give the state about $125 million for January through March.
Office of Policy and Management Secretary Ben Barnes said earlier this week that he expects to receive the remainder of the money for the first quarter once the issue over the state plan amendment is settled. Barnes anticipates this will happen before any deferral would be implemented for the second quarter payment.
The state is “confident that it will be resolved in October without having any deleterious impacts on the state’s cash position,” Barnes said.
In his monthly letter to Democratic Gov. Dannel P. Malloy, state Comptroller Kevin Lembo confirmed that the federal government has released half the payment and continues to work with the state regarding “its claim methodology.”
“I have joined with OPM and the State Treasurer in carefully monitoring the federal reimbursement issue and will report on any change in the current situation and the potential budgetary impact,” Lembo wrote in Wednesday’s letter.
State Treasurer Denise Nappier reported Wednesday that there is $1.3 billion in the common cash pool.
“At present, the State’s available cash remains adequate to meet its obligations,” Nappier wrote.
The state, according to Lembo, is still expected to end the fiscal year with a $300,000 surplus. Since Medicaid spending has been moved outside of the state budget any fluctuations in the account only impact the state’s cash position and not the state budget’s bottom line.
“General Fund spending is expected to grow by an estimated 2 percent in Fiscal Year 2015, while revenue growth is projected at 2.6 percent,” Lembo said. “These budget targets will be influenced by changes in economic conditions as the fiscal year progresses.”
Lembo reminded the governor that the budget assumes the Department of Revenue Services will be able to collect an additional $75 million in revenue related to “enhanced collection activities.” In the future, Lembo said he will report on those efforts and if there’s any change in those projections.
The last-minute decision to include that $75 million in the state budget was controversial. At the time, the nonpartisan Office of Fiscal Analysis was unable to independently verify exactly how the state would obtain the additional revenue.
“We have sought but not been able to obtain other information to support the $75 million in enhanced collection initiatives,” Alan Calandro, director of OFA, wrote in a letter to House Minority Leader Lawrence Cafero.
But Democrats said the success of the tax amnesty program in 2013 was proof the state would be able to find the money from delinquent taxpayers.
The amnesty program, which ran from Sept. 16 to Nov. 15, 2013, allowed individuals and businesses who owed back taxes to receive a 75-percent reduction in the interest owed as part of the program. The opportunity to take advantage of that reduction in interest no longer exists, but Barnes believes the state still will be able to collect more delinquent taxes than in previous years based on the success of the amnesty program.
During that program, Barnes has said the department learned there were more taxpayers willing to pay back taxes owed to the state, but they were unable to find the cash in order to take advantage of the program last year.
Ultimately, the Department of Revenue Services “believe there’s a reservoir they can relatively easily identify of unpaid taxes that they can undertake to collect,” Barnes has said.