Minnesota’s budget forecast: deficit, uncertainty, potential cuts

Capitol
Photo courtesy of the Minnesota State
Legislature website.

On Wednesday the Minnesota Management and Budget office released an updated budget forecast for the 2012-2013 and 2014-2015 budget cycles. The forecast sets the stage for the budget discussions that will happen in 2013 at the state capitol. In each odd-numbered year, a budget is set for the upcoming biennium (in this case, 2014-2015).

What did we learn?

The budget forecast news was a mixed bag and reveals the uncertainty that surrounds the budgeting process. The current projections show a $1.1 billion deficit for the upcoming budget cycle. State law dictates that the budget must be balanced, so we know that budget talks in 2013 will have to include difficult decisions about how to eliminate the pending deficit.

What’s more, we know that this budget forecast is shrouded in uncertainty, because it assumes that the pending fiscal cliff (a series of automatic spending cuts that will go into effect on January 1, 2013 if a deal is not reached at the federal level) will not come to pass. If the U.S. Congress and President Obama are unable to reach agreement to avoid the fiscal cliff, the Minnesota budget picture will look considerably bleaker. (We’ll be blogging about the fiscal cliff and impacts on pediatric health care next week).

Minnesota’s health care spending

The Health and Human Services (HHS) line of the state budget compromises a large portion of total expenses. Within HHS, health care programs like Medical Assistance (MA, Minnesota’s Medicaid program) account for the majority of spending. Human services spending in 2012-2013 shows a decline of $262 million from the February forecast. The bulk of that reduction comes from reduced costs related to Medical Assistance, including a lower cost of average care for families with children.

What does this mean for pediatric care?

As policymakers look for solutions to the projected $1.1 billion shortfall during the upcoming legislative session, both revenue increases and spending cuts will be on the table. Given that Children’s serves many children who rely on Minnesota’s Medical Assistance program (42% of our revenue), we are always concerned about potential cuts to that program. Beyond this, we’ll keep an eye on other proposals – cuts, surcharges, taxes – that could negatively impact our organization or the services our patients count on for care.

We’ll update you on the 2013 budget talks and how they impacting children’s health care throughout the 2013 session. You can also follow us on twitter @childrenspolicy.