Arizona budget impasse imperils Medicaid spending

PHOENIX — Arizona’s Medicaid program won’t have money to pay its bills next month unless the governor and lawmakers reach a deal soon on at least some elements of a state government budget.

Senate President Warren Petersen told Capitol Media Services Monday that legislative Democrats are balking at providing the Legislature’s GOP leaders with a list of their priorities. Without that, he said, there can be little progress on coming up with a spending plan for the new fiscal year that begins July 1.

But the more immediate problem is that some state agencies need additional funds for the current budget year, said Petersen, a Gilbert Republican. He said efforts to resolve that have become bogged down in the talks over next year’s budget.

Most immediate is the funding for the Arizona Health Care Cost Containment System, the Medicaid program.

Legislative budget staffers say the agency requested an additional $3.3 billion to finish off this fiscal year. That includes state funds and authorization to spend federal dollars, which cover about two-thirds of the total price tag.

Lawmakers did approve — and Democratic Gov. Katie Hobbs signed — legislation at the end of last month for half of that amount. But without the other half, GOP staffers say, AHCCCS cannot make payments to the managed care plans due in May and June for the services they are providing to eligible Arizonans.

Less pressing but also necessary is to fill an estimated $180.6 million shortfall in spending for K-12 education. Those dollars are needed in June.

And the Arizona State Hospital also needs additional money before June 30, though the figures were not immediately available.

Petersen said all these supplemental requests were included in the “skinny” budget that Republicans sent to the governor earlier this year. Hobbs rejected the $15.8 billion plan, saying it failed to include any of the priorities in her own $17.1 billion spending proposal.

Petersen said there is a simple way to resolve the issue of the current shortfall, which is in the Arizona Constitution and the governor’s power to remove any item in a legislative spending plan she doesn’t like.

“She could have line-itemed everything but the supplementals,” he said. That would have preserved Hobbs’ bargaining power for the 2023-2024 budget while not creating a potential emergency for this fiscal year.

Holding health care ‘hostage’

Hobbs is unwilling to take the blame for the current situation.

She has been working since she took office in January to “pass a budget that makes meaningful investments in improving Arizonans’ lives,” said her press aide Christian Slater.

What’s happening now is not her fault, Slater said.

The most recent report from AHCCCS shows it is providing care to nearly 2.5 million Arizonans.

“Republicans are committed to holding health care for one-third of Arizonans hostage to score cheap political points,” Slater told Capitol Media Services.

He said there is no reason Senate Republicans cannot act now in a bipartisan way, as they did in March, to approve the supplemental funds for AHCCCS.

Even assuming the more immediate funding issues can be worked out, that still leaves just 66 days until the end of this fiscal year to adopt a new budget.

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There is no authority in Arizona, unlike for the federal government, to simply enact a “continuing resolution” to keep the state’s government operating once the new budget year begins on July 1.

What happens without a budget is pretty much uncharted territory, though negotiations one year went a few hours into the new spending year.

Petersen said it’s not the governor holding up progress so much as legislative Democrats.

“We’ve got the governor’s ask,” he said, referring to her budget requests. GOP legislative leaders and her office have been holding talks several times a week, he said.

“We’re pretty close with her” on the numbers, Petersen said.

What’s missing, he said, is what Democratic lawmakers want.

Roads spending

For the moment, he said much of the discussion is over projects that can be financed with one-time spending, as GOP leaders are loathe to start new, ongoing programs or vastly expand existing ones with dollars that may or may not be there years from now.

Many are projects requested by one or more lawmakers.

For example, there’s $5.9 million for pavement rehabilitation along U.S. 99 in Yuma County. A plan for drainage and safety improvements for Moson Road in Cochise County is logged in at $6.1 million. Some $10 million is set aside for a traffic interchange between I-10 and Cortaro Road in Marana. And there’s another $6.9 million to improve a stretch of Ironwood Drive in Apache Junction.

There are smaller allocations, too, for everything from streetlights to reconstructing a roundabout.

Peterson said there are “hundreds of millions” of dollars available for such projects. Some of those dollars are available for Democrat priorities, he said.

House Minority Leader Andres Cano of Tucson said Democrats have provided a list of priorities. But he said that list has to go through the Democratic governor with whom GOP leaders are negotiating — and who has the ultimate power over the budget by virtue of her veto pen.

More to the point, Cano said his colleagues have a real concern about lawmakers coming up with their own wish list of road projects which may not even be priorities of the Department of Transportation.

While trying to finance favored rural road projects, he said many lawmakers are refusing to advance the necessary legislation to allow Maricopa County residents to vote on continuing the half-cent sales tax that pays not only for roads but also mass transit, including light rail, programs he said are priorities for area business leaders.

Nor is Cano letting Republicans off the hook for the looming deadline to provide more money for AHCCCS.

He said the GOP leaders had the opportunity last month to approve the entire $3.3 billion needed for AHCCCS. Instead, Cano said, they decided to take this “week-by-week, month-by-month (approach) that tries to paint the minority party as obstructionist.”

“We’ve seen from Day One who the true obstructionists are,” he said.