The state Department of Health and Hospitals will take a $70 million budget hit in the next three months, sparing colleges and universities from what could have been deeper cuts at the end of the financial year.
Gov. John Bel Edwards on Thursday announced his plan to close the remaining gap in the state budget that ends June 30 without resorting to the draconian cuts that some had anticipated.
The cuts come two weeks after state legislators wrapped up a special session, leaving millions more to be lopped at Edwards’ hands. Edwards, a Democrat who took office Jan. 11 with the state barreling toward a nearly $900 million shortfall, said “hours and hours of work went into” finding the right approach to finally shore up the budget before it ends June 30.
“These cuts certainly are not easy to make, but they will help finish out our responsibility to the people of Louisiana this year to balance our budget and prioritize a more stable government going forward for our citizens,” he said during a news conference.
On the chopping block: $10.3 million in rates paid to companies that run the state’s Medicaid managed care program; $6.9 million in contracts with private health care providers who oversee public hospitals; $1.9 million in contracts; and $500,000 for a program that serves medically fragile children.
The department also expects to save $10.4 million by making hospital payments under a better Medicaid expansion federal match rate; $10 million in administrative efficiencies; and $30 million from expenses that have come in below earlier projections.
Leaders largely downplayed the ultimate impact.
“We’re very focused on doing more with less,” DHH Secretary Dr. Rebekah Gee said. “We understand that we need to be the best shepherds of the taxpayer dollar. It’s particularly important now that we are not in a time of surplus.”
Overall, the picture heading into the final months of the budget is not as grim as leaders had been bracing for in recent weeks. Higher education received no additional cuts Thursday but still will have to cover a shortfall that was earlier identified.
“There’s nothing painless about any of these cuts,” Edwards said. “At the same time, we have to be as smart as we can in how we move forward and allocate these cuts. That’s what we’re doing.”
During the 25-day special session, leaders from health care, higher education and other services outlined potentially devastating scenarios that the state faced if their budgets were more deeply cut.
Lawmakers raised taxes to bridge some of the gap but left the remaining hole to Edwards to decide.
Colleges and universities will still absorb $28 million that the Legislature didn’t provide to fully fund the state Taylor Opportunity Program for Students during the current year. Schools essentially will have to eat that cost — effectively a budget cut.
Edwards said not cutting beyond the TOPS shortfall was important.
“I could not in good conscience put another cut on higher education on the backs of college students after eight years of the deepest cuts to higher education,” he said.
Some higher education leaders had hoped as recently as this week that even the TOPS shortfall could be filled, but the outcome Wednesday was still better than many had feared.
“We were able to spare higher ed, and I’m very proud of that,” Gee said.
The governor had warned higher education leaders at the start of the special session that the cut could be between $70 million and $200 million.
“We don’t celebrate any cut to our campuses, but this outcome is clearly better than many we prepared for last month,” said Dan Reneau, interim president of the University of Louisiana system, which oversees the University of New Orleans, Louisiana Tech University and the University of Louisiana at Lafayette.
LSU’s cut from the TOPS shortfall is about $10 million because the university has more students on the program. The University of Louisiana at Lafayette takes the second-highest cut with $3.5 million. UNO will be cut about $1 million, and Southern University will lose about $300,00.
“It is troubling that, as the highest-performing public university in the state, LSU will once again bear the majority of cuts simply because it is home to more high-achieving TOPS recipients than other state universities, but we are grateful to be spared the devastating cuts that were previously on the table for 2016,” LSU President F. King Alexander said in a statement.
During the special session, the private providers who administer the state’s charity hospitals had warned that they would walk away from contracts if their payments were cut too severely. They also expressed some relief over Wednesday’s announcement. Their contracts will be cut about 1.5 percent across 10 hospitals.
In a statement, leaders of the University Medical Center in New Orleans said leaders were not available for direct interviews Thursday afternoon after the cuts were announced but that the outlook was better than expected.
“The state and legislators had to make difficult decisions to find a solution to the budget deficit,” the hospital said in a statement. “A $6.4 million cut is significant, but it is a better outcome than the previously proposed cut, which would have been catastrophic.”
Scott Wester, CEO of Our Lady of the Lake Regional Medical Center in Baton Rouge, said leaders are still evaluating the ultimate impact.
“With the cuts announced (Thursday), we will have to look at some services that may have to be reduced or re-evaluated,” he said.
Gee said savings were realized over the past year because the state saw fewer expenses from flu cases and other illnesses.
“We were very fortunate, and our prayers were somewhat answered in that way,” she said. “The expenditures were just lower than we had budgeted for.”
Rebekah Allen contributed to this report. Follow Elizabeth Crisp on Twitter, @elizabeth crisp. For more coverage of state government and politics, follow our Politics blog at http://blogs.theadvocate.com/politicsblog .