Lawmakers unanimously approved a rescission plan Monday to adjust the budget in light of a projection from economists that the general fund will bring in less revenue this year than originally expected.
The plan, proposed by the Shumlin administration, does not cut any services or programs in the budget. Instead, it relies largely on money leftover from the Medicaid program, which did not spend quite as much as was expected last year.
"It's not a rescission as we normally experience it," Sen. Jane Kitchel, D-Caledonia, who chairs the committee, said.
The committee considered the Shumlin administration's proposal just days after economists reduced estimates for how much revenue the state is likely to take in for fiscal year 2017.
The new estimates downgraded the amount of revenue expected to flow into the general fund in fiscal year 2017 by $21 million. The Emergency Board adopted the new July revenue estimates last week.
On Monday, Andy Pallito, commissioner of the Department of Finance and Management, outlined the administration's proposal to adjust the budget in light of the lowered revenue projects to the Joint Fiscal Committee, a panel of House and Senate lawmakers that meets when the Legislature is not in session.
Medicaid spending came in far below expectations in the last fiscal year, which ended in June. According to a report released last week, a total of $28 million, about half of which is state funds and the other half federal in the Medicaid program was not spent last year. That allows the state to carry forward some of the unspent money to address the revenue downgrade.
Under the administration's proposal, $8.3 million will be carried forward from the Agency of Human Services secretary's office budget; $1.7 million will come from the Medicaid program in the Department of Vermont Health Access.
Another $3.6 million to mitigate the revenue downgrade will come from the state health care resources fund — a pot of money from several revenue sources, including the cigarette tax and the employer assessment, dedicated to pay for Medicaid.
The state health care resources fund brought about $4.7 million extra in the last fiscal year and revenue projections suggest that it will earn about $3.4 million more than originally anticipated in the current year. The administration proposed using some of that excess as part of the rescission plan.
The Shumlin administration also proposes to pay off the so-called Medicaid 53rd week, a one-time expense akin to a leap day. The administration paid Vermont's $7 million share of the expense with excess funds from fiscal 2016. (The remainder of the $15.4 million total cost was covered by federal funds.)
Because the 53rd week does not occur every year, the administration says that Medicaid's budget in fiscal 2017 does not need to include money to cover that expense. Accordingly, the administration proposed to reduce the amount appropriated for the Medicaid budget in fiscal 2017 by $7 million.
However, the Legislature also set aside an additional $5.3 million in the fiscal 2017 budget in case that money was needed to cover the expense of the 53rd week. That money has now been put aside in a special fund to help the state prepare for the next time that week occurs in seven years.
The Joint Fiscal Committee opened the floor for a public hearing on the rescission proposal Monday, which attracted only a handful of questions.
There was minimal discussion among committee members before the panel voted unanimously to adopt the rescission plan.
After the vote, Rep. Janet Ancel, D-Calais, who chairs House Ways and Means, said that the proposal was "a much easier path" than rescission votes have been in previous years.
Rep. Mitzi Johnson, D-South Hero, who chairs House Appropriations, celebrated the news that the Medicaid program underspent in the last fiscal year, as well as that the state could successfully close out the last fiscal year and manage the revenue downgrade without impacting programming.
Additionally, she said, the state can save money for future 53rd weeks "that we weren't counting on putting in reserve a couple months ago."
"That's really big news," Johnson said.
The revenue updates also reduced estimates for how much money is expected to flow into other key state accounts. The transportation fund is down by $3.5 million, and the education fund is down by $3.4 million.
The administration will present more on those funds in September, after the finances for the end of fiscal 2016 are finalized.