FRANKFORT — Kentucky lawmakers are expected to end the 2011 legislative session on Wednesday without patching a hole in the state's Medicaid budget.
Budget negotiations between House and Senate leaders fell apart Tuesday evening, raising the specter of deep cuts in the health care program for the poor and disabled unless a special legislative session is called quickly.
Without legislative action, Gov. Steve Beshear has said he will be forced to cut Medicaid payments to hospitals, doctors and other health care providers by 30 percent. That move could shut down some rural hospitals, he said.
After negotiations reached an impasse, the Democratic-led House adjourned until March 21 to give Beshear time to veto legislation he opposes. House leaders pledged to continue negotiating with Republican Senate leaders during the veto recess.
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However, Senate leaders said the full Senate will convene again at 10 a.m. Wednesday. The move would end the legislative session Wednesday, because state law limits the General Assembly's odd-year sessions to 30 work days. Tuesday was the 29th day of the session.
Senate President David Williams and Majority Leader Robert Stivers still held out hope Tuesday night a resolution on the Medicaid budget could be reached on Wednesday, but only if Gov. Steve Beshear promises not to veto any part of a compromise budget bill.
Beshear spokeswoman Kerri Richardson said late Tuesday it's too early to know whether Beshear might be willing to set aside his veto power.
House leaders said late Tuesday they had not been asked by the Senate to return to the negotiating table and they have no intention of recalling the full House to Frankfort on Wednesday.
If a compromise can't be reached Wednesday, the governor could call a special session once an agreement is reached, said Williams, R-Burkesville. The special session could last as few as five days, which would save taxpayers money because lawmakers were scheduled to be paid every day, including weekends, until the session's end on March 21, he added.
The lawmaking session costs taxpayers about $68,000 a day.
Beshear said after the impasse Tuesday he wanted the legislature to continue its work until the last day of the legislative session. Only a governor can call a special session.
Senate Republicans stand alone in wanting to cut education spending to make up the Medicaid budget shortfall, Beshear said.
"It's very clear that 114 out of the 138 members of the House and Senate, both Republicans and Democrats, agree with me as governor that there is a very simple way to solve this shortfall in the Medicaid budget and that is to solve it with Medicaid money," Beshear said. "I am hopeful that between now and March 21 ... some folks in the Senate will come to their senses and decide that they will work with us to resolve this matter because the alternatives are not pretty."
Williams, who wants Beshear's job, said the House rejected the last offer of the Senate, which included some across-the-board cuts, including cuts to education, that would total $93 million.
"We came more than half way," Williams said, referring to a possible $166 million hole in the Medicaid budget in the coming fiscal year, which starts July 1.
But House Speaker Greg Stumbo, D-Prestonsburg, said House Republicans and Democrats don't want to cut education unless it's absolutely necessary. In a rare move, House Republicans said last week they would not support the Senate's plan to cut education to fix problems in the Medicaid budget.
"The House will do anything to move this process forward," Stumbo said. "What the House will not do — Democrats and Republicans — is to cut education when we don't have to. And that is the bottom line."
Stumbo said the Senate's final offer still included cuts to school districts, which are already struggling.
Lawmakers reached a stalemate on the budget issue after two days of negotiations.
Much of the discussion centered on whether Beshear's administration could save $166.5 million in the second year of the Medicaid budget.
Beshear proposed and the House approved a budget fix that would include moving $166.5 million from next year's budget to the current year. Beshear has said he can generate savings to make up for the resulting hole in the next fiscal year by starting managed care programs in the $6.5 billion health care plan for the poor and disabled.
Senate Republicans say Beshear can't generate those savings, in part because managed care contracts won't be signed until this summer. Beshear also could not save $120 million in the Medicaid program this year, as he had promised in the budget, Senate Republicans say.
The Senate's version of House Bill 305 includes across-the-board cuts to make up the shortfall in Medicaid. Those cuts would be 0.525 percent in the first year of the budget and 2.26 percent in the second year of the budget. Education would be spared in the first year but would be cut in the second year, which begins July 1.
During negotiations Tuesday, the House offered a proposal that would put some one-time money in an account. If savings in the Medicaid program fall short, the state could draw down those funds. If the savings did appear, the money would go to the state's Rainy Day account, which has been drained over the past several years.
Senate Republicans countered with a proposal that would still institute about $93 million in cuts, which would translate to roughly 0.316 percent cuts in the current fiscal year and 1.58 percent cuts in the second year. The state's main funding formula for schools would have a 0.65 percent cut in the second year of the budget, Williams said.
The money would be taken from agency budgets, but if Medicaid savings materialize the money would be restored, Williams said.
Earlier Tuesday, Senate Health and Welfare Chairman Julie Denton, R-Louisville, said Beshear's administration will likely not see savings because the proposed managed care contracts are fragmented into various specialties, including radiology and imaging and pharmacy.