Decrease in federal share of Nebraska Medicaid costs increases state budget shortfall
State Sen. Rob Clements of Elmwood, right, talks with Speaker John Arch of La Vista. July 26, 2024. (Zach Wendling/Nebraska Examiner)
LINCOLN — The federal government is again planning to decrease the percentage of state Medicaid costs it will cover for Nebraska, leaving state lawmakers on the hook for an additional $90.3 million this budgeting cycle.
State Sen. Rob Clements of Elmwood, chair of the budget-writing Appropriations Committee, announced the revision Thursday, one day after legislative staff found the overlooked Federal Medical Assistance Percentage (FMAP) revisions from January.
That oversight will eat into the progress of a recently amended two-year economic forecast, which decreased an initial $432 million shortfall at the start of the session to $267 million.
That's because of an additional $65 million in projected tax revenue over the next two fiscal years. Lawmakers also have the option of accessing an additional $100 million in revenue from this fiscal year that went automatically to the cash reserve.
The change Clements discussed this week determines federal matching funds to offset state Medicaid costs, meaning the recent decrease in federal funds leaves the state needing to pay for more.
The initial decrease in the federal share of state Medicaid costs from October passed $235 million in Medicaid costs back on to Nebraska. That was before the January adjustment.
Clements' committee issued a preliminary budget Feb. 18 that identified $171 million toward closing the shortfall. However, some of those items, including a $14 million cut to the University of Nebraska, will be fought in committee and, if advanced, during floor debate.
With the Medicaid changes but without the committee's recommended cuts, the state budget shortfall for the 2025-27 fiscal years is $357 million. Including the committee's changes, the shortfall would be about $189 million, according to the legislative fiscal office.
Clements said it will be 'a tougher year than we thought' to balance the budget.
'We all need to work together to balance the budget,' he said. 'It's not just the Appropriations Committee's budget. It's the Legislature's budget, and we're required to balance it.'
Nov. 20 — $432 million shortfall, identified by Tax Rate Review Committee, nearly $490 million below recent expectations.
Feb. 18 — $261 million shortfall, if all cuts in preliminary Appropriations Committee budget are adopted by the full Legislature.
Feb. 28 — $99 million shortfall, identified by February Nebraska Economic Forecast Advisory Board revisions wiping $65 million from the shortfall from the next two fiscal years and estimating a boon of $100 million than initially anticipated this fiscal year that could be applied to the shortfall, and if all preliminary budget cuts are adopted.
March 6 — $189 million shortfall, including a $90.3 million increase in state share of Medicaid costs after federal funding decrease, economic forecast revisions and preliminary budget cuts.
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