Governor orders cost cutting at state agencies

Published 12:00 am Saturday, March 9, 2013

RALEIGH (AP) — Gov. Pat McCrory on Friday directed state government offices to trim costs to help keep the budget balanced through the end of June because he said the state Medicaid office is expected to spend at least $202 million more than initially projected.
In a memo to department heads and Cabinet secretaries, McCrory told agencies to halt most employee salary increases, scale back purchases and travel and speed up collection of outstanding revenues.
The directive comes, McCrory said, because Medicaid is on track to spend $70 million to $130 million more in state funds than originally budgeted through June 30. The program also began the fiscal year with a $132 million shortfall, McCrory said, citing a state audit that says it didn’t pay back a portion of drug rebates and other invoices in the previous year, even though the General Assembly told it to do so.
McCrory said he told state budget director Art Pope to transfer available cash in state accounts to Medicaid to offset the increases, but the decision means there will be less money available at the start of the new fiscal year. So more efficiencies must be found.
While North Carolina state government is running on a $20.2 billion budget and is in a much improved position compared to four years ago, McCrory said he won’t remain behind the budget eight ball on Medicaid.
“It is time to solve this mess, not kick the can down the road and manipulate the budget as was done in the past. It stops now,” the Republican governor, who took office in January, said in a prepared statement.
McCrory has said the federal-state Medicaid program is broken and that top staff in the Department of Health and Human Services will work to bring its spending under control.
The Jan. 31 report from State Auditor Beth Wood’s office found the Medicaid division used flawed or incomplete budget forecasting methods, helping contribute to a $418 million shortfall last year. The amount is three times greater when federal funds are added.
The report also said Medicaid had annual shortfalls going back to 2009, when Democratic Gov. Beverly Perdue took office and faced broader fiscal emergencies due to the Great Recession.
Without the cost efficiencies, North Carolina would appear able if needed to pay for the current Medicaid overspending. The legislature set aside another $200 million for the state’s rainy-day reserve last year. The state is on track to collect at least $100 million more in revenues than expected this fiscal year and obtain $125 million in additional savings, the memo said.
“I am pleased to say that overall North Carolina is in a sound financial state,” McCrory wrote.
But Pope said the state still needs to reduce spending now “to live within our budget and make sure everything is disclosed and accounted for.”
McCrory is expected to release his first two-year state government proposal for the legislature later this month.