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Governor LePage’s Letter to Legislative Leadership Outlining Principles of Medicaid Expansion

By Governor Paul R. LePage

Medicaid expansion, as passed by the voters on November 7, 2017, will become law shortly. The Legislature must now step up and identify a way to fund this, and it is your duty to the people of Maine to identify a way to pay for expansion that is both fiscally prudent and sustainable.

Implementation and funding of Medicaid expansion must be based on the cost estimates of the Maine Department of Health and Human Services, and it must meet the following principles:

1. No  tax increases on Maine families or businesses.

2. No use of the Budget Stabilization Fund or money that will be directed this year to the fund with the goal of reaching $300 million; diversion of these funds would drain a key budget stability resource and only provide funding on a one-time basis.

3. No use of other one-time funding mechanisms or budget gimmicks.

4. Full funding of our Section 21 and 29 waitlists, and no reduction of services or funding for our elderly or disabled populations and prioritization of our fiscal obligations.

Since 2011, our administration has implemented policies that have yielded significant improvements in Maine’s fiscal outlook and business climate. Some key accomplishments include: the largest tax cut in state history—8.5 percent to 7.15 percent; an unemployment rate lower than 4 percent, down from 8 percent when I took office; an all-time high in private-sector jobs; a record-level Budget Stabilization Fund; and a significant reduction in Maine’s biennial structural gap. As I enter my final year as Governor of our state, I am committed to maintaining these advances and leaving my successor with a balanced, sustainable state budget.

No Tax Increases. Since 2011, a family of four earning an income of $90,000 has seen a 29 percent reduction in its state income tax burden— or more than $1,200 in annual savings. A family of four earning $35,000 has experienced a 100 percent reduction in state income taxes, going from an annual tax bill of about $300 to no state income tax burden. Maintaining these tax reductions and continuing policies that seek to reduce the tax burden wherever possible has improved our state’s economic outlook and made Maine families more prosperous. An increase in taxes would eradicate these gains, and we must not turn away from policies that make it easier for Mainers to live and work in our state, raise their families and invest in their futures. Therefore, raising taxes on Maine families and their businesses is not an option to fund Medicaid expansion.

No Raiding the Budget Stabilization Fund. Ratings agencies, which urge states to maintain sufficient rainy day funds, have recently credited Maine for growing ours. These reserves, in Maine’s case our Budget Stabilization Fund, protect states against having to make extreme, short-sighted policy decisions during temporary downturns. Maintaining adequate reserves is a hallmark of good governance and is a key goal of our administration; adequate reserves for a budget the size of Maine’s is a minimum of $300 million.

When I took office, our Budget Stabilization Fund was nearly empty; today it is nearly $200 million. Maine’s BSF-to-General Fund ratio is now greater than the New England average and nearly on par with Triple-A rated states.  To continue improving Maine’s credit rating—and reducing the interest we pay on our bonds—Maine needs to keep growing the BSF to reach at least $300 million in reserve, not raid it to cover ongoing costs with a one-time solution.

Notably, after the referendum passed, rating agencies were quick to point out that the new financial obligation from expanding Medicaid will require Maine to identify funding. As Moody’s Investment Services stated, “Increased Medicaid expenditures without accompanying state own-source revenue growth will force the state to cut spending in other areas, raise revenue or look for other budget-balancing measures.” Maine families and businesses depend on the strength of our economy, and the State’s bottom line benefits from a strong credit rating. Jeopardizing our economic stability to fund an entitlement program in the short term with no sustainable plan for long-term funding is irresponsible and would have negative consequences for Maine families. Raiding the Budget Stabilization Fund is not an option to fund Medicaid Expansion.

No Use of One-Time Funding or Budget Gimmicks. Historically, politicians have relied on budget gimmicks, one-time money or windfall resources to downplay real fiscal challenges. For decades, Maine experienced shortfall after shortfall, requiring numerous supplemental budgets to get us through each biennium. We were barely budgeting on an annual basis, let alone a biennial basis.

Funding long-term, ongoing expenditures with one-time funding, gimmicks and false savings is not only fiscally irresponsible, but it will also be disastrous for Maine families. Services would be cut, programs would be under-staffed, investments in vital infrastructure would be delayed, and hard-working Mainers would suffer the consequences. We cannot leave our budget in disarray with significant shortfalls for the next governor and legislature to clean up—as previous governors did. As we work to fulfill the will of the voters by expanding Medicaid to more than 80,000 people, we must do it honestly and with resources that are both sustainable and ongoing. I hope we can all agree we are responsible to govern in a way that makes Maine a better place for our children and grandchildren. Using gimmicks, one-time funding, false savings or unappropriated surpluses are all contrary to good, responsible governing; none of these are options to fund the massive, ongoing costs of Medicaid expansion.

Full funding of our Section 21 and 29 waitlists, and no reduction of services or funding for our elderly or Mainers with disabilities and prioritization of current fiscal obligations. The Legislature has repeatedly denied this Administration’s efforts to adequately fund services to Mainers with developmental disabilities who languish on waitlists—more than 1,500 are still waiting for the services they need. Increasing rates, just to help nursing facilities keep up with inflation, was a herculean effort that only happened because Maine’s books were finally balanced and our elderly were prioritized. Some in-home services are still not receiving the reimbursement rate they need to stay in business and continue assisting our elderly so they can stay in their homes.

The Department of Health and Human Services continually assesses their budget to ensure there are adequate resources to fund what is of the highest priority—and things already look challenging for SFY 19. They are already hearing from nursing homes and other providers to adjust rates so they can face financial pressures caused by under the new minimum wage laws. While Mainers with developmental disabilities wait for services, service providers are threatening to close their doors due to inadequate reimbursement rates. The most recent biennial budget included temporary rate increases for service providers; however, without the intervention of the Legislature and some serious prioritization in funding, those increases will go away on June 30, 2018. Additionally, a decision regarding Disproportionate Share reimbursement at Riverview Psychiatric Center is still under review by the Federal Government and poses a more that $60 million liability. Reducing services or funding to our elderly and Mainers with disabilities is not an option to fund Medicaid expansion. We must eliminate the waitlists, and we must not lose sight of current fiscal obligations.

Implementation of Medicaid expansion is an enormous undertaking for DHHS. The Department must hire more than 100 people to carry out expansion, and they need time to recruit and train these new employees. We cannot hire staff to enroll people in this program without funding.

Let me be clear. I believe it is both contradictory and disingenuous for Democrats, the hospitals, the advocacy groups and the wealthy out-of-state special interests who campaigned for this bill to claim that adding 80,000 people to an entitlement program will save money, but maybe it is time to take them at their word.

While I remain adamantly opposed to the policy of expanding Medicaid because it threatens our state’s financial stability, the Legislature is allowing it to become the law. You, the Legislature, now must do your job to fund it as quickly as possible so the Executive branch can do its job: execute the law. But I will not implement it without adequate funding. It’s time to act responsibly to fund this referendum with real dollars based on real savings.

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