JUNE 16, 2009 -- When Emma Forkner told members of the Senate Finance Committee in May that her agency, the S.C. Department of Health and Human Services, “could go over a cliff” in 2011, she was doing so with a unique perspective.
Her office sits on the precipice.
Like many other state agencies this year, DHHS, with its nearly billion-dollar annual budget, took major mid-year budget hits; three to be exact, totaling $154 million.
But that’s not what had Forkner so concerned.
What she was warning the committee about was, perhaps surprisingly, the potentially disastrous effects of millions and millions of federal stimulus package money flowing into her agency.
In February, the U.S. Congress passed the American Recovery and Reinvestment Act (ARRA), the fancy name for President Obama’s stimulus package, and it dedicated as much as $97 million per quarter to her department as part of the state’s two-year $8-billion portion.
The federal money was welcomed, as state DHHS cuts had already led to a series of administrative, beneficiary and service cuts. It also allowed the legislature to use the state money freed-up from DHHS to shore up other flagging agencies.
But the stimulus money also came with strings and a time limit.
To be able to draw-down the additional federal funds, Forkner would have to reverse many of the just-made cuts. And she would only be getting the money for the nine fiscal quarters stretching from October 2009 to December 2011.
Since fiscal years start and finish in summer, the stimulus money would overlap three fiscal years. As such, Forkner could only count on stimulus money for the first two quarters of the 2011-12 budget year.
Cutting off the stimulus tap, Forkner feared, could create havoc.
Interviewed this week, Forkner worried that there could even bigger state cuts after the federal stimulus money runs out in January of 2012, because the number of people receiving ever-more expensive services likely will increase.
“It’s the classic situation where you have less supply and more demand,” said Forkner, who also oversees the state’s Medicaid program, which pays for medical and health services for the very poor.
The big concern is that the state economy will not have rebounded far enough out of its current recession to generate the amount of tax revenues required to support the rejuvenated DHHS and Medicaid programs when the stimulus funds run out.
Medicaid rolls could increase
Forkner said the state’s slowed economy has already begun to increase the state’s Medicaid rolls, especially among eligible children. She said that close to 14,000 needy children have been added recently, bringing the percentage of all children in the state covered by Medicaid to 41.3 percent.
“This week I heard a story I’m hearing every week from around the state,” said the former Air Force captain. “A single father with three kids loses his job and takes a lower-paying one immediately. He’s got a job, but he lost his health insurance.”
And thus the state’s health care rolls increased by three.
DHHS may soon receive more applicants, as the hopes for a speedy recovery haven’t been the rosiest lately. The state’s unemployment rate today was reported at 12 percent for May, with 15 percent lurking in next year’s shadows.
Adding insult to penury, the state recently found itself with dampened economic forecasts for the coming fiscal year after the state Board of Economic Advisors announced the state was $92 million short with three weeks to go in the 2008-09 fiscal year.
Forkner also said the state’s Medicaid concerns stretched past its borders, because of the national health care debate taking place in the U.S. Congress, which could extend coverage to single individuals making as little as 130 percent of federal poverty levels.
“The costs would be enormous; I don’t know if the state could even afford the match,” said Forkner. “It would be huge.”
It was also unclear which segment of the state would be the most vulnerable to another, potentially deeper round of cuts in 2012. Forkner said that cuts in mental health have already been so severe “that any more will create chaos.”
Forkner said she knew that some people would criticize her, and perhaps accuse her of overstating the problem, because she worked for Gov. Mark Sanford, an ardent foe of the stimulus package.
“But, if they looked at the numbers, at my cash flow, they’d come to the same conclusion.”
Crystal ball: Forkner did a smart thing bringing her agency’s troubles up when she did. Many in Columbia blame the debacle at the bankrupt Employment Security Commission, not on mismanagement, but on its board not informing the legislature soon enough (or perhaps loud enough) about its mounting financial woes. By Forkner getting out the bad news a year and a half ahead of time, there is a better chance of averting a meltdown. But, be clear, that doesn’t mean some very sick and very vulnerable South Carolinians won’t still get their public health benefits cut in 2012.