Money matters top the list: fiscal prognosticators see budget concerns still dominating legislative discussions.

• Author: Eckl, Corina

Money talks. And lack of money' speaks even louder. That's why budget issues will continue to dominate 2005 legislative sessions. Even though state revenues are rebounding from their lackluster performance of recent years, budget pressures threaten to overwhelm them. Programs weakened by four years of cuts are seeking restoration. Caseloads and enrollment are expanding. Health care costs are rising. Even without new initiatives or program expansions, expenses are growing. The bottom line is that lawmakers still have difficult budget decisions ahead.

Legislative fiscal directors are keenly attuned to the budget demands confronting legislatures. NCSL's latest budget survey asked these experts to look into their crystal balls to identify the top three fiscal issues they expect their states to address this year. Their responses focused on the usual suspects, with a variety of state-specific concerns thrown into the mix.

HEALTH COSTS LOOM LARGE

Rapidly rising health care costs have squeezed state budgets in recent years and promise to do so again in FY 2006. Thirty states identified Medicaid or other health care costs as a top fiscal issue.

Most concerns focus on Medicaid. Caseload growth, prescription drug costs and medical cost inflation are pushing expenses up. Idaho reports that Medicaid cost containment will be a top concern as growth over the past 20 years has averaged 15 percent annually.

Some states are worried about replacing federal Medicaid dollars with state money as one-time federal fiscal assistance funds are exhausted. Others are seeing their Federal Medical Assistance Percentage (FMAP) decline in accordance with an automatic adjustment that reflects changes in per capita income, so they'll need to provide more state funds for Medicaid right out of the chute. Oklahoma faces a $65 million gap as its FMAP falls, on top of a regular annual cost increase of about $50 million. New Mexico is looking at a $60 million price tag from the FMAP change before other growth is even calculated. Nationally, 29 states will see their FMAP decrease, nine states will see an increase and 12 will have no change.

Some of the same cost drivers in Medicaid also are affecting health insurance costs for state employees. Georgia faces a $450 million shortfall in its employee health insurance program. New Hampshire notes that significant cost increases have pushed the benefits calculation rate from 37 percent to 44 percent for next two fiscal years. Although...