BATON ROUGE — To rebalance this year’s budget, Gov. John Bel Edwards announced Thursday that he is levying all of a $70 million spending reduction on the state health department and sparing Louisiana’s public colleges.
The Democratic governor unveiled the final pieces of budget rebalancing needed to get Louisiana out of the red before the budget year ends June 30. The reductions were less sizable — and less grim — than state officials, higher education leaders and others who rely on the state for services worried they could be.
Edwards warned more slashing looms next year. The state is short an estimated $750 million to continue all programs and services in the fiscal year that begins July 1.
To close the immediate deficit, Edwards said the Department of Health and Hospitals has $40 million in savings from lower-than-expected Medicaid spending and in changes made in department management since he took office.
“We are seeing better, more cost-effective monitoring of who is a Medicaid client now, and we’re making sure we’re capturing all the insurance reimbursement that we can to pay for services that we give to our people,” the governor said.
The remaining $30 million in cuts will be divided among a program for “medically fragile” children, the managers of the privatized LSU hospitals and managed care companies that provide Medicaid services. Contracts in the department also will be cut, and Louisiana will tap into additional federal financing available for the Medicaid program.
After months of debate about worst-case scenarios, the cuts announced Thursday were far less devastating than anticipated.
Earlier this year, this year’s budget was projected to have gaps of as much as $900 million.
Lawmakers raised taxes, tapped into short-term financing streams and made cuts of their own to whittle away much of the shortfall.
“These cuts are not painless,” Edwards said. “But at the same time, we have to be as smart as we can in how we move forward and allocating the cuts. And that’s what we’re doing.”
The governor said his administration negotiated the 1.5 percent reduction with the LSU hospital managers. The nearly $7 million state financing reduction will grow to about $19 million with the loss of federal matching dollars. Edwards said he doesn’t expect “any major reduction to services” at the hospitals because of the decreased financing.
The operators of University Medical Center New Orleans said despite the hospital’s share of the cut, more than $6 million, “we will continue to invest in the success of UMC for the community, including maintaining services for our patients, preserving all jobs, training students and supporting our academic partners.”
College campuses, already asked to absorb a $28 million reduction in spending on the TOPS free college tuition program this year, won’t take another hit. Edwards said he didn’t want to deepen slashing on higher education systems that have been stripped of about $700 million in state financing since 2008.
“I could not in good conscience put another cut onto higher education,” he said.
Higher education leaders expressed gratitude for the governor’s decision, but noted they’ll still be coping with the TOPS reduction and are threatened with more reductions next year.
“We don’t celebrate any cut to our campuses, but this outcome is clearly better than many we prepared for last month,” Dan Reneau, University of Louisiana System interim president, said in a statement.
The latest budget cuts come on top of $170 million in reductions already enacted by the governor and lawmakers earlier this year.