Why compiling a state budget in CT is unpredictable as Trump takes office

As Connecticut lawmakers craft a two-year state budget in the coming months, they will do so with a significant disadvantage: almost no idea what is about to happen at the federal level.

President-elect Donald Trump, who will take office Jan. 20, has declared an intent to reduce government spending, in part to offset the cost of extending the tax cuts he first implemented in 2017. If he follows through, Connecticut and other states could see reductions in federal funding, complicating their ability to fund key programs.

"That's the big shoe that we're waiting to drop," Senate President Pro Tempore Martin Looney, D-New Haven, said Wednesday. "There are so many areas where we receive a substantial infusion of federal funds, many of which are threatened right now."

Meanwhile, the timing of the state legislative session — which started Wednesday and will last through June 4 — means state lawmakers may have to approve a budget before knowing what federal funding will look like.

Gov. Ned Lamont alluded to the issue several times during his annual State of the State speech Wednesday, noting that the Trump administration and Republicans in Congress could cut funding for Medicaid and the Affordable Care Act, which Lamont fears "will hit working families and small businesses hard."

"Over the next month or two, we should have more insights into how the changing relationship with the new administration will affect our budget and our people," the governor said.

Medicaid cuts coming?

Though Trump hasn't proclaimed exactly which programs could be at risk for cuts, some allies have reportedly eyed Medicaid as a potential target, and Connecticut lawmakers and advocates say that's where the new federal administration could have the biggest impact on the state budget. Medicaid, which is funded through a combination of state and federal money, provides health insurance for about 1 in 5 Connecticut adults.

Speaker of the House Matt Ritter, D-Hartford, called Medicaid his "single biggest concern" when it comes to how the incoming Trump administration will affect the state budget.

Even without a Trump presidency, Medicaid was likely to be a focus for Connecticut lawmakers during the upcoming session. The state has not broadly increased reimbursement rates since 2007, and a study last year revealed a "large gap" between Connecticut's rates and those in peer states.

Medical and behavioral health providers have urged the state to increase rates, arguing they lose money on Medicaid patients and often wind up passing costs along to those with private insurance.

"The practical implication of Medicaid — and Medicare — not reimbursing for the (full) cost of the care is that providers then have to seek reimbursement from other places to make up for that shortfall," said Paul Kidwell, senior vice president of policy for the Connecticut Hospital Association.

Losing federal funding would be "really concerning" to Connecticut hospitals, Kidwell said.

Possible changes to Medicaid under the Trump administration could include implementing work requirements, capping funds or allotting money as a block grant instead of as-needed. Any of those changes would reduce the amount of money flowing to Connecticut residents.

Gian-Carl Casa, president of the CT Nonprofit Alliance, cautioned that no one knows exactly what the Trump administration will do and said he was hesitant to predict. Still, he warned that cuts to Medicaid could harm non-profits and the people they serve.

"As it is, people are doing going without help that they need," Casa said. "A loss of federal money would make it more difficult for the state to fund needs. More people won't get services, waiting lists will just grow, and people who need help won't get it — unless the state picks up the difference."

Top Democratic lawmakers say they hope to fund higher Medicaid reimbursement rates during the legislative session that began this week, but it would be difficult for them to do so if the state receives less federal money for the program.

"We might be in a position to have to spend more just to get to current levels," Looney said.

Other concerns

Still, Medicaid is far from the only area where Connecticut could lose funding.

House Majority Leader Jason Rojas, D-East Hartford, noted Wednesday that agencies such as the Department of Labor and the Department of Energy and Environmental Protection rely heavily on federal funds as well.

"What happens if those go away?" he said.

The Trump administration and Republican-controlled Congress could also decline to renew subsidies that help millions of Americans afford health insurance under the Affordable Care Act. And Trump's pledge to eliminate — or at least sharply cut — the federal Department of Education, has spooked advocates, who fear a loss of funding that would particularly strain low-income districts.

Ritter said in December he's planning for two distinct scenarios.

"We will be telling our caucuses, there's two budgets," he said. "There's the normal budget assuming federal is not touched, and then there's a second budget, which would have to involve dealing with a loss of federal revenue."

Complicating matters further, Connecticut lawmakers will have to pass their budget by early June, by which point Congress might not have passed all its appropriation bills.

That means legislative leaders could be partially in the dark as they prepare and finalize their budget.

"We may not have the full information that we need at that point," Looney said. "So I don't know whether we'll be able to fully account for what's going to happen at the federal level by the time we have to make our budget decisions."