Local government leaders must brace themselves to withstand the coming budgetary collision of entitlement programs and funding obligations at the federal and state levels, local officials were told at the annual conference of the Utah League of Cities and Towns held last week in Salt Lake City.
Sen. Dan Liljenquist, R-Bountiful, told the 103rd annual conference that growing financial obligations for Medicaid and education represent "two huge forces crashing together" creating unprecedented pressures on the state.
Liljenquist, who helped broker legislation in the 2009 legislative session to help tame out-of-control pension costs in the state's retirement system, said the next 10 years will see a 30 percent increase in the state's student population. He further warns that Medicaid's current cost arc is "absolutely unsustainable."
He said Medicaid, which represented nine percent of Utah's general fund expenditures in 1999, now represents 18 percent of the general fund pie. More worrisome are projections placing that figure at 40 percent of the general fund budget a decade from now unless action is taken soon. The general fund is the only discretionary spending freedom the state has, currently representing 17 percent of the overall Utah budget.
Utah House Speaker Rep. Dave Clark, R-Santa Clara, told the same gathering that even in the short term Utah is going to be budget-challenged. He said that come next July, state government is looking at a $313 million shortfall just to maintain current funding levels for fiscal 2012.
"It's not just next budget year but well into the future," Clark said, adding that general and education funds have been decreasing since 2008. "The good news is that it's not as bad as it looked several months ago; the bad news is that it's still not good."
Clark told local leaders that the pressures being felt at the federal and state levels will "trickle down" to local government in the form of, among other things, decreased funding for roads and enforcement of whatever immigration reform legislation is ultimately adopted during the next legislative session.
Tapping his southern Utah roots, Clark said, when the horse you're riding dies you dismount and find a new horse, but that's not what is happening in Washington, D.C. these days. He said it's beyond irresponsible that 41-cents of every dollar spent by congress is borrowed.
Price Mayor Joe Piccolo, who attended the conference along with a number of council members from the town said he's confident his city will successfully navigate these challenging times.
"We're within our budget; we're not suffering high unemployment," Piccolo said stressing the positive. "We my never get back to where we were (a few years ago), but we're prepared to deal with what we'll be facing."
Orangeville Treasurer Cindy Nielsen said there is definitely a trickle down effect being felt even in her small town of 1,300 residents. Although Orangeville only has three fulltime employees and a $400,000 yearly budget, the impact isn't lessened when the city is required to increase retirement contributions, as was the case this year.
"How do you handle that when it's such a large part of the payroll?" she asks.
Liljenquist said health care costs in general have formed a classic bubble. Medicaid is also out of control, he said, having been turned into a hammock - a destination. It's no longer merely a safety net as folks are now looking to find their way onto Medicaid because it's so generous. He argues that the system needs to be recalibrated to curb spending. But it needs to reflect, "how much can we afford and how much does that buy?"
Clark, who's been a player on the national stage for health care and Medicaid reform in recent years, said Utah is definitely on the right track. Others have pointed out that health care costs for the nation would drop by one-third if other states delivered health care the way Utah does.
"But even then, it's financially unsustainable," admits Clark, acknowledging major overhauls to Medicaid like those pushed by Liljenquist and others for the retirement system need to be a key part of the solution.
Clark said he's buoyed because Utah has always shown a willingness to address future obligations before they become a crisis.
"Reality is not negotiable. It'll be difficult, but we'll be able to get through this," concluded Liljenquist.