Franchot Questions Transfer From Local Income Tax Reserve to Cover Medicaid Spending

As uncertainty looms for Congress to approve an extension of federal stimulus funding for Medicaid, Comptroller Peter V.R. Franchot says it would be “unwise” to transfer $200 million from a local income reserve fund for this purpose as already agreed to by the Governor and  General Assembly.

In drafting a $13.2 billion fiscal 2011 budget that was approved by the legislature, O’Malley (D) assumed Congress would provide $389 million to extend federal stimulus funding for Medicaid by six months through the end of fiscal 2011.

Now, the $24 billion aid package to help states with Medicaid costs is in doubt. The U.S. House of Representatives cut the aid from a taxes and jobs bill passed May 28, and state officials are counting on the Senate, which was debating the bill Thursday afternoon, to pass a version that includes the aid.

“They shouldn’t have put the state budget at the mercy of the federal process,” Franchot (D) said in an interview after Wednesday’s Board of Public Works meeting. “We should get together as a Board of Public Works and make appropriate reductions.”

In addition to approving a $200 million transfer from the local income reserve fund should the federal funds not come through, the Governor and General Assembly agreed to transfer $350 million from this fund in fiscal 2011 to the Education Trust Fund.  The State will begin paying back this money in fiscal 2014.  $350 million was also transferred to cover budget shortfalls in fiscal 2010.  The counties need to repay this money.

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