Debt Deadline: State moves to claim cash before Aug. 2
Director of Administration Jeff Mohlenkamp ordered state agencies this week to draw down all the federal funds they are entitled to in case the battle over the debt ceiling isn’t resolved by Tuesday.
That is the deadline to raise the debt limit so the federal government can continue to pay its bills uninterrupted.
“It is unclear if the federal debt issues will cause a disruption in the flow of federal funds to the state,” says Mohlenkamp’s memo, issued Thursday. “Therefore, it is critical that you draw all available federal funds that you are entitled to.”
Mohlenkamp said Friday that there is “the potential for a delay” in federal funding for a long list of programs. That includes some of the largest federally supported programs like Medicaid, welfare and food stamps.
But he said the state can pay its bills in the short term because, since it’s early in the fiscal year, there is plenty of state cash to cover any delays for several weeks. Fiscal year 2011 ended June 30.
“If this was in April and May, it would be more difficult,” he said.
That’s because the state would have already used up most of its money, and agencies would be relying on federal cash to finish the fiscal year.
“The state is in a position to meet ongoing obligations in the short term,” he said.
Mark Winebarger of the Treasurer’s Office said that as of Friday morning, the state had a cash balance of $745 million. With local governments getting their state revenue payments Friday and the university system and school districts getting theirs Monday, Winebarger said, that will drop the cash balance to about $500 million — still more than enough to continue meeting fiscal obligations for the time being.
Mohlenkamp said the primary reason for the memo was to ensure that agencies haven’t left behind any funding from fiscal year 2011.
“By and large, state agencies are well prepared for the close out of fiscal ’11,” he said.
The largest amounts of federal money go to the Department of Health and Human Services. But Director Mike Willden said his agencies are pretty current in their federal cash draws.
“We can use state dollars for cash flow if the draw process is slowed or eliminated for some period of time,” he said.
Willden said he doesn’t expect disruptions in the Medicaid, Welfare or child-care programs because those contain both state and federal money and, for the time being, can rely on state cash.
“My biggest concerns are what might happen with the 100 percent federal funded programs,” he said.
The two primary concerns on that list at SNAP (the acronym for food the food stamp program) and WIC, which is the program for Women, Infants and Children.
“We don’t have assurance one way or another from the feds on those,” said Willden.
Mohlenkamp said state officials are assuming that even if the Tuesday deadline passes without a deal, they will eventually get all the money withheld once Congress and President Barack Obama have a deal.
While the state can continue to operate for a while, a long-term delay followed by a decision not to make up the funding lost during a default could cause serious problems for the states.
“None of the states have received any indication there is going to be a reduction in dollars,” he said.
Willden said he is worried about potential policy changes coming out of Congress.
“Just what is in this package of debt reduction? What are they doing to us?”
He said there are rumors of reductions in the federal Medicaid match percentage – where even a fraction of a percent change costs Nevada millions — as well as cuts to the funding for hospitals that handle a disproportionate share of indigent patients or reductions in what nursing homes get in payments. He said the problem is that federal officials have given no specifics on what might happen.
“We can’t analyze those (possibilities) because we don’t know what to analyze,” he said. “The frustrating part is nobody’s really communicating to the states what’s going to happen if they don’t solve the problem by Tuesday.”