Indiana lawmakers of both parties say they’re cautiously optimistic about the state’s financial situation ahead of writing a new, two-year state budget.
A forecast unveiled Tuesday projects the state will add about $800 million across both years of the new budget. That’s revenue growth of about 3 percent in the first year, and essentially flat in the second — just a 0.3 percent increase in revenue.
Senate Republican budget architect Ryan Mishler (R-Mishawaka) said writing the new budget requires caution.
“This is the reason we have strong reserves,” Mishler said. “So, I think we’re in a good place.”
READ MORE: Where does Indiana state budget funding come from?
Lawmakers also received a new Medicaid forecast Tuesday. And that projects the Medicaid program will continue to take up a bigger and bigger portion of the state budget. Rep. Greg Porter (D-Indianapolis) said hard decisions must be made.
“We can’t build our budget on the back of the most vulnerable Hoosiers — children and our seniors,” Porter said.
One year ago, lawmakers learned that the Medicaid program would cost the state about $1 billion more than projected. Since then, the Holcomb administration has made major program changes aimed at reducing costs, notably creating waitlists for home- and community-based care programs for older and medically vulnerable Hoosiers.
The latest Medicaid projection shows those changes generated $348 million in savings, based on what the state would need to fund the program. But Indiana also underestimated how many people would remain on Medicaid after the end of the federal public health emergency.
The December 2023 forecast’s estimate was that 400,000 people would be removed from the Medicaid rolls. After 12 months of redetermining every recipients’ eligibility, only 225,000 came off.
That meant the program’s costs increased — and so the net savings to the state budget, between last December’s forecast and Tuesday’s update, is only $85 million.
Legislators grilled Jeremy Palmer, a principal at Milliman Indianapolis, the private company that leads the creation of that forecast.
Palmer repeatedly rejected the idea that the $1 billion error was a mistake at all.
“Sir, I feel like I am the messenger of the financials — meaning that we are projecting,” Palmer said. “I am not spending that money, nor did I squander any of that money.”
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Sen. Chris Garten (R-Charlestown) said he doesn’t think the state should be hiring or retaining companies that make billion-dollar mistakes.
“I go back to accountability and responsibility,” Garten said. “And I’m sorry, I haven’t seen Milliman take any.”
Legislative fiscal leaders said it’s a good idea for the state to explore whether changing vendors for its Medicaid forecast is appropriate.
Lawmakers will receive another revenue and Medicaid forecast in April, shortly before they finalize the new budget that takes effect in July.
Brandon is our Statehouse bureau chief. Contact him at bsmith@ipbs.org or follow him on Twitter at @brandonjsmith5.