MONTPELIER >> Officials anticipate that state spending will exceed revenue in the next fiscal year by some $66.2 million.
The numbers, presented to the Joint Fiscal Committee on Friday, drew a prickly comparison from committee chair Sen. Jane Kitchel, D-Caledonia.
"We're trying to figure out if you sit on a cactus which spine is sticking in the deepest," Kitchel said to her fellow committee members Friday.
Budget documents presented to lawmakers on the panel point to one particularly long spine: Medicaid. In the current fiscal year and the next, state health care spending is exerting the major upward pressure.
In the short term, the Shumlin administration and lawmakers in January will need to reconcile a $40 million shortfall in the current year's budget.
Of that, all but $3 million is related to Medicaid, according to JFO estimates issued this month.
The drivers include a Medicaid caseload higher than originally anticipated, as well as other pressures in the Department of Vermont Health Access (DVHA). The calculation also includes the so-called 53rd week of Medicaid — an occurrence similar to a leap year when the state needs to reconcile payments for the extra days in each year.
Some non-health-care expenses are also coming in above projected levels within the Agency of Human Services, such as needs within the family services division of the Department for Children and Families.
Andy Pallito, commissioner of the Department of Finance and Management, is optimistic that the state will be able to address the FY 2016 budget adjustment.
In December, the House Appropriations Committee will begin working on the Budget Adjustment Act, legislation that comes halfway through the fiscal year in which lawmakers adjust the annual budget to meet actual state expenditures.
"Although a significant challenge, we think it's manageable," Pallito said Friday. In the scheme of a state budget that totals $5.5 billion, he said, "there's a lot of moving parts."
Pallito's bigger concern is addressing the budget problems for the next fiscal year.
Budget pressures are already adding up to be $66.2 million above revenue projections in FY 2017, which begins July 1.
Projections estimate that Medicaid will be up by some $54.1 million in FY 2017.
Other AHS pressures, including needs for the DCF family services division, ring in at about $5.2 million.
Meanwhile, state labor costs will drive spending up by some $28.5 million, according to JFO estimates. Those costs, related to state employees and teachers, reflect the pay act, rate increases for benefits and other factors.
The judiciary branch has asked for an increase of $1.9 million, according to Pallito. It's an early estimate, but about half of that money would go toward improving court security — a matter that has been of high priority following the shooting of a social worker this summer and the rape of a woman in the building that houses the criminal and family courts in Burlington
It's unclear yet exactly how the Medicaid gap will impact the rest of state government, Pallito said.
"We're still trying to figure out, do we have the complete picture?" Pallito said.
Rep. Mitzi Johnson, D-South Hero, who chairs the House Appropriations Committee, said that she was not surprised by the information presented by the administration and the Joint Fiscal Office.
"We had some clues at the end of last year that Medicaid was running hot," Johnson said.
Her committee will convene in December to begin taking testimony on the budget adjustment.
Johnson nodded to the labor savings carried out in the last year's budget, including the 221 people who left their jobs under a retirement incentive. Lawmakers will need to take stock of priorities for state agencies and departments, she said.
"We're going to have to really look into figuring out what our top priorities are for various agencies because we're asking an awful lot and Vermonters are asking an awful lot of state government," Johnson said.
Elizabeth Hewitt is the criminal justice reporter for VTDigger.