Billion-dollar budget problem or budget brinkmanship?

Hartford, Conn. (WTNH) — Governor Malloy must sign or veto the just passed state budget no later than next Wednesday (Nov. 1) night; but he claims to have found a billion dollar mistake in the document. He fears that if it becomes law the state would face a legal and financial nightmare.

There was a big meeting of lawyers from the General Assembly and the Governor’s office Friday afternoon on this very serious budget issue.

Related Content: Breaking down the state budget deal

The Governor’s state budget director, Ben Barnes,  says the budget passed by the Assembly has language on the hospital tax that is deeply flawed saying “the state would face hundreds of millions in penalties from CMS” (that’s the federal Medicaid and Medicare Service),” hundreds of millions in lost tax revenue from hospitals, and be on the hook for funding hundreds of millions in unreimbursed payments.”

The 140 member Connecticut Hospital Association tells News 8 they did agree to the language that increases the hospital tax in exchange for a new federal Medicaid reimbursement formula that would offset the cost of the tax hike. But the budget director says the Medicaid language does not comply with federal law and will result in the state being on the hook to pay the hospitals what they were promised, plus penalties from the feds and end up not getting the tax revenue.

Related Content: Budget passes House & Senate with veto-proof majorities; Malloy says there’s a problem

The Republican leader in the Senate, Sen. Len Fasano (R-North Haven) telling News 8,  “The Governor really wants to starve the hospitals of money to force them to settle the second part of their lawsuit.”

More than a year ago, the Hospital Association took the Governor and the state to court seeking to have the Hospital Tax ruled illegal.

The Governor has said publicly that he would fail in his duty if he did not attempt to get the lawsuit withdrawn. Legislative leaders think the Governor is threatening to hold the Medicaid application to the feds hostage.

Adds Fasano,  “We are not going to let the Governor control the trigger because he has shown through actions and words the propensity of trying to have leverage on the hospitals to settle the case.”

The Governor’s office contends that is not what is going on, that the language in the budget bill just won’t work. Legislative leadership says if that’s really the case, they will fix it.

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