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The state might have to cut back the hours of some employees or else begin offering them health insurance to avoid a fine that could be as steep as $40 million under "Obamacare," as provisions start to kick in next year.
The state has thousands of workers state liquor store workers, for example who are paid hourly wages and don't receive health benefits.
Under the Affordable Care Act, if the state doesn't offer health care to anyone working over 30 hours, it could be penalized $2,000 for each of those workers, Chet Loftis, director of the state's Public Employees Health Plan told legislators Tuesday.
The total would come to "something crazy," like $40 million, Loftis said.
Jeff Herring, director of human resources for the state, said one option is to hire more part-time workers and cut hours to avoid the requirement. Or, the state could offer a very basic level of coverage to those workers who might exceed the 30-hour threshold.
Herring said the state has some time to respond. It anticipates tracking employee hours from April to September of next year and then would have until the end of the year to make the necessary adjustments before the requirement kicks in Jan. 1, 2014, Herring said.
Even if the state runs afoul of the provision, it's not clear the federal government could charge the state, since it is illegal for one government entity to tax another.
House Speaker Becky Lockhart said Congress will have to step in and deal with some of the fallout the states are feeling from Obamacare. If a small state like Utah is anticipating significant new costs, she said, it is hard to imagine what the impact will be on states like California and New York.
While there is some time to deal with that funding crisis, the Legislature got an earful Tuesday of more immediate concerns about $284 million in necessary funding just to keep up with growth in education, the state prison population, Utah's pension fund and health insurance costs.
Lawmakers are anticipating about $100 million in revenue increase in the coming year, as Utah's economy starts to rebound.
"It puts us in the position the Legislature is always in, which is to prioritize the needs of the state and make tough decisions," said Lockhart.
But she also notes that what is a daunting problem could become a catastrophe "if we hit the fiscal cliff" and automatic federal spending cuts kick in.
Legislative analysts are projecting 13,254 more students will enroll in Utah schools next year, bringing the public school enrollment to 614,224. That will cost the state $105 million just to keep pace with the growth and maintain Utah's last-in-the-nation per-pupil spending.
Education officials plan to ask legislators for an additional $44 million, which would increase the base pupil spending formula by 2 percent.
In addition, the state will have to come up with about the same amount to pay for increased contributions to Utah's pension fund and employee health premiums.
It will need to find $55 million if it wants to catch up on building maintenance projects that were put on hold during the economic downturn.
And legislators will have to find about $18 million to pay county jails to lock up the same number of state inmates they housed this year.
"Before we even start talking about discretionary funding, these are some things we try to fund," said Sen. Lyle Hillyard, the Senate budget chairman.
Hillyard said he is shocked that it will take $105 million just so state workers avoid seeing a cut to salary or benefits and more if legislators want to try to give them a pay raise.
"With these reduced revenues and increased costs coming at us, there's got to be a change in paradigm," Hillyard said.
Obamacare is also expected to drive up the state's Medicaid and CHIP (Childrens Health Insurance Program) costs, but legislators learned Tuesday that the Medicaid CHIP program finished the year with a $44.7 million surplus. Federal health reform is expected to cost the program about $21.7 million more next year.
The list of budget needs laid out Tuesday was in addition to several big-ticket items that have already been presented to lawmakers. This summer, they were told they would have to find $21 million for fire suppression costs incurred, $12 million to mitigate a massive data breach at the Department of Health and $25 million for a permanent fix to an accounting error by the Utah State Office of Education.
On Tuesday it was learned that the state office had another $7 million shortfall in funds allocated to pay teacher salaries a topic legislators are expected to address in greater detail in meetings Wednesday.
Associate State Superintendent Bruce Williams said the $7 million error was discovered during a thorough review of the state education budget this year. He said it was a computational error that occurred before he began working at the state office.
During the review, the state office discovered the shortfall in a program that gives school districts and charter schools money to help pay teachers with high levels of experience and training. Williams said upon discovering the mistake, the state office notified the legislative fiscal analyst's office and the governor's office, and found that there was enough money in the state's education budget to cover the shortfall this school year.
As for next school year, Williams said the money will be part of what the state office requests from lawmakers.
Earlier this year, Williams replaced previous associate superintendent Todd Hauber, who resigned, along with the office's director of school finance, after the $25 million mistake was found in Utah's education budget.
Tribune reporter Lisa Schencker contributed to this story.