Debt-deal fallout creates haze in Utah

Budgets • "Exempt" programs may not be safe; the state is willing to "take its medicine."
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Utah officials are still unclear on what final passage of a debt deal could mean for agencies and services that depend heavily on federal funds.

"This is just Washington's first step at getting its fiscal house in order," said Gov. Gary Herbert's chief of staff, Derek Miller, while underscoring the state's willingness to "take its medicine for the health of the country."

Nearly a quarter of Utah's $12 billion annual budget comes from federal funds.

A bipartisan agreement to cut spending and raise the debt ceiling passed the House late Monday, and the Senate on Tuesday morning.

It calls for cutting $900 billion in spending over 10 years from discretionary programs including, defense, law enforcement, education and highways.

Exempt — for now — from cuts are entitlement programs such as Social Security, Medicare, Medicaid, federal pension and Veterans Affairs programs. Another $1.5 trillion in deficit reductions are to be identified by a special congressional committee with automatic across-the-board cuts triggered if members fail to reach agreement.

The committee has leeway to overhaul the tax code and restructure programs such as Medicaid and Medicare.

States, too, will play a role as they determine how to balance their own budgets.

A Utah law passed earlier this year bars the state from incurring additional expenses stemming from federal health care reform.

For the short term, that means swallowing the cuts prescribed by Congress, Miller said. "It's important to have that trigger in there. Otherwise, if a program is spending money, that's a liability, an unplanned-for liability, for the state. We can't write checks that we can't cash."

But in the long term, Utah and other states are pressing for flexibility to allow them to scale back or tweak some federally funded programs as a means to prop up others.

A prime example of how that might play out is with the low-income health insurance program Medicaid, which is theoretically exempt from the first round of cuts. But Herbert is among GOP governors calling for more leeway to scale back eligibility and benefits as well as payments to providers.

"The governor firmly believes if the feds would give us all the money without strings attached … that we could still meet our obligations, do the same, or more, with less," Miller said.