State could be on hook for $320 million without federal changes

By Cy Ryan

Wednesday, Nov. 17, 2010 | 10:39 a.m.

CARSON CITY – Unless the federal government changes its rules, Nevada will face a $320 million problem tied to unemployment insurance and Medicaid.

Dale Erquiaga, who will be deputy chief of staff for Brian Sandoval, told reporters Wednesday the governor-elect met with Senate Majority Leader Harry Reid on Tuesday in search of relief.

Unless the federal government alters its formula for financing Medicaid, the state would have to put an extra $215 million in the next two fiscal years into the program that provides medical care for the poor.

And the state would be required to start paying $105 million to the federal government for interest on the money it borrowed to pay unemployment claims.

Erquiaga, a member of the Sandoval’s transition team, said those were the two most pressing problems the governor-elect talked about with Reid.

Erquiaga said he didn't talk with Sandoval after the meeting about whether Reid agreed to seek the relief requested.

Before the federal stimulus program, the state and the federal government each paid about 50 percent for Medicaid. But starting in October 2008, the federal share went up to 63.9 percent.

Mike Willden, director of the state Department of Health and Human Resources, said the federal government’s share will gradually shrink to 55 percent on July 1, 2011. And for the next biennium, unless the federal government changes its formula, that would mean $215-$220 million extra the state would have to pick up.

Big growth is expected in Medicaid. In the last three years there has been a 54 percent increase in caseloads. By the end of the next biennium, Willden says there probably will be 311,000 recipients in the state.

To bail out its unemployment fund, the state is borrowing anywhere from $750 million to $1 billion from the federal government. Starting in September, the state will have to pay interest on that loan, amounting to $105 million in the next biennium, Erquiaga said.

The loan itself will be repaid by Nevada employers but the interest will be picked up by the state’s general fund, Erquiaga said.

The state fund to pay 26 weeks of unemployment benefits went broke because of the high numbers of jobless Nevadans.

On other topics, Erquiaga said Sandoval on the day after the election asked to meet with Gov. Jim Gibbons, who he defeated in the primary election. But he said there have been no meetings and none are scheduled.

He said Gibbons is still recovering from surgery at the governor's mansion.

The governor-elect will be in San Diego this week to attend a meeting of Republican governors but will return to Nevada next week.

On Dec. 1-2, he will be in Washington, D.C., for a meeting at the White House.

Sandoval expects to make an announcement Friday or Monday on another appointment to his cabinet, Erquiaga said.