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Budget gap grows as result of ‘unrealized savings’

Legislative budget analysts said last week that $165 million of the state budget deficit is due to “potential unrealized budget savings” that were assumed as part of the spending plan, which was designed to bridge a $3 billion shortfall.

In short, several savings measures won’t work as planned.

One such component of the budget is $50 million in savings expected from implementing new anti-fraud measures for the Arizona Health Care Cost Containment System, the state’s public health insurance for the poor. Although the savings was included in budget calculations, lawmakers neglected to enact statutory changes needed to revise the AHCCCS fraud procedures.

“Regardless of the actual level of fraud, substantial new fraud-reduction savings seems unlikely without some change in statutory or administrative procedures,” Joint Legislative Budget Committee Director Richard Stavneak wrote in a memo to lawmakers Oct. 22.

The budget also assumed $100 million would be generated in upfront payments by private firms signing contracts to operate nine of the state’s 10 prisons, including its death row. However, the process for securing vendors is lengthy and likely will take most of the fiscal year, Stavneak wrote in the memo.

“As a result, it may be better to move forward with the procurement process so as to determine the state’s possible gain, but not score any FY2010 revenue until we have more information,” he wrote.

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