Bullock says audit shouldn't derail infrastructure projects

Bullock says audit shouldn't derail infrastructure projects

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Gov. Steve Bullock

Gov. Steve Bullock, in a November 2019 file photo

After rumblings about a pending legislative audit that might call into question the eligibility of half the state’s Medicaid enrollees, and governor staffers asserting the issue could put at risk $80 million in infrastructure projects, Gov. Steve Bullock said Tuesday he expects the projects to get underway this summer.

“We’re working through it as we speak, with the expectation that we’re still going to get bonds out, it won’t impair our (state credit) ratings and it won’t substantially impact the construction season,” Bullock said.

In early January, Bullock’s office raised the red flag about the audit, which is set to be published sometime in February. They say auditors — incorrectly, according to the governor’s office — are calling into question the eligibility of up to half of the roughly 270,000 Montanans who are enrolled on the state's Medicaid program.

That would create a $135 million liability if the federal government requires the state to pay back the funds spent on anyone improperly enrolled, something both sides say is extremely unlikely.

But legislative auditors say that liability, no matter how improbable, would have to be reported to the credit agencies that the state works with to issue the bonds to pay for building projects and determine what ratings the state is given. Those ratings determine the interest rate the state will pay on bonds, with higher ratings meaning the state pays less interest.

On Tuesday, speaking with the Helena Independent Record editorial board, Bullock said while the state would have preferred to issue bonds in November because of the volatility of the bond market, his office has been having positive conversations with the major credit rating agencies about the situation.

“We’ve reached out already to the (rating) agencies to say this may be a disparity or difference between legislative audit and us,” Bullock said. “ … Even if the conversations with the credit agencies have been generally positive, you won’t know until … right in advance of the bond levy.”

By positive, Bullock said he meant the audit "wouldn't impact or impair our overall credit rating, which we've worked really hard to maintain."

Included in the infrastructure projects Bullock's office previously said were at risk are the long-awaited renovation of Romney Hall on the Montana State University campus in Bozeman. That project has been proposed for the better part of a decade, and finally crossed the finish line in last year's session. The list also includes bridge, water and wastewater projects and more.

The state will put out what’s called the Montana Comprehensive Annual Financial Report in early February. That’s the report auditors have said they would need to issue with a disclaimer about the potential liability.

Bullock said Tuesday he anticipates the Legislative Audit Division will flag the concerns, but his office will not.

“I can’t see our accounting division requiring our accountants to flag a liability that by no means from our perspective meets the remote possibility of occurring,” Bullock said. “ … I don’t foresee ever accepting the notion that 50% of the people on Medicaid are ineligible because I think by even the Legislative Audit Division’s own standards, they recognize that money is not going to be clawed back and it’s a fairly absurd proposition.”

In memos with the governor’s budget director on Jan. 6, the deputy legislative auditor wrote the division believed “the likelihood of the Centers for Medicare and Medicaid Services requiring the state to return funds is more than remote.”

Legislative auditors follow a longstanding practice of not discussing audits before they are in front of the Legislative Audit Committee.

Bullock was critical Tuesday of how auditors have used state tax data and not the same metrics the Department of Public Health and Human Services does to verify Medicaid eligibility. The state must follow a process for approval agreed upon with the federal government, but in the draft audit auditors are using tax data the governor's office says can be out of date.

“We use 27 metrics to figure out who’s eligible,” Bullock said. “The federal government requires us to use those metrics.”

In the 2019 Legislature, lawmakers passed a bill to continue Medicaid expansion that requires the state to use some of that state income tax data to verify eligibility before before authorizing payment of benefits, though that is not in place yet.

Some Republican lawmakers have been calling for the state health department to change its income verification process to not allow for self-attesting of income, but federal law requires the state health department to accept that and then verify eligibility using state and federal data. 

By the start of this year, the department was verifying eligibility prior to issuing benefits as required under the bill that continued Medicaid expansion. By as early as possibly April, the state will add the income tax data to the other 27 metrics it uses to verify eligibility.

Once the audit is published, it will be discussed by the Legislative Audit Committee, likely in April. At that meeting health department heads will discuss findings and recommendations.

“As we do with every legislative audit, we'll work with the legislative auditor and as we’ve done through this try to help the audit division recognize they should actually be looking at the factors we’re allowed to look at,” Bullock said. “We’ll continue to work to try to make sure that (this doesn’t) impact the state’s ability to bond or the overall Medicaid program.”

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