The coming influx of federal funds to expand Medicaid for low-income individuals highlights the need for common sense reforms to Connecticut’s spending cap, as well as the importance of transparency in how the state treats funds it receives from the federal government.

Connecticut’s spending cap, which is intended to limit state spending, also covers federal funds that flow through the state budget. Even when such programs are 100% federally funded—as the Medicaid expansion under the Affordable Care Act is—the spending cap treats them as state spending. This creates the current, perverse situation in which Connecticut cannot accept over $1 billion in federal funds without cutting over $1 billion from vital state services over the next two fiscal years. Clearly, the rules governing the cap should be modified so that it can serve its intended purpose of limiting state, not federal, spending.

Lacking the votes to make such a modification, however, the Governor and General Assembly have elected to move the $1+ billion off budget, beyond the realm of appropriated funds— funds the legislature explicitly authorizes to be spent for a particular purpose. Since the spending cap covers only appropriated funds, this move sidesteps the flaw in the cap; however, the safeguards for such “unappropriated” funds are not clear.

It is essential that the state provide transparency for these “unappropriated” funds. The vast majority of states appropriate federal funds, ensuring that they receive public and legislative scrutiny through disclosure and public hearings. If Connecticut is to break from the pack, we must preserve transparency. The Medicaid expansion funds should be clearly noted in the budget books published by the Office of Fiscal Analysis, as well as publications by other state agencies, and they should be the subject of public hearings also. With totals reaching into ten figures, sunlight is a necessity.