State Auditor Crit Luallen released the first ever in-depth review of Kentucky's federal funding. The 137-page report includes recommendations for how the state can obtain the most funding possible from the United States Government. The report's central recommendation is that Kentucky can maximize its efforts with a centralized approach to coordinating federal funding opportunities.
The review discovered that Kentucky received $30 billion in federal funds. Of that total, Kentucky state government entities received $5.8 billion in fiscal year 2003, which represented approximately one - third of the state budget. State Auditor Crit Luallen said, "These funds are used for a variety of needs including Medicaid, unemployment insurance, highway construction, education, school lunches, and housing programs. Kentucky obtaining such a large amount of federal funds is not necessarily a positive development, but a symptom of our systemic problems with poverty and poor health. But given our challenges we certainly need to access every dollar we deserve. It is our goal that this report be a valuable tool for the Fletcher administration as we all work toward the shared goal of maximizing our use of federal dollars."
The State Auditor's major recommendations were to centralize grant oversight and to prepare for increased use of block grant funding, especially within Medicaid. Luallen added that, "in the fiscal year ending June 30, 2002 there were 126 federal grants or programs that Kentucky did not participate but at least one of our regional states did. Because there is no statewide method or requirement for documenting efforts to apply for federal assistance we cannot determine whether Kentucky had applied for assistance that was not awarded or simply did not apply."
Luallen called on the Office of the State Budget Director to manage the centralized grant oversight operation. "Benefits would include reduced costs and drains on existing agency resources and increased potential for identifying additional federal grant moneys. Kentucky has a tenured and strong Congressional delegation with many recent successes in obtaining federal funds. A strategic and coordinated approach to federal funding that fully utilizes the delegations' expertise would improve Kentucky's access to federal funds." Luallen said.
Regarding the future of Medicaid, Auditor Luallen warned of the effects of the move toward block grants would have on Kentucky. She noted that Kentucky now has more citizens on Medicaid than in the public school system and that the 70% - 30% match could be in jeopardy since the federal government would cap amounts given to states through block grants. "This cost cutting measure in Washington could have devastating effect upon a Medicaid program already suffering from deficits here in Kentucky. Although opinions on the ultimate impact of block grant proposals differ, the significant economic and functional differences between current Medicaid funding and future proposals for block grant Medicaid funding have severe implications and raise manifold concerns for Kentucky," she added.