LINCOLN — A fund intended to support Nebraska health needs for generations is declining and will probably run dry if current trends continue.
Nebraska's state investment officer, Jeffrey States, warned lawmakers Tuesday that money going out of the Health Care Cash Fund exceeded money coming in during the last fiscal year.
Projections show that the imbalance is likely to continue unless lawmakers cut back the spending from the fund, he said.
"You could maintain for the next 10 years the current level of spending, but it would not be perpetual," States said.
The situation jeopardizes money used for a host of health-related needs.
Biomedical research, children's health insurance, public health, behavioral health care, developmental disability services, respite care and more get annual allocations from the fund.
The fund provided about $59 million for those purposes during the fiscal year that ended June 30. More than $58 million was appropriated in the current fiscal year.
Former State Sen. Jim Jensen of Omaha said the Health Care Cash Fund was created in 2001 with Nebraska's share of a national tobacco settlement agreement and with funds Nebraska collected through a Medicaid billing loophole.
The intent was to create a perpetual fund that could support health-related needs with its earnings, he said.
But the plan began running into trouble in recent years because less money has been going into the fund than expected.
The federal government closed the Medicaid loophole in 2005, and annual amounts coming in through the tobacco settlement are projected to shrink.
The volatile investment climate of recent years added to the difficulties of maintaining the principal in the fund, let alone adding to it, States said.
He told lawmakers the situation leaves them with the choice of spending at current levels and letting the fund slowly disappear or reducing spending to a level at which the fund's principal could be maintained.
Jensen urged members of the Appropriations and Health and Human Services Committees to choose the latter option and preserve the fund.
"If it requires a temporary reduction in spending, so be it," he said.
Senators heading the two committees said they have not decided which direction to head.
It may be the 2012 legislative session before lawmakers tackle the issue, said Sen. Lavon Heidemann of Elk Creek, the Appropriations Committee chairman.
"It's not going to be an easy process by any means," he said.
Sen. Kathy Campbell of Lincoln, the HHS Committee chairwoman, said senators may look at other options, such as finding money to bolster the fund.
Any proposal to cut spending is bound to face resistance.
Representatives of groups that have benefited from the fund told lawmakers Tuesday how critical the money has been for them.
Kay Oestmann, president of Friends of Public Health, said the $5.6 million per year for public health aid made it possible for Nebraska to expand public health services statewide.
The $14 million per year for biomedical research allowed the University of Nebraska, Creighton University and Boys Town to recruit top researchers, who now bring in many times that amount in federal research dollars, said Jennifer Larsen, University of Nebraska Medical Center vice chancellor.
David Holmquist, a lobbyist for the American Cancer Society, said money going to Tobacco Free Nebraska has helped the state bring down smoking rates by adults and teenagers to below national averages.
Nebraska was projected to receive $1.3 billion over 25 years in the settlement between states and tobacco companies. The settlement ended a lawsuit filed to recoup money spent on health care for smokers.
Contact the writer: