As the North Carolina House passed its version of the state budget this week, the eyes of many legislators were turned to Washington to see whether Medicaid funding will be extended beyond 2010.

At stake for North Carolina in the federal debate, $500 million in Medicaid reimbursements in this year’s budget, and around $1 billion in next year’s budget.

The temporary use of lottery funds to save about 1,600 teaching jobs highlights the $19 billion package passed in the House shortly after midnight Friday.

N.C. Rep. Melanie Goodwin called the plan “the best budget that we could create under these circumstances,” and expressed disappointment with cuts to home health services in the budgets proposed by the Senate and House.

“Clearly, there were things that were cut that make me deeply uncomfortable,” she said of the $19 billion plan, which Democrats said cuts 3.5 percent from the spending plan already in place for the upcoming fiscal year.

However, Goodwin said there is concern in Raleigh that more cuts may be needed after $500 million in Medicaid funding were rescinded from legislation in the U.S. House.

The “extenders” bill would have extended current Medicaid funding to states through mid-2011, but was taken out of the House version of the package.

A press official from U.S. Rep. Larry Kissell’s office said the congressman fought for the FMAP funding, putting a call into the House Majority Leader on behalf of Gov. Perdue.

“He continues to fight to help the state shore up these budget shortfalls,” Kissell staffer Haven Kerchner said.

When the U.S. Senate takes the matter up, it could include the money.

“The concern, in both the House and the Senate, is that the federal government withdrew $500 million in FNAP funding, which includes money for Medicaid,” Goodwin said. “We are hoping that the federal government will send down this money, but it was taken out of (House Resolution 4213). If they don’t give us that money, we may have to go back and start this process all over again and find $500 million more to cut.”

N.C. Sen. Bill Purcell explained that in the past, the federal government paid 62 percent of Medicaid cost in the state, counties paid 4 percent and the state paid 32 percent, or about a third.

“Over the past couple of years, the state has taken over paying the county’s share, and now pays 38 percent, and the federal government has paid the other 62, which equals about $1 billion every year in North Carolina,” Purcell said.

He explained this arrangement was authorized through Dec. 31 under the stimulus package, but is now in limbo as the Senate is in recess.

“It’s not only us being affected by this, and all the states are very concerned,” Purcell said. “There’s a lot of pressure on Congress to restore this funding.”

Several media outlets report the National Association of State Budget Officers and the National Governor’s Association are among the groups lobbying for the funds to be restored by the Senate.

Purcell said the General Assembly would most likely have to look at forming committees to decide what to do.

“It’s kind of a dilemma,” he explained. “But, do you go ahead and fire teachers now because you think they might not approve the money? I don’t think so. I think you just have to assume they’re going to approve it and when we find out they’re not, come back and do whatever drastic things we need to do.”

He pointed out North Carolina cut $1 billion in funding from Health and Human Services last year, and seems headed toward $400 million more in cuts in this budget.

“We just can’t cut anymore from Health and Human Services, so I think that if we don’t get this money, the next round of cuts will have to be across the board,” Purcell said. “If this becomes necessary, I think you’re really going to begin to see education getting touched.”

For now, Goodwin said the House sought to protect education.

The AP reports public schools gained $90 million in additional funding in the House version than the Senate version, which Goodwin said would come from lottery revenue being temporarily moved out of school construction.

“This move alone is going to save over 1,600 classroom positions,” Goodwin said.

“The focus was on jobs and education, which my constituents have voiced to me are the most important issues to them,” Goodwin said. “This budget also contains tax breaks for small businesses, job creation and health insurance, and funds for small business expansion.”

She said the overall philosophy of the proposal is “scale back programs, so that when the economy rebounds there will still be the infrastructure to rebuild those programs.”

The House budget measure passed by a margin of 63-49 shortly after midnight Friday.

Leadership from the House and Senate will begin hammering out the differences of their proposals next week.

Staff Writer Philip D. Brown can be reached at (910) 997-3111 ext. 32, or by e-mail at pbrown@yourdailyjournal.com.