One could hardly fault Governor Bob Riley for his adamant position of seeking cuts in state funding rather than increased taxes. He is still reeling from the 2-to-1 defeat his tax package received at the polls last year. He very well heard the message loud and clear from Alabamians. He is simply responding to their mandate.

He has relied on his Finance Director, Drayton Nabers, to find the solution to our state’s fiscal crisis. Nabers is a brilliant businessman who was CEO of Protective Life for two decades before retiring. The Governor lured Nabers out of retirement to be Finance Director. Therefore, Nabers looks at the state finances from an independent and unbiased position. He and most outside observers focused on two areas of growth. One is the enormous increase in employee benefits, most notably being the escalating cost of health insurance. The skyrocketing cost of health care is a national problem and all state governments and businesses are wrestling with this bear. I don’t know whether anyone knows the answer to this problem.

The Governor will get the most resistance to cutting Medicaid because it affects the elderly, a very popular group of Alabamians. Likewise, one of the fastest growing and expensive entitlement programs the federal government has is Medicare.

The federal government’s need to trim the federal budget is exacerbating our crisis in Medicaid. The Bush administration in its newly proposed budget is calling for changes in the funding formula for Medicaid which could have severe implications for Alabama. The State is already delaying payments to healthcare providers. This discourages doctors, dentists, and even hospitals from serving Medicaid patients.

As Riley’s team eyes the Medicaid cuts it must be mindful of the fact that each state tax dollar spent receives a federal match of $2.65. No other state agency can leverage this kind of federal aid. It would be short sighted to leave that kind of federal change on the table. Putting Medicaid on solid fiscal footing is crucial to the future well-being of the state. The arrival of the baby boomers over the next decade will otherwise be traumatic.

The legislative session is coming into the final stretch with the Governor and Legislature at a standoff over the budgets and the Governor’s accountability package. There is a lot of work remaining. As predicted earlier, Riley will have a hard time winning in the Legislature against Paul Hubbert and the AEA when it comes to reducing teacher benefits.

Now that the deadline to challenge Senator Richard Shelby has passed, speculation is that ousted Supreme Court Justice, Roy Moore, will seriously consider running for Governor in 2006. He is busy on the speaking circuit to religious groups around the country which could be a source for campaign contributions in a political race.

Insiders close to Lucy Baxley believe she may be edging closer to a race for Governor in 2006. She is certainly keeping a brisk political schedule around the state. Speaker of the House, Seth Hammett, is also very interested in the Governor’s race. He is very organized and is keeping an eye on his options and electability.