State finance chief tells lawmakers Medicaid costs were anticipated, pushes for full funding ahead of November budget proposal.
Arkansas Department of Finance and Administration Secretary Jim Hudson told state lawmakers in Little Rock this month that Medicaid must remain fully funded, defending a $200 million transfer from restricted reserves to the Medicaid Trust Fund after legislators questioned the transparency of the move, according to a report dated September 18, 2026. The exchange occurred as lawmakers scrutinized declining trust fund balances and growing reliance on one-time reserve money to cover recurring Medicaid costs.
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Hudson Defends Transfer as Planned Expense
Responding to a senator who suggested the $200 million infusion was an unanticipated expense, Hudson said, "Sorry Senator, that's not accurate. We actually had the $200 million, you know, approved in the budget process. We talked about the $200 million during fiscal session that there would be a need." He added that Medicaid "had a tremendous amount of expense that we did not foresee for FY26," tying the pressure to claims and enrollment patterns. The $200 million transfer followed a separate $400 million supplemental appropriation for Medicaid provider payments previously authorized under Act 153 during the 2022 fiscal session, tied to increased reimbursement rates and enrollment during the public health emergency.
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Reserves, Trust Fund Pressure and Next Steps
Legislative Council approval of the $200 million transfer came amid broader concern that Medicaid's trust fund balance has been declining, prompting the state to rely on the General Revenue Allotment Reserve Fund. Budget analysis shows lawmakers have authorized up to $518.7 million in one-time transfers from that reserve fund for fiscal year 2027, including up to $100 million earmarked specifically for the Medicaid Trust Fund. Hudson told lawmakers to expect further clarity when Governor Sarah Huckabee Sanders presents her balanced budget in November. "We're going to go into budget hearings next month," Hudson said. "I think when she presents that, she'll address all the needs that are required to be able to fund state programs. I'm not going to get ahead of her on that." Sanders' prior budget proposals have included a $100 million Medicaid sustainability set-aside and $13 million for maternal health-related Medicaid funding, providing precedent for continued reliance on surplus funds to offset rising costs.
