In Arkansas, 2011 was a year of record flooding and searing heat, a busy and deadly tornado season and a slow recovery from national economic woes. However, our agricultural industry has rebounded after those floods, we continue to rebuild and recover from the storms, and Arkansas remains one of only four states to make it through the past two fiscal years without a general-revenue shortfall.
We can't predict everything 2012 will bring with it, but we know some of the events that are on the horizon. First and foremost, the Arkansas General Assembly will convene in February to set the state budget for the coming fiscal year that begins in July. This is only the second fiscal session since Arkansas voters created them in 2008. This session is designed to address only budget issues, not to fashion and debate new policies. The legislature held to this ideal two years ago, and I have seen no indications that this February will be any different.
The state's general-revenue budget will again be tight, and operations budgets for most state agencies will remain flat. With a small increase in revenue being forecast, I will propose a funding increase in K-12 education to ensure our continued push for excellence and compliance with adequacy requirements. Beyond that, we will examine other areas where the demand for government services has continued to increase.
One area we've been watching closely is Medicaid. Rising health-care costs and a struggling national economy continue to increase demand for Medicaid services, and soon our state budget will be unable to keep up with that demand. We now believe we will have sufficient Medicaid funding for the coming fiscal year. But our improved national standing for per-capita income means that federal matching funds for Medicaid will be decreased. The result is a projected Medicaid shortfall in the hundreds of millions of dollars by fiscal year 2014.
That is why we want to begin instituting our payment-reform initiatives for Arkansas health care in 2012. What began as an idea to curb rising Medicaid costs has become a system-wide effort to better control health-care costs while improving quality of care. Working with health-care providers, consumers, insurance companies and federal officials, we are concentrating on specific areas of care to improve the system. These include bundling payments, eliminating duplications of expensive tests and placing a strong emphasis on results. This effort could position Arkansas as a national innovator in developing state-led solutions in health care.
Finally, 2012 will be a busy and contentious election year. The presidency, four Arkansas congressional seats and every seat in the state legislature will be on the ballot, along with countless local and judicial contests. While voters will hear many ideas and promises from candidates, I encourage you to ask thoughtful questions about the real-world impact of campaign pledges. New programs often require new revenue, which can mean higher taxes. And cost-cutting ideas and lower taxes can have a very real impact on state services and job growth.
We can all work together to improve our State, but those improvements are best made through pragmatic debate and solutions, not heated rhetoric and impractical promises. I look forward to better years continuing to lie ahead for Arkansas in 2012 and beyond.