Appropriations panel backs two‑year $397.8 million state appropriation for Rural Health Transformation grant

The Appropriations Division on Thursday recommended a draft bill that would appropriate $397,800,000 in federal Rural Health Transformation grant funds, comprising two federal fiscal years of award authority, and sent the measure to the full joint appropriations committee ahead of a special legislative session.

Legislative counsel Brady told the division the draft is intended to provide the Department of Health and Human Services (DHHS) the appropriation authority to obligate and spend the federal award across the grant period. "This appropriation amount will include two federal fiscal years’ worth of funding," Brady said, explaining the doubling compared with the first‑year award.

The bill draft includes provisions to allow limited line‑item transfers within DHHS, to permit DHHS to award grant funds to other state agencies with matching appropriation authority from the Office of Management and Budget, and to carve out salary and wage uses of federal grant funds so those uses will not count against a separate transfer limit in the regular appropriation bill.

Jonathan Hall, chief legal officer for the department, reviewed statutory exemptions the draft would temporarily allow so projects could proceed without violating existing state procurement, surplus property and other requirements. "We looked at various laws ... and what may be exemptions that we need for a limited time period dealing with just this funding request," Hall said, noting the exemptions are intended to remove potential roadblocks to implementation.

Committee members pressed DHHS on three recurring themes: (1) whether the state must accept the federal award as appropriated, (2) how strictly capital and building‑related expenditures are limited, and (3) what cash‑flow and timing constraints apply to payments and obligations.

Donna Ockland, DHHS chief financial officer, said the department requested two years of appropriation authority so it will have carryover authority and be able to obligate money in the award period. "We're simply asking for year 1 times 2. If we don't receive the grant, we just don't spend the money," Ockland said. She emphasized that federal terms and conditions will determine final allowability and that DHHS will work with CMS on technical questions during the special session.

On capital spending the committee was told CMS limits capital to minor renovations, equipment and alterations that do not materially increase a building's value or useful life. Jonathan Hall said the exemptions are drafted to permit procurement and use of prequalified architect/engineer pools and to avoid conflicts with surplus property rules, but major construction or purchase of real property remains disallowed by federal guidance.

DHHS staff also clarified timing and cash‑flow rules: the department expects to obligate roughly the first‑year award (about $198 million) by the federal obligation deadline and will draw funds on a weekly reimbursement schedule. Ockland warned that projects must be ready for spending or risk leaving money unobligated or unspent at the end of the award period.

The draft requires grant recipients to acknowledge that funding is not guaranteed beyond the federal program’s duration and directs DHHS to provide periodic reports to legislative management on program activities and outcomes. The bill sets an effective date upon filing with the Secretary of State in the special session.

After discussion, Representative Steaman moved to recommend the draft appropriation bill to the full joint appropriations committee; Representative Murphy seconded. By voice roll call the division recorded affirmative votes and the chairman announced the motion carried. The full joint appropriations committee will consider the draft during the special session next week.

The division meeting closed with members asking DHHS and legislative council to provide additional details at the public hearing — including survey/listening session participation numbers, clarity about CMS review procedures, and dollar examples for allowable capital projects.

The appropriation draft will be taken up in joint session with the full appropriations committee during the special session.