A state health insurance program for low-income children needs more money to avoid running out of funds before the end of the fiscal year, appropriators in the state Legislature were told Thursday.
They’re being asked for an additional $19.5 million from the Education Trust Fund to cover the expected shortfall for the Children’s Health Insurance Program in the current and 2027 fiscal years.
A $419 million supplemental education spending bill proposed by Gov. Kay Ivey includes a $19.2 million allocation for the program.
Also known as CHIP or ALL Kids, it has higher income requirements than Medicaid and offers working families low premiums for Blue Cross Blue Shield coverage.
“CHIP is important to us because there are a lot of families that just wouldn’t be able to get insurance without it,” Health Officer Dr. Scott Harris told lawmakers during budget hearings with several of the General Fund’s largest agencies. The program covers about 105,000 children whose families have “skin in the game,” paying co-pays and premiums.
It is administered by the Alabama Department of Public Health, which Harris leads. He explained to lawmakers that the funding shortfall was at least in part because of faulty estimates when officials were putting together their 2026 budget requests in late 2024.
At that time and during the COVID-19 pandemic, many of the children now receiving CHIP were receiving Medicaid. A federal mandate wouldn’t let states remove people from Medicaid during the pandemic. Enrollment in CHIP during the pandemic was down by about 25,000 children, Harris said, lessening the needed state money for the program that it mostly funded through federal dollars.
In 2023, the Medicaid Agency began an “unwinding” process to remove people no longer eligible from its rolls. Some of those children have continued to be enrolled in CHIP, Harris said.
“We’re asking for state dollars to pull down federal dollars,” Harris told lawmakers about the need for the supplemental appropriation.
In fiscal 2025, the state’s CHIP costs to the state General Fund was $82.6 million.
Asked about the CHIP allocation in the education supplemental, Senate education budget committee chairman Sen. Arthur Orr, R-Decatur, said it’s been reviewed by he and his House counterpart, Rep. Danny Garrett, R-Trussville.
“Chairman Garrett and I are still looking at it and evaluating the impact on the education budget,” Orr said.
Senate General Fund committee chairman Sen. Greg Albritton, R-Range, is sponsoring Senate Bill 152 to move some of the CHIP obligation out of the General Fund budget. That bill originated in Gov. Kay Ivey’s office.
“The Children’s Health Insurance Program has been funded from both budgets in the past,” a statement from the Alabama Department of Finance to Alabama Daily News said. “Recognizing the challenges in the General Fund, the capacity available in the Education Trust Fund, and the program’s focus on children’s health insurance, this package proposes funding the FY27 growth in that obligation through the ETF supplemental.”
Albritton, who has argued recently CHIP shouldn’t solely be a General Fund responsibility, said Thursday the bill does allow future funding to come from the ETF “to a point.”
“It’s only dealing with the growth in CHIP,” he said.
Outside of the CHIP request, ADPH’s 2027 funding request totals an about $2 million increase, nearly $880,000 of that for employee merit raises.
Agency leaders were previously warned to keep their asks low as the General Fund faces shrinking revenues.
Gov. Kay Ivey’s proposed $3.69 billion 2027 General Fund budget calls for level funding of all state agencies when it comes to operations and maintenance. It reflects a $28.5 million drop from the current year’s $3.71 billion budget.
The tightening is due to an expected 4.2% decline in revenue for FY27, which begins Oct. 1, 2026.
Sen. Linda Coleman-Madison, D-Birmingham, told her colleagues that the state has to be able to fund the functions of government and should consider ways to increase revenue.
“I know we don’t want to talk about the big T word,” she said. “… We’ve got to change our mindsets about some things, and I’m talking about. The big G — gaming.”