An effort to set aside up to $100 million in surplus funds to shore up Arkansas' Medicaid program failed in the state Legislature Tuesday, with Republican and Democratic lawmakers split on how and when to address a projected $400 million state deficit.

n effort to set aside up to $100 million in surplus funds to shore up Arkansas' Medicaid program failed in the state Legislature Tuesday, with Republican and Democratic lawmakers split on how and when to address a projected $400 million state deficit.

The Joint Budget Committee rejected the proposal to reserve the one-time money for the shortfall officials predict will hit the program in July 2013. The proposal would have set aside $40 million from Arkansas' current surplus and up to $60 million from any surplus it has next year to help pay for the Medicaid deficit.

Sen. Jonathan Dismang said his proposal would allow the state to prepare by setting aside the money ahead of the regular legislative session that begins in January. The Legislature is in an abbreviated session focusing on the budget that began Feb. 13 and is expected to end Friday.

"I believe as a legislative body we have to stop being reactionary in nature," said Dismang, R-Searcy. "We have to start being proactive, and that's what this is."

Democratic Gov. Mike Beebe has opposed the proposal and said there's nothing to prevent the Legislature from using the surplus funds for Medicaid during next year's session. Dismang amended his proposal to include protections on using the surplus for a job incentive fund created by Beebe and for the state's debt obligations.

"It will not go anywhere," Richard Weiss, director of the Arkansas Department of Finance and Administration, told the budget panel. "There's no way to tap into it. We would prefer to keep it in surplus until the next session."

The proposal failed on a 16-34 vote, with no Democrats voting in favor of the proposal and only one Republican opposing it. Democrats said they worried about earmarking the money for Medicaid only to find other crises arise before next year's session.

"Let's keep a cushion available in an emergency that could be tapped without being locked away, untouchable, should we need it," Sen. Jimmy Jeffress, D-Crossett, said.

Department of Human Services officials last week said they expect the program to face a shortfall of between $350 million and $400 million for the budget year that begins July 1, 2013. The revised figure is higher than the $250 million shortfall the department originally predicted.

Beebe said last week he's skeptical of the revised number and wants to review the reasons for it.

Beebe has proposed increasing the Medicaid budget by $114 million for the budget year that begins July 1. Beebe had rejected a spending cut proposal from House Republicans that would have paid for $14 million of his proposed Medicaid increase from the state's surplus and would have set aside another $25 million from the surplus to help with the shortfall in 2013.

Beebe had said using the one-time money for the budget that begins on July 1 would only exacerbate the problem because it would still face the ongoing need the following year.

The federal government last year gave Arkansas permission to explore changing the way it pays medical providers for services, and state plans to begin rolling out those reforms in July in a handful of Medicaid programs. Officials have said, however, that those reforms won't eliminate the shortfall.

The Legislature is expected to wrap up its session on Friday, with Beebe's $4.7 billion budget scheduled to go before the joint panel on Wednesday.

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Andrew DeMillo can be reached at www.twitter.com/ademillo