After years of complaints from county governments, state leaders under then-Gov. George E. Pataki agreed in 2005 to cap the growth of each county’s Medicaid costs.

The program has evolved to the point where by 2008 each county can rest assured its Medicaid costs will rise no more than 3 percent a year. The state will cover the excess and refund money to counties where the cost rises less than 3 percent.

So Erie County officials know their Medicaid bill will reach no more than about $189 million in 2008, about $194 million in 2009, and so on.

But the state also added an option: Counties can hand their entire Medicaid bill to the state government if they also hand over a standard percentage of their sales tax income. It’s a one-time offer that expires Sept. 30.

Never again would a county executive need to budget for Medicaid, the health insurance program for the poor. And a county executive would never again be able to blame a budget crisis on Medicaid.

But since county officials cannot predict the rise and fall of taxable sales, they cannot predict the cost to future generations of county taxpayers if they take the offer.

“What the state has done here is turn us into fortunetellers,” said Legislator Thomas Loughran, D-Amherst. “Does this legislation come with a crystal ball?”

Erie County would have to turn over 1.4 percent of its total taxable sales each year. For instance, if the total sales of gasoline, clothing, appliances, cars, restaurant meals and all the items subject to the sales tax reach $13.4 billion by 2008, the state will take 1.4 percent, or about $188 million, for Medicaid that year.

In that case, Erie County would receive a $600,000 benefit.

But the benefit shrinks as the years progress. As the volume of retail sales rises, so does the amount of money Albany will take from Erie County — perhaps more than the county would pay to simply meet those 3 percent annual increases in Medicaid, with the chance for a refund.

Since 1995, Erie County’s total taxable sales have fluctuated. Sales volume rose 9 percent in 1999, a banner year, to $10.7 billion. But year-to-year sales volume declined twice, as well.

Since county leaders cannot confidently predict the growth in retail sales, they said they see no clear choice, aside from continuing to press the state to assume each county’s Medicaid costs with no strings attached. They are also studying the matter with a group from the Erie County control board.

County leaders said they do not plan to change the percentages of sales tax proceeds they share with cities, towns, villages and school districts, so those governments wouldn’t be affected should Erie County choose the “Medicaid intercept” program. But the control board itself could be affected.

To pay its bills, the control board intercepts the sales tax money Albany returns to Erie County each month. The control board keeps what it needs for its own operations and gives the remainder to government officials.

It would use the same mechanism to repay money it borrows for county government, as the control board wants to do even though county leaders are skeptical that money would be saved.

If Albany is keeping $190 million to pay Erie County’s Medicaid bill, the control board would have less money to use to repay debt, according to Comptroller Mark C. Poloncarz and other county officials.

The control board’s lawyers interpret state law differently and do not think the board’s ability to borrow would be affected.

mspina@buffnews.com

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