ANCHORAGE, Alaska (AP) — The state is facing a $100 million drop in Medicaid funding for the coming year and won’t be increasing rates for providers as a result.

The Alaska Department of Health and Social Services is freezing rates that usually increase to account for inflation each year.

“Where we are is not where we thought we would be as a state,” Health and Social Services Commissioner Valerie Davidson said of Alaska’s gaping $3.5 billion deficit. “We are all having to tighten our belts.”

The state and federal government just about split the $1.5 billion cost of providing more than 120,000 Alaskans with Medicaid. State funding for the program dropped by $51.9 million, but the total reduction is twice that when the loss of matching federal dollars is included.

Freezing rates rather than increasing them by between 1 and 2 percent is expected to save the program $8 million.

Medicaid reform efforts have reduced costs but Davidson says the state is still looking for ways to account for the remaining $23.9 million in eliminated state funds.

Davidson says the rate freeze is one of the least impactful ways to cut the budget. Still, he said consumers would feel the change.

John Cannon is the executive director of Mat-Su Services for Children and Adults Inc., which serves residents with disabilities. He said the nonprofit organization knew a drop in funding was coming, and that next year’s budget will need careful review.

“Clearly our costs are going up, so we’re worried,” Cannon said.