Sick tax resurrection requires vigilance to stop later

Don’t look now, and it may take while, but on top of increased premiums, pricing, and taxes resulting from imposition of the Patient Protection and Affordable Care Act (“Obamacare”), now the Louisiana Legislature is setting the stage for its own tax increase on health care.

HB 532 by Speaker Chuck Kleckley by itself is innocuous. It creates a special fund called the Hospital Stabilization Fund into which money may flow that state government then will use to attract federal reimbursements for Medicaid, at a claimed leverage of three extra bucks for every two thrown in. It has sailed out of two committees unanimously and got overwhelming support on the House floor.

But its consequences could turn ugly in two years. The master plan on this calls for legislation then that charges an “assessment” on hospitals that backers claim would come out revenues of hospitals. If this sounds familiar, take the cue from state Rep. Sam Jones who worked in the Gov. Kathleen Blanco Administration when they ran an identical idea into law in 2005 – a “bed tax,” as he so honestly if somewhat imprecisely termed it on the floor during debate; more accurately, this is a “sick tax.”

Funding affirmed voucher program poses little difficulty

The Louisiana Supreme Court’s decision to strike down the funding mechanism for the state’s scholarship voucher program causes another complication for Gov. Bobby Jindal and state Legislature, but represents little more than a bump in the road for the path-breaking program.

In a 6-1 decision, the Court ruled that the Constitution said that the funding, dollars given to families to purchase education at participating public and private schools, could not be part of the Minimum Foundation Program that funds public education. The MFP is created by formula approved by the Board of Elementary and Secondary Education and ratified by the Legislature to distribute general fund tax dollars to the 70 independent agencies (including any charter schools within them) involved in educating at this level.

For last year, that program funding is estimated to be about $22 million for the almost 5,000 students taking part. For this year, with an expected 3,000 additional students at present with the chance that more could come, expenses could be closer to $40 million, although this is contingent on nonpublic school pricings. Because those levels charged cannot exceed the MFP average, the state saved $18 million last year through this program.

Hawks endorse selling out smaller govt for more taxes

With the presentation of their New Coke-like alternative budget plan for Louisiana’s upcoming fiscal year, the self-styled “fiscal hawk” budget reformers finally uncloak themselves in confirmation of the worst fears of genuine budget reformers and true fiscal conservatives.

The document wishes to prevent redirection of about $345 million in recurring funds that do not go to the state’s general fund to it, as well as about $144 million more in nonrecurring funds to the same place. Instead, much of the recurring portion will be directed to nonrecurring uses, while much of the nonrecurring portion won’t be used at all. To compensate, the plan from the group, composed almost exclusively of House Republicans who teamed up with their Democrat colleagues, hopes for some savings and bonus revenues, makes minor spending cuts, reduces marginally a number tax credits that serve to act as subsidies of activities that may or may not cost the state money, and raises taxes on businesses, considerably on a few select industries, but also generally to any concern that sells things currently taxed and on some individuals.

The cuts largely are tractable, if perhaps a bit overstated. For example, travel by state employees is cut, but in my own job I haven’t had that covered for years, so there’s a real question of whether the amount the plan envisions will be realized. The proposal also avoids the trap of cutting all contracting across the board, which not only makes targeting and prioritizing of this difficult thereby risking elimination of high-value activities but also may run into legal problems, by cutting just a tenth of these that would receive general fund money. A smaller figure like that likely can slice only low-priority items. Mostly troubling is the wishing away of increased Medicaid payments in a program, despite efficiency-inducing reforms, that continues to grow at a rate typically underestimated.

Despite window dressing, expansion bill merits rejection

While the latest attempt to expand Medicaid coverage in Louisiana has been greeted with some success politically and in public relations terms, it’s merely a matter of old sour wine in new bottles that compels its rejection.

Last week, SB 125 by Sen. Karen Peterson passed a Senate committee. Heavily amended from its original form, the bill seeks to emulate a similar measure passed in Arkansas concerning the controversial expansion of Medicaid built upon implementation of the Patient Protection and Affordable Care Act (“Obamacare”). Heretofore state lawmakers as well as Gov. Bobby Jindal have balked at the extra costs this move would impose on the state, which have been estimated to be $93 million by 2023 and by then growing at a rate of 15 percent per year, and with no guarantee that cost burdens will not rise further by changes in federal policy. The law and regulations also prevent the state from opting in during the initial period, purposely created to entice states into it with the lowest costs (although still increasing the overall burden onto taxpayers nationwide), and then withdrawing.

Last month, Arkansas worked out a deal with the federal government to allow the state to pursue expansion by tapping into Medicaid money to purchase private insurance to give to the population targeted for addition onto roles by Obamacare. In essence, it would route these clients through the new mandated exchanges. However, while Senate committee members, the crucial vote provided by Republican state Sen. Fred Mills whose pharmacy business no doubt would benefit from the extra anticipated business brought by expansion, were willing to push the similar measure forward, Jindal has continued to express skepticism.

Hawks may empower Jindal, Democrats while maiming selves

First, it was the political agenda of the moribund Louisiana Democrats that the so-called “fiscal hawks” may revive. And depending on what they do this week in the Louisiana Legislature, Gov. Bobby Jindal’s prospects may be brightened as well while they destroy theirs.

Better known as the Louisiana Budget Reform Campaign, the “hawks,” comprised almost exclusively of House Republicans, joined forces with House Democrats to sideline last week the budget supported by Jindal and other Republicans, in favor potentially of their own concoction. They object to the use in the operating budget of what is termed “one-time” money, or a combination of nonrecurring, one-off revenues, and recurring revenues (as defined by R.S. 39:2) from sources not directly tied to the general fund but instead demand a bookkeeping entry in legislation to get them into the general fund (the latter point apparently not realized even by at least one long-time legislator.)

Instead, they seem ready, with Democrats, to offer up their own version – but potentially at the cost of accepting tax increases and growth of government, which would seem to go against the rhetoric espoused by many of their members. This empowers Democrats in a way they could not have imagined a month ago, and that could extend beyond their wildest dreams.

End, don't mend, both solar and film giveaways

It’s a start to reducing wasteful spending in Louisiana government, but the timidity involved seems unlikely to start the snowball rolling necessary to deal significantly with the larger problem of wealth transfer of the many to the few.

HB 705 by state Rep. Erich Ponti would reduce over the next three years the subsidization the state provides to the solar industry and to individuals with means or to those assisted by the industry. It also eliminates entirely the wind power subsidy, which has deprived the state of little money. The problem comes from solar: it has cost the state over four years nearly $39 million.

Unfortunately, the bill mends but does not end the giveaway. It has showered cash onto solar energy installers, where the exorbitant 50 percent credit with the federal 30 percent version allows Louisiana property owners to install systems for as little as $5,000 – a cost often waived by installers in order to get a $20,000 handout from American and Louisiana taxpayers as they still could make money off the deal. It also has allowed the number of power users, as the number of these owners has increased as a result of the gifting, to get preferential power rates at the expense of other ratepayers, their lower rate meaning others must pay more to make up the difference. The bill allows the installation subsidy to continue, but at a lower level of reimbursement.

Shift in hawk focus might bring them, state success

With the first move made on the Louisiana budgetary chess board, the next came yesterday setting up the potential for competing versions of the document. What’s next, and does it mean genuine budgetary and fiscal reform is on the way?

Monday, under threat that it would go nowhere unless “one-time” money was removed from it, mostly Republican lawmakers allied with Gov. Bobby Jindal removed this source of funding, almost $500 million worth or two percent of the total spending requested. This is a mix of recurring and nonrecurring revenues, with the former distinguished from any other kind of recurring revenue in that it doesn’t go directly into the general fund, while the latter comes from one-off events not defined constitutionally as nonrecurring.

Removal occurred because another group, mainly of Republicans who call themselves “fiscal hawks,” wanted to use a House rule they had gotten adopted a couple of years previously that called for a two-thirds vote on the use of this kind of money past a certain growth factor in a growing budget. By stripping this money preemptively with dramatic cuts to health care and higher education, they could ship the bill to the Senate on a majority vote, removing the “hawks’” veto power. There, presumably the Senate would amend that money back in and ship the finished product back to the House for concurrence by a majority vote.

Hawks succeeding in defeating genuine spending reform

The self-styled “fiscal hawks” of the Louisiana House of Representatives won a couple of battles yesterday – at the cost of near-certain defeat in the larger war to control the state’s budgeting process and in empowering their strange bedfellow allies House Democrats.

Yesterday, the House Appropriations Committee went through the operating budget bill HB 1 and withdrew substantial funding for health care, and some for higher education, to excise what’s termed “one-time” money from that. This refers to money that is redirected from other funds, much tied to dedications of revenue, that comes from recurring sources, as well as other money from non-recurring sources such as asset sales. But it was all a mirage of sorts, for if passed by the House, perhaps almost exclusively by the majority Republicans, the Republican-controlled Senate is sure to put back in the nearly $500 million and return it for concurrence.

This tactic is to avoid the requirements of House Rule 7.19, which means that before a budget vote if this budget contains more than a growth factor over the previous year of one-time money, a two-thirds majority must be secured to proceed. With this kind of funding removed, this prior vote is not required for this version, nor for later concurrence in a budget returning after Senate action. It’s an approach tacitly endorsed by the Gov. Bobby Jindal Administration, whose budget is on the line.

Dedications overuse until changed requires funds sweeps

As the Legislature prepares to grapple with the annual budgeting exercise, special attention has come to the practice of “funds sweeps,” hopefully initiating a larger review of funding mechanisms and genuine state needs as previously noted.

In recent years, this tactic increasingly has been used to allow for current funding of programs. This is because money accrues into these accounts, whose funding is set by law, which then builds up and whose recent deposits, much less any substantial portion of their balances, would appear not to be used in the upcoming fiscal of year or perhaps even never given historical use patterns. Rather than sit idle, past gubernatorial administrations have taken to dipping into such funds except for those very few that legally cannot be siphoned this way. While the appearance of dedicated legislation especially for this purpose started under Gov. Kathleen Blanco, earlier instances appear here and there; for example, in the supplemental appropriation bill in 2004 and in a bill creating new dedicated funds in 2001.

The problem with dedicated funding is that it locks in a certain purpose invariant of amount and priority of that eligible expenditure relative to all others. A good example comes from R.S. 56:639.8 that defines the Artificial Reef Development Fund. This fund collects a portion of money from owners of decommissioned offshore rigs that they save from not moving the rigs in deference to sinking them to create an artificial reef, if they follow state regulations in doing so.

Hawks to self-inflict more power, credibility wounds?

Almost two years ago this space predicted that a desire by many Louisiana House Republicans to posture as budget reformers, leading to adoption of House Rule 7.19, would continue to haunt them. Another spectral appearance of the rule is about to cause them more grief.

This week, the House Appropriations Committee takes up the operating budget HB 1. As introduced, it contains in its roughly $24 billion (with a several hundred million more in ancillary and supplementary appropriations elsewhere) nearly $500 million in “one-time” money. There are two kinds of this kind of funding, one that is recurring where this money comes from other excessively funded dedicated accounts not diverted into the general fund, and a nonrecurring kind, which comes from one-off events such as property sales, settlements, and lending from other state-created special funds.

A number of representatives, almost all Republicans, wish to excise these monies from the budget. And the leverage they can use to cause this is the rule, which states that (in a year such as this where the operating budget of this year exceeds the prior year) any one-time money budgeted beyond a growth factor requires a two-thirds vote to be inserted into the budget. This year, the computation reveals that about $199 million may be implanted without triggering the rule. The Senate has no such rule.