Senate Health Bill (BCRA) Would Hit West Virginia Hardest

While it is unclear what version of the legislation the U.S. Senate will plan to take up on Tuesday (7/25) when they vote to proceed to repeal and replace the Affordable Care Act (ACA), the revised version of the Better Care Reconciliation Act (BCRA) would be particularly harmful to West Virginians.

A updated report from the national Center on Budget and Policy Priorities shows that West Virginia would be among the hardest hit states in the nation. Not only would the number of uninsured West Virginians grow by nearly 300% – the largest increase in the nation (See Map) – but it would reduce federal Medicaid/CHIP spending by half or $1.8 billion by 2022. Last-ditch efforts by Senate leadership to offer more money to Medicaid expansion states won’t fix this bill either. Below is a quick summary of BCRA’s impact on West Virginia and here’s a one-page fact sheet.

West Virginia Would Sustain Huge Coverage Losses

  • 211,000 West Virginians would lose coverage by 2022 if BCRA is passed.
  • The BCRA would increase West Virginia’s non-elderly uninsured rate from 5% to over 19%, a 299% increase, more than any other state.
  • 1 out of 7 non-elderly West Virginians who would have coverage under the ACA would lose it because of the BCRA

West Virginia’s Medicaid and CHIP Programs Would Cut in Half

  • The BCRA would cut West Virginia’s CHIP program by 47% by 2022 (compared to 26 percent nationally)
  • The number of people enrolled in Medicaid would fall by more than half by 2022, or 263,000 people.

 BCRA Would Drastically Increase West Virginia’s Costs to Maintain Medicaid Expansion

  • The state’s cost to maintain expansion would rise by 50% by 2021, 100% by 2022, and 150% by 2023.

 BCRA Would Make Access to Substance Use Disorder Treatment Less Available

  • West Virginia has the highest drug overdose death rate in 2015.
  • The share of West Virginians with substance use or mental health disorders who were hospitalized but uninsured fell from 23 percent in 2013 to 5 percent in 2014.
  • Rolling back expansion would roll back coverage for the 33% of West Virginia expansion enrollees who used mental health or substance use disorder services in 2014.

 

SNAP Helps Over 81,000 West Virginia Workers

SNAP plays a crucial role helping workers in low-paying jobs afford a basic diet in West Virginia. Each year between 2013 and 2015, an average of 81,000 West Virginia workers lived in households that participated in SNAP within the last year, according to analysis from the Center on Budget and Policy Priorities.

For many of our friends and neighbors, work doesn’t provide enough income for them to feed their families. Many workers earn wages so low that a full-time worker doesn’t earn enough to lift a family out of poverty. Low-wage jobs often have irregular schedules, where the number of hours changes frequently. Crucial benefits such as paid sick leave are rare in low-wage positions. Many of these jobs also have high turnover rates, so workers in low-wage jobs experience periods of unemployment at higher rates than higher-paid workers.

Because many workers struggle to feed their families in West Virginia, they often turn to SNAP to help supplement low wages, smooth out income fluctuations due to shifting schedules, or help sustain them during periods of unemployment.

In the Mountain State, close to one-fifth of working SNAP participants work in service jobs, most commonly as cooks and wait staff, security guards, home health aides, and folks who clean homes and do yard work for a living. Almost one-fourth of working participants work in either sales jobs, most commonly as cashiers or retail salespersons, or in office and administrative support positions, largely as customer service representatives or stock clerks.

These jobs typically have low wages. For example, the top four occupations among West Virginians participating in SNAP have average hourly wages far below the state average of $19.35 in 2016, and many with wages low enough to be in the bottom quarter, according to Bureau of Labor Statistics data: cashiers ($9.65); personal care aides ($9.54); cooks ($10.58); nursing, psychiatric, and home health aides ($11.14).

In some occupations, SNAP participants make up a significant share of all workers. For example, more than one-in-five housekeeping cleaners, grounds maintenance workers, security guards and gaming surveillance officers, and nursing, psychiatric, and home health aides in West Virginia report participating in SNAP. One-third of personal care aides in West Virginia participate in SNAP.

In sum, for over 81,000 West Virginians, SNAP responds to low wages and job instability by providing workers and their families with supplementary income to buy food. Show your support for them by signing your organization on to this letter being circulated on Capitol Hill by our friends at the Food Research Action Network.

Yes, State Government and Taxes Are Shrinking

When lawmakers passed a “bare-bones” state budget, some lawmakers  expressed that the state government needs to “live within its means” because of our “shrinking population and tax base.” Other lawmakers have suggested that our state budget is too big and that we will need to “continue making cuts to programs and services” and that we should not place “additional tax burdens on our citizens.”

What many of these lawmakers neglected to mention is that our state budget has already been drastically reduced over the last several years and that our tax levels are at an all-time low. Even with our state’s declining population, our per capita spending has declined over the last several years, after adjusting for inflation. While the number of state employees has grown over the last decade, almost all of the growth has been in higher education, which is mostly funded with tuition and fees that aren’t appropriated by lawmakers. State employees funded by the General Revenue Fund, the part of the budget that contains most of the state taxes that support our biggest programs, is at a 10-year low.

State Budget Spending Down, Not Up

Before I show how state spending has changed over the past decade, it first important to understand the different spending accounts or “funds.” There are six main accounts and each of them derive their revenue from different places, including the  General Revenue Fund (mostly taxes), Special Revenue (mostly dedicated fees and some taxes), Lottery Funds (games), State Road Funds (gasoline tax/DMV fees/federal taxes), Federal Funds (income/payroll taxes), and Non-Appropriated Special Revenue Funds (dedicated fees).

While each is important (See Your Guide to the State Budget for more details), the General Revenue Fund (GRF) pays for most of the state’s key budgetary items (e.g. Public Education, Higher Education, Corrections, etc.) and is the source of most of the taxes we pay to maintain government services. The GRF is also the part of the budget legislators have the most control over and it is where most of the budget debate takes place each year.

As the chart below shows, General Revenue Fund appropriations for 2018 are slightly below actual spending in 2013. If you adjust for inflation, the state plans to spend about $350 million less in 2018 than it did in 2013 and $268 million less than it did ten years ago in 2008. (The central reason GRF spending declined in 2010 and 2011 was because of hundreds of millions of additional federal dollars from the stimulus (ARRA) that were used to back-fill spending for higher education, public education, and Medicaid.)

If you look at GRF spending over the last six years with and without Medicaid, it is clear that Medicaid is one of the only growing parts of the state budget and that is largely responsible for any increases in spending since 2012. The growth in Medicaid spending is mostly due to rising health care costs and the depletion of the Medicaid Trust Fund that was built up from a higher federal match rate (FMAP) from the stimulus.

Some policymakers have been quick to point out that West Virginia should be spending less because of its declining population. At quick look at per capita General Revenue Fund spending in West Virginia reveals the state spent less per person in 2016 compared to the past.

Altogether, the West Virginia State Budget Office  estimates that West Virginia has cut its budget by more than $600 million over the last five years. In the final analysis, it is pretty clear that West Virginia’s budget has been reduced over the last several years both in nominal and real (inflation-adjusted) terms.

State Employment Growth is Due to Rising Tuition, Not Increased Budget Spending

While some policymakers have suggested that our state government is too big because the number of people working for state government has grown, this is only true if you are looking at the growth in employment at our public colleges and universities that is funded primarily through tuition and fees, which have grown partly due to budget cuts.

As the graph below highlights, total Full-Time Equivalent (FTEs) positions in state government have grown by 3,685 over the last 10 years, from 38,917 in FY 2008 to 42,145 in FY 2017. However, if you break down the number of FTEs by each spending account or revenue fund it is clear that almost all of the growth is in positions funded by Non-Appropriated Special Revenue that have increased from 8,332 to 11,470 from 2008 to 2017, an increase of 3,138. Meanwhile, state government positions funded by the GRF have declined over this period by 427 FTEs, from 17,335 in 2008 to 16,908 in 2017.

Federally funded state government position have grown by 111 FTEs from 2008 to 2017, while State Road Fund positions – which receive more than one-third of their revenues from federal funds – has grown by 908 over this period. If you just look at funds that comprise only state-source funding, the  General Revenue, Lottery, and Special Revenue funds, the number of state government FTEs has declined by 544 since 2008.

So, what is causing the increase in state government positions in Non-Appropriated  Special Revenue Funds? If you look at the data from executive budget reports, it is being driven almost entirely from Non-Appropriated Special Revenue growth in our two and four-year public colleges which is mostly made up of tuition and fees charged to students. From FY 2008 to FY 2016, Non-Appropriated Special Revenues at West Virginia’s two and four-year colleges have grown by over $450 million while General Revenue Funds have grown by less than $1 million over this period. The decline in state GRF support for higher education has partly led to an increased reliance on tuition/fees to fund the colleges and the people that work there.

As the chart below shows, in 2008, there were 5,345 permanent positions at West Virginia’s public colleges funded by General Revenue expenditures compared to just 4,155 in 2017. Conversely, the number of positions at colleges funded by mostly tuition and fees rose from 5,765 to 8,690, an increase of nearly 2,925. So, while the number of people employed by our public colleges has grown, this isn’t due to more state spending at our public colleges; it due to the increase in tuition and fees that are paid by in-state and out-of-state students.

Taxes Are a Smaller Share of our Income

As discussed above, the General Revenue Fund contains most of the taxes that are collected by the state. Over the last decade, General Revenue collections in West Virginia as a share of the state economy have shrunk from a high of 7.4 percent in 2005 to just 6 percent in 2016. The drop in state revenues as a share of the economy is mostly due to large tax reductions that were phased in beginning in 2006, including the elimination of the business franchise and grocery tax and the reduction in the corporate net income tax from 9 to 6.5 percent. Before the tax cuts were enacted, General Revenue Fund collections made up on average about 7 percent of our state’s economy between 1990 and 2005. At 7 percent, West Virginia would have collected over $650 million more in General Revenue Funds in 2016 than it did.

Moving forward, the state is going to need additional revenues to keep up with the cost of government services, which tend to grow faster than our overall economy (and for good reason). This is especially true for Medicaid and other state health care services. The state will also have to reorganize itself in some manner to deal with population shrinkage – especially in the south – and will need to take steps to lower health care costs, make college more affordable, and ensure that our classrooms are filled with better paid teachers. The one thing we should not be doing is priding ourselves on gutting state government when it will be needed now more than ever if the state is ever going to rebound in the future.

Senate Health Care Bill Cuts Medicaid to Pay for Tax Cuts for the Rich – UPDATED

The Better Care Reconciliation Act (BCRA), the latest Republican plan to repeal and replace the Affordable Care Act (ACA), was introduced in the U.S. Senate on June 22, 2017, and is awaiting a vote. In its current form, the bill would eliminate most of the provisions of the ACA, including its tax provisions, and drastically cut Medicaid, essentially ending Medicaid expansion and instituting per capita caps. The end result of these changes for West Virginia would be a large tax cut for a small number of the wealthiest individuals in the state, while tens of thousands would lose Medicaid coverage.

The two largest tax provisions that would be repealed are the  Additional Medicare Tax, which is a 3.8 percent tax on wages for taxpayers with wages exceeding $200,000 ($250,000 for married earners), and the Net Investment Tax, which is a 3.8 percent tax on investment income for taxpayers with income exceeding $200,000 ($250,000 for married couples). Repealing these two taxes would cost over $31 billion, with 85 percent of the benefit going to the top 1 percent of Americans.

According to the Institute on Taxation and Economic Policy, only 11,100 West Virginians would benefit from the repeal of these two taxes, or only 1.2 percent of taxpayers in the state. The tax cut would be worth $46 million for West Virginia, with 96 percent of the savings going to the wealthiest 1 percent in the state, or those earning more than $346,000/year.

On the health care coverage side, federal funding for Medicaid would be $102.2 billion lower in 2022 under the BCRA than under the ACA, a 26.4 percent decline. Federal funding for premium tax credits and cost-sharing reductions would also fall by $38.2 billion, an 84 percent decrease. West Virginia would lose $1.8 billion in federal spending, a 48.9 percent decrease compared to current law.

The decrease in funding would force West Virginia to end Medicaid expansion, and make further restrictions to Medicaid eligibility. According to the Urban Institute, 264,000 West Virginians would lose their Medicaid coverage due to the loss of federal funding. Overall, 218,000 West Virginians would lose health insurance coverage, quadrupling the state’s uninsured rate.

 

The cost to give 11,100 of the wealthiest West Virginians millions in tax cuts is 218,000 uninsured West Virginians. The “savings” from the cuts to Medicaid are poured directly into tax cuts which overwhelmingly benefit the wealthy. Overall, for every West Virginian who would benefit from the tax cuts in the Senate health care bill, 24 would lose their Medicaid coverage. The core of the BCRA is taking away health care from millions of people in order to pay for a tax cut for the rich.

 

***UPDATE***

New numbers from the Urban Institute provide estimates for the number of children affected by the Senate’s health care bill. In West Virginia, the number of uninsured children would increase by 19,000 by 2022 under the Senate health care bill, a 475% increase. The uninsured rate for children in West Virginia would increase from 1.1% to 6.2%. West Virginia would have the largest increase in the share of its children who are uninsured in the country.

A Short History of the 2017 Budget Crisis in West Virginia (So Far)

This week, Governor Justice said he would let the state budget become law instead of signing it because the budget contained so many cuts ( a “travesty”) and that his proposed tax plans failed to become law. Governor Justice mostly blamed Democrats and Republicans in the House of Delegates, along with the Senate Democrats, for the state’s “bare bones” budget because they refused to go along with several income tax cut plans that were put together between himself and Senate Republicans. It is important to recognize that had the legislature gone along with most of the governor’s proposed tax plans, the state would have do to make much deeper cuts next year and beyond.

Given the choice between baking in large-scale future budget cuts with big tax cuts and passing a budget with sizable cuts for one year, it seems like the legislature made the better of two bad choices in refusing to go along with Senate Republicans and the governor.

As Governor Justice pointed out during his budget announcement, there were several tax plans that he and the Senate proposed that failed to pass in the House. While the governor called them “missed opportunities” it is more apt to look back upon each of the tax plans as missed fiscal calamities for the state that would have resulted in deeper budget cuts in the future.

While Governor Justice put together several tax plans during the regular legislative session that raised enough revenue to close the budget gap  – which moved from -$497 million to -$270 million based on agreed to budget reductions – his joint proposal with Senate Republicans during the last night of the 60-day regular session would have led to larger budget cuts in FY 2018 and beyond. Therefore, it is difficult to understand how Governor Justice can see this as a “missed opportunity” if he is concerned about budget cuts hurting the state.

Strangely, Governor Justice told the media  that  “all this [the passed state budget and no tax reform] does is kick the can down the road, and there’s massive budget holes in the out years.” The governor went on to say that the budget gap for FY 2019 is “$179 million” and “$486 million” by FY 2022. A simple look at the revenue impact of each of the “missed opportunities” or tax proposals shows that these gaps would have likely been much larger in outer years if most of these tax proposals would have been adopted.

Below is table that includes the net revenue impact of each of the proposed tax plans from the governor, House, Senate and several that the governor endorsed along with Senate leadership. Outside of the governor’s first tax plan that was included as part of this original budget for FY 2018 and his second proposed tax plan based on agreed to budget cuts (these were not mentioned as “missed opportunities” by the Governor), all of the other tax plans proposed by the Governor (along with the Senate) failed to raise enough money to close the projected budget gap for FY 2018 let alone for future budget years.

In fact, the tax plan the governor put together with Senate Republicans on the last night of the session on April 8th – missed opportunity #1 according to the governor – would have drastically reduced revenues for the state and expenditures absent future tax increases. By FY 2021, the State Tax Department estimated that it would have reduced General Revenue Fund collections by -$220 million and much more going forward, as the income tax was phased down. The House did not fare much better. Two out of three of the tax plans that passed the House lowered net revenue collections by FY 2020, which would require tax increases or more future budget cuts. While the tax plan passed by the Senate last Thursday increased net revenue by $93 million in FY 2018 – presumably close to enough revenue to pass the governor’s FY 2018 budget during the special session along with the new revenue estimates – the estimated revenue for FY 2019 was $30 million less, leading most likely to more budget cuts next year.

While Protect WV,  WV Center on Budget Policy,  and some lawmakers (see here and here) put forth a several revenue proposals for avoiding the deep cuts included in the FY 2018 budget, the legislature unfortunately could not agree on any revenue enhancements. Despite this inaction, the state’s fiscal health and funding of future budget priorities would have been much worse had most of the “missed opportunities” become law. On top of the tax proposals not bringing in enough money to fund budget priorities, most of the compromise tax plans between the Governor and Senate  (see here, here, here, and here) lowered taxes on the wealthy while increasing them on most West Virginians.

If there is silver lining to the state’s budget crisis this year it is that the budget passed by the legislature last week contains about $122 million more in General Revenue Fund appropriations than the budget vetoed by the governor in April. While it remains to be seen whether the new revenue estimates for next year pan out, they at least helped avoid more severe budget cuts.

Moving forward, the state is in for more hard times as the state faces yet again another large budget gap next year and likely stalemate on the need to pass sufficient revenues to meet the states needs. That said, it would have been a lot worse had the legislature acted on many of the governor’s tax proposals.

 

 

Comparing the FY 2017 and FY 2018 Budgets

Earlier this week, this post covered all the changes in the final FY 2018 budget with the governor’s original proposal, with the final budget coming in at $280.3 million below the governor’s original proposal. But how does it compare with last year’s budget?

The FY 2018 base budget (General Revenue, Lottery, and Excess Lottery) totaled $4.653 billion, $46 million more than the FY 2017 budget, which totaled $4.607 billion. Most of that increase can be attributed to Medicaid. General Revenue appropriations for Medicaid are increased by $60.9 million from FY 2017. This increase is due to the use of $70 million in Rainy Day Funds in FY 2017 for Medicaid, which lowered FY 2017’s General Revenue appropriations. FY 2018’s budget does not use the Rainy Day Fund, and makes up for it with an increase in General Revenue appropriations. So even though the state is appropriating less overall for Medicaid in FY 2018, General Revenue appropriations have increased.

Aside from General Revenue appropriations for Medicaid, nearly every other area of the budget is cut compared to FY 2017. Executive Branch agencies are cut by $2.7 million, the Department of Commerce is cut by $4.1 million, the State Department of Education is cut by $12.9 million, Education and the Arts is cut by $2.4 million, DHHR other than Medicaid is cut by $7.7 million, and Higher Education is cut by a total of $19 million. The only areas of the budget to see a significant increase over FY 2017 are payments to the Teacher’s Retirement System Unfunded Liability (+$23.3 million) and the WV State Police (+$7.1 million). The table below details all of the changes from FY 2017 to FY 2018.

FY 2018 continues the downward trend for state expenditures. Since 2012, only Medicaid, foster care, and the Judiciary have seen an increase in General Revenue spending (Senior Services was not fully part of General Revenue in FY 2012). Higher Education has seen the biggest divestment, with appropriations declining by $74 million since 2012. Overall, General Revenue spending has only increased by 1.9 percent since 2012.

West Virginia Finally has a Budget

After failing to come to an agreement on a plan to either completely overhaul the state’s tax system, or simply raise some revenue to close the upcoming budget gap, the legislature passed a “bare bones” budget over the weekend, ending the extended special session just two weeks before a possible government shutdown.

The FY 2018 budget totals $4.653 billion, including $4.225 billion from General Revenue. That is $280.3 million less than what was proposed by the governor at the beginning of the regular session, and $124.6 million less than the governor’s special session proposal.

Cuts were made throughout the budget to bring it into balance. Some of the major cuts, compared to the governor’s original proposal, include:

  • Eliminating the Save Our State Fund
  • $5.3 million cut from the Department of Education, including $1 million cut from 21st Century Assessment and Professional Development and eliminating Innovation in Education and Technology Systems Specialist funding  – $4.5 million.
  • Canceling the teacher’s pay raise – $19.4 million.
  • Smoothing teacher’s retirement system unfunded liability payments – $44.7 million.
  • $4.5 million cut from the Division of Health, including eliminating funding for the Tobacco Education Program – $3 million.
  • $5 million cut from the Consolidated Medical Service Fund.
  • $84.2 million reduction from General Revenue funding for Medicaid.
  • $3.8 million cut from the Division of Corrections.
  • $1.5 million cut from the State Police.
  • $2.8 million cut from Community and Technical Colleges.
  • $6.2 million cut from Higher Education, which comes on top of the $10 million cut in the original FY 2018 budget proposal.
  • Funding for the Educational Broadcasting Authority, which was eliminated in the governor’s original proposal, was restored, but cut by $1 million from FY 2017.

The table below lists all of the cuts made to the budget compared to the governor’s original proposal.

Additional Revenues Still Needed to Avoid Cuts to Critical Needs

As MetroNews reported, the state Senate passed a state budget of $4.225 billion in General Revenue Fund spending for FY 2018. The budget contains deep cuts in Medicaid and higher education above and beyond what the governor proposed during the regular and special legislative session. The budget also relies on updated revenue estimates of $169.9 million for FY 2018 that are “contingent on” the “projected economic activity” associated with passage of a road bond passing along with increased State Road Fund revenue from a gas tax and DMV fee hikes.

According to Governor Justice, the new FY 2018 General Revenue Fund estimates are $4.225 billion compared to $4.055 from the original estimates released in February 2017. The biggest revenue change – comprising 61 percent of the total increase in revenues – is the state severance tax, which increases by $104 million, from $257 million to $361 million. Personal income tax collections are expected to be $26 million higher, which increases from $1.834 billion to $1.860 billion. The new revenue estimates also rely on an increase in Special Revenues (one-time fund from Workers’ Comp) of $33 million and small increases in the liquor profits and departmental collections totaling $7.2 million.

It is unclear how the projected increase in severance tax collections is tied to the passage of a road bond, while the $26 million in increased personal income tax collections could theoretically be attributed to the economic activity from a large revenue bond being issued. That said, it is not a sound practice to adjust revenue estimates based on a public vote for a road bond that has yet to take place.

Even taking into account the $169.9 boost in revenue for FY 2018, the governor’s proposed budget needs an additional $124 million to match the $4.335 billion in anticipated General Revenue Fund expenditures. While the Senate has said that the reason they are making large budget cuts is because they could not agree on a bill to implement “tax reform”  (personal income tax cuts), the latest compromise draft tax plan only boosted revenues by $89 million in FY 2018. After FY 2018, the revenues in the draft plan fell to just $12 million in FY 2019 and close to zero in each subsequent year.

An examination of each of the five tax plans that have passed the Senate shows that only three of them provided enough revenue to pass the governor’s proposed budget for FY 2018 while all of them would have led to deeper budget cuts in FY 2019 and beyond. The reason for the sharp revenue losses in FY 2019 and beyond had to do with the partial phaseout of the income tax that the Senate included in each plan.

While the good news is the personal income tax reductions seem to be off the negotiating table, the bad news is the Senate now does not want to pursue any revenue measures that will avoid even larger budget cuts that will deprive our communities and families of what they need. With the clock winding down on the Special Session, let’s hope the legislature finds additional revenue (Simple Plan!) that will protect our state and ensure we are not cutting the budget even more next year.

 

More Budget Cuts on the Table (Updated 6/15/17)

As the extended special session drags on, with no agreement on a tax bill yet, the House has made adjustments to the governor’s budget plan submitted at the beginning of the special session.

To recap, after vetoing the budget passed during the regular session, which was balanced by taking $90 million from the Rainy Day Fund and major cuts to Medicaid and higher education, the legislature went into a special session and the House, the Senate, and the governor have all been in a stand off over personal income tax cuts and sales tax increases ever since.

With no deal on revenue, the governor introduced a new budget with HB 115. HB 115 made a number of cuts compared to the governor’s original proposal, including reducing the Save our State Fund to $15 million and cutting higher education by $5.4 million. At the time, HB 115 would have required the legislature to raise about $260 million in revenue to balance the budget.

Yesterday, the House introduced a committee substitute for HB 115, with $78 million in further cuts. While the full text of the bill is still not available, a summary was posted online.

Here are the major changes in the committee substitute for HB 115 compared to the governor’s version.

  • The Save Our State Fund is eliminated fully. The governor’s originally called for a $105.5 million SOS Fund, and then reduced it to $15 million at the start of the special session. The House bill eliminates it entirely.
  • $28.3 million in further cuts to the Department of Education, including $8 million in program cuts and $20 million cut from canceling the teacher’s pay raise. HB 115 already included $44.7 million in savings from the unfunded liability smoothing.
  • $1.7 million in further cuts to the Department of Education and the Arts, including $941,294 cut from Education Broadcasting Authority.
  • $33 million cut from DHHR. According to the summary posted online, this includes $13 million cut from Medicaid.
  • No further cuts to Higher Education, leaving Higher Ed at $13.8 million below FY 2017’s funding.

The Senate also introduced their plan for the budget through an amendment to SB 1013. The Senate’s bill also makes cuts to the Governor’s special session proposal, but goes much further than the House, cutting by $254 million.

Here are the major changes in the amendment to SB 1013 compared to the Governor’s introduced version of HB 115.

  • The Save Our State Fund is fully eliminated, plus an additional $250,000 cut to the Division of Energy.
  • The teacher pay raise is canceled, cutting $20 million from the Department of Education.
  • $85,813 cut from the Education Broadcasting Authority.
  • $118 million from Medicaid.
  • $5.6 million cut from the Bureau of Senior Services.
  • $19.3 million cut from Community and technical colleges, which would be a 30 percent reduction from FY 2017.
  • $75.2 million cut from Higher Education, which would be a 22 percent reduction from FY 2017.

The figure below shows the levels on General Revenue expenditures from the various budget proposals in both the regular and special session.  The latest version from the House is $223 million below the governor’s original proposal, and is very close to the House’s proposal during the regular session. Even the governor’s special session proposal is $155 million below the original proposal. The Senate’s proposal is $409.9 million below the governor’s original proposal, and is even below the budget that was vetoed by the governor at the end of the regular session.

***UPDATE***

Last night, the Senate passed an amended version of SB 1013, with smaller cuts than the version mentioned above, due to improved revenue forecasts. The Senate budget, balanced with millions in cuts, was passed in response to the failure to come to an agreement on a tax reform package that include major cuts to the income tax. Compared to the Governor’s special session budget bill, the version passed by the Senate includes:

  • Elimination of the Save our State fund.
  • Canceled teacher’s pay raise.
  • $85,813 cut from the Education Broadcasting Authority.
  • $54.3 million cut from General Revenue funding for Medicaid. The net effect of this cut is only $34 million, as the Governor adjusted down the amount needed for Medicaid by $20 million in a letter to the legislature.
  • $5.6 million cut from Senior Services
  • $6.4 million cut from Community and Technical Colleges, which would be a 10% cut from 2017.
  • $23.3 million cut from Higher Education, which would be a 7% cut from 2017.

The budget passed by the Senate is $124 million below the governor’s special session proposal, and $280 million below the governor’s original budget.

 

***UPDATE***

After the Senate passed SB 1013, the House last night amended and passed their own version of the bill. Like the Senate’s bill, the House’s version of SB 1013 totaled $4.225 billion, but makes cuts in different areas than the Senate’s version, and also relies on some reserve funds and anticipated lottery surpluses. The House’s version of SB 1013 includes:

  • Elimination of the Save our State Fund.
  • Canceled teacher pay raise.
  • $8.3 million cut from the Department of Education.
  • $1.7 million cut from the Department of Education and the Arts, including $941,294 cut from the Education Broadcasting Authority.
  • $5 million cut from the Consolidated Medical Service Fund.
  • $74 million cut from General Revenue funding for Medicaid. The net effect of this cut is only $25 million, after the Governor’s adjustments and the planned use of reserves and surpluses.
  • $197,723 cut from Veterans’ Assistance.
  • No further cuts to Higher Education, which would leave Higher Ed at $15 million below FY 2017 levels.

 

Guest Blog: Kansas’ Experiment Yields Valuable Lessons

Heidi Holliday, Executive Director of the Kansas Center for Economic Growth  

You’re welcome, America. Our state, Kansas, just wrapped up a 5-year long experiment in governance from which the other 49 states can now glean some important lessons. The Kansas Legislature has voted to roll back much of the 2012 package of tax cuts that sent the state into a downward spiral of financial instability and weakened the Kansas’ public schools, universities, Medicaid program, and virtually everything else that the state funds.

With the state facing yet another budget shortfall of $900 million, government leaders decided that enough was enough. Governor Brownback, who heralded the 2012 experiment, was proposing yet more temporary band-aid approaches and more cuts deal with the shortfalls. The Legislature chose a different path and instead sent the Governor a bill that would raise more than $1.2 billion in new revenue over two years by, among other things, repealing a costly tax break for pass-through income, rebalancing individual income tax rates by reinstating a third tax bracket, and reversing course on the Governor’s plan to eliminate our state income tax. Brownback vetoed the legislation but, with bipartisan support, the House and Senate quickly overrode the veto.

Our state has begun the path to fiscal stability and is closer to becoming a model of good policy choices as much as it is a cautionary tale. The damage done to Kansas from this reckless experiment will not be undone overnight, but other states need not wait to act upon the lessons learned.

Put simply, revenue matters. You can’t get something for nothing. We all want and deserve thriving communities with great schools, parks, and modern roads and bridges; and we chip in to pay for that. That’s what taxes are for.

Because of the scope of the 2012 changes, it didn’t take long before Kansans in every corner of the state began connecting the dots between the actions of state lawmakers and the quickly eroding quality of the things that make for a good economic foundation in every community. With every subsequent shortfall, the picture became more clear. Meanwhile, the promised economic boom—and the revenue rebound that would supposedly follow—never happened (as economists predicted). In the last few election cycles, voters have viewed candidates and their promises through a different lens, and the 2017 Legislature had the experience and public backing to chart a new course.

Most state tax codes, including ours, need further reform, but it’s high time that state tax policy adhere to one basic, proven (and now proven once again) principle – states need revenue to invest in the things that create thriving communities and a prosperous economy. Kansas just learned this lesson again, the hard way, so that your state doesn’t have to. You’re welcome.