Budget Areas Compete for Priority as Session Ends

Opinion writers for The Oregonian over the weekend tried to make a case for higher education or K-12 education getting short shrift in this legislative session and, in one case, a writer argued against more money for the state's prison system to save dollars for other education.

What's missing from this editorial picture?  Human services, that's what.

For the last several legislative sessions, human services, including health care for low income Oregonians, has tended to be the "balancer" – the last major general fund budget developed by legislators and one that takes the last cuts when other budgets already have been put to bed.

This session is no different.

Legislators have turned to two tax sources – taxes on hospitals and taxes on those who pay insurance premiums – as a way fund human services.  They have tended to treat the money as just another source of general funds.  In the past, hospitals and the state have used the hospital tax as a way to generate "state funds," then gain federal matching dollars under the Medicaid program in Washington, D.C.  The money came home and hospitals, in the aggregate, were made whole for their tax "investment."  This session, the hospital taxes, which can be increased by administrative action, will be used to fund programs other than Medicaid reimbursement increases for hospitals, which today are paid about 70 cents on the dollar of their costs for treating low income Oregonians.

In the case of the health insurance premium taxes, passed in 2009 for four years, commercial insurers in Oregon function as the state collector.  They add a 1 per cent surcharge to the cost of each premium, and then turn the money over to the state to generate the federal Medicaid match.  Then, according to a decision in 2009, the funds are used to provide health insurance for children who didn't have coverage previously under a program known as Healthy Kids.  This time, about a $30 million "excess" in premium tax money is being used to avoid deeper cuts for primary care physicians under the Oregon Health Plan, a laudable purpose, but one not contemplated when the taxes were first imposed.

With this new revenue, the legislative budget writers have tried to cushion the overall blow for human services, but hospitals have generally been taking more than their fair share of cuts, including two imposed very late in surprise actions on two bills, Senate Bill 204 and Senate Bill 101.  On SB 204, hospital tax money will be tapped for re-allocation to managed care organizations, and under SB 101, hospitals stand to be penalized when they are unable to reach contract agreement with managed care organizations.  [Late word last weekend indicated that the full Ways and Means Committee, at the behest of Governor John Kitzhaber, might consider reducing the penalty for hospitals under SB 101.]

In addition, the health care budget faces a daunting prospect in the second year of the biennium.  Under the governor's proposal for "health care transformation," those who treat Oregon Health Plan clients (Medicaid) will be expected to save a huge amount of money – more than $240 million – by working smarter and harder.  Many observers believe that, while "transformation" is necessary, it won't save that much money that quickly.

So, the point is that reasonable people – both those who write for the Oregonian and those who write for this blog – can reach different conclusions about the state budget and about which category serves as the "balancer."  Supporters of K-12 education, higher education and human services all want more money – and there is a solid rationale in each case.

It's just that all the advocates face a clear reality – Oregonians do not appear ready to increase their taxes to fund more state services, no matter how important they are.

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[Footnote:  The writer, CFM partner Dave Fiskum, is involved in the many of the debates mentioned above as a lobbyist for health care, children and families and technology interests.]