WashACE Blog

Governor's pension, health, and management reforms make good sense

Leading up to tomorrow's budget release, Gov. Gregoire is making some positive proposals for easing the state's budget woes. Yesterday, she endorsed pension and healthcare reforms. Today, she calls for agency consolidations. We'll look at the recommendations more closely later, but our initial reaction is positive.

Ending the automatic increases in the state's richest defined benefits systems is a very modest proposal, but the governor says it has a powerful budget impact.

Gregoire announced she will ask the Legislature to end the automatic annual pay increases now provided for those under the PERS and TRS 1 pension plans. While intended to protect against inflation, the increase itself is not linked to inflation, which in recent years has been low. The proposal would save $368 million during the 2011-2013 biennium, and would immediately cut the state’s unfunded pension liability of $7 billion by nearly 60 percent. The Legislature would still have the authority to provide inflation-related increases, as it did prior to 1995.

“I realize these benefits are important to thousands of Washingtonians who spent their careers serving the public,” Gregoire said. “But as we’ve asked all sectors of government to sacrifice, ending the automatic nature of these increases would save the state $2 billion through 2015, and $9 billion over the next 25 years.”

There's less clarity in how the healthcare recommendations will result in savings. But, with health care gobbling up an ever-increasing share of the state budget, practically anything the state can do to "bend the cost curve" will be a plus.

The agency consolidation recommendations have percolated a while and were included among the ideas suggested by the governor's budget transformation commission. Immediate dollar savings may be difficult to estimate. There will, nonetheless, be tangible benefits from streamlining, increasing accountability and transparency, and clarifying missions. From the governor's press release:

Gregoire’s proposals would reduce the number of state agencies included in her consolidation plan from 21 to nine, and are expected to save nearly $30 million while reducing the number of state positions by 125 over the next biennium.

Good first steps.

The House Democrats have coverage here.

Seattle Times story on the pension proposal.

The News Tribune on agency consolidation.

Washington ranks in top 10 for health insurance mandates

The Council for Affordable Health Insurance recently released Health Insurance Mandates in the States.

Here's why it's important:

Policymakers are increasingly focused on how to reduce the number of uninsured Americans and lower the cost of health insurance," stated CAHI Executive Director J.P. Wieske. "While some state and federal legislators continue to pass new mandated benefit laws, others recognize that mandates drive up the cost of health insurance and make health insurance policies unaffordable for millions of Americans. As implementation of the new federal health insurance law further drives up the cost of health insurance, the cost of adding new mandated benefits will become a more important issue.”

Washington, with 57 mandates, just misses being in the top 5.

Federal health care law needs to be changed to avoid worsening state budget crisis

Sen. Joe Zarelli has a good "tidbit" today on the harm federal health care legislation will do to the state budget.

The federal government, via its health care legislation, is forcing states to make irrational decisions.  No state would choose to eliminate prescription drug coverage while maintaining policies that shelter corporate income, permit self-reporting of income, pay for bills incurred prior to being on Medicaid, pay for bills for persons with incomes too high for Medicaid, and allow eligibility regardless of an individual‟s other available assets.  But that‟s precisely the outcome demanded.     

Read the whole thing.

For more, Jason Mercier at the Washington Policy Center has a good piece on the importance of Medicaid flexibility.

Congressional Health Care Reform Rebuked in Missouri

As has long been confirmed in multiple polls, Americans continue to dislike the health care plan pushed through by Congress last spring. Tuesday, Missouri voters overwhelming showed their distaste by backing Proposition C.

On Tuesday, Missouri voters cast 71 percent of their ballots in favor of a state measure to bar the government from requiring people to carry health insurance, and penalizing those who don't.

That approach is at the heart of the federal health care law that Obama signed in March.

Senate Majority Leader Harry Reid explains the vote in the Wall Street Journal.

“It’s very obvious that people have a lack of understanding of our health care reform bill,” Reid said. “The more people learn about this bill, the more they like it.”

Mark Tapscott offers a more compelling explanation, pegging off polls demonstrating a big gap between the attitudes and perceptions of the "political class" and the rest of us.

That the Political Class' attitudes toward Mainstream America are corrosive and destructive is seen in Obamacare. It became law despite opposition from a clear majority of voters and only after President Obama and his Democratic allies in Congress resorted to corrupt bargains and procedural abuses to force its passage.

Such attitudes are unsustainable in a democratic republic and will sooner or later get the Political Class tossed off the train for good.

It didn't have to go this way.

States Step Up Efforts to Get Additional Medicaid Funding

The New York Times reports this morning that 30 states face larger-than-anticipated budget shortfalls because they banked on Medicaid money they didn't have in the bank.

According to the National Conference of State Legislatures, states are relying on the money to close more than a fourth of the $89 billion in cumulative budget shortfalls projected for the 2011 fiscal year, which starts on July 1 in 46 states.

Gov. Gregoire wrote Congress, warning that 6,000 state jobs are at risk if the money doesn't arrive, as reported in the Olympian. Here's the letter.

The money is in the bill being considered in the Senate, says the Seattle Times.

The Yakima Herald-Republic editorial board has some advice for the state if the money doesn't flow.

If cutbacks have to be considered to the tune of $480 million, they will have to come out of a limited pool of dedicated funds -- for health care, social services and corrections. That's because the state accepted federal stimulus money in order to balance its current budget and that carried restrictions -- namely protecting basic education and higher education from any further cuts.

Asking lawmakers to consider such painful decisions during a special session is not the best way to conduct business. We saw that during the special session a few months ago when Democrats hid behind closed doors and cobbled together a laundry list of tax increases.

It may turn out, though, that circumstances will force lawmakers into another emergency.

One day it would be nice to finally see the state spend money it actually has in hand. Sadly, that day seems far, far away.

I'm betting the money arrives, giving incumbents a hero moment ... but it's far from a sure thing right now.

I

States Step Up Efforts to Get Additional Medicaid Funding

The New York Times reports this morning that 30 states face larger-than-anticipated budget shortfalls because they banked on Medicaid money they didn't have in the bank.

According to the National Conference of State Legislatures, states are relying on the money to close more than a fourth of the $89 billion in cumulative budget shortfalls projected for the 2011 fiscal year, which starts on July 1 in 46 states.

Gov. Gregoire wrote Congress, warning that 6,000 state jobs are at risk if the money doesn't arrive, as reported in the Olympian. Here's the letter.

The money is in the bill being considered in the Senate, says the Seattle Times.

The Yakima Herald-Republic editorial board has some advice for the state if the money doesn't flow.

If cutbacks have to be considered to the tune of $480 million, they will have to come out of a limited pool of dedicated funds -- for health care, social services and corrections. That's because the state accepted federal stimulus money in order to balance its current budget and that carried restrictions -- namely protecting basic education and higher education from any further cuts.

Asking lawmakers to consider such painful decisions during a special session is not the best way to conduct business. We saw that during the special session a few months ago when Democrats hid behind closed doors and cobbled together a laundry list of tax increases.

It may turn out, though, that circumstances will force lawmakers into another emergency.

One day it would be nice to finally see the state spend money it actually has in hand. Sadly, that day seems far, far away.

I'm betting the money arrives, giving incumbents a hero moment ... but it's far from a sure thing right now.

I

A Decade of Discovering what Health Care Reform Means to the States?

Now that the bill has been passed so we can know what's in it, it looks like it's going to be a decade of discovery. Stateline.org reports on a recent conference of state health officials.

With estimates ranging from state savings of $1 billion to $27 billion in additional costs, the one thing clear about health care reform is that little, if anything, is actually clear.

“It’ll probably be 10 years before it all shakes out,” says Chris Whatley, of the Council of State Governments, only half-jokingly. “This will push the fabric of the state-federal relationship in new directions, and we don’t know how it will all come out.”

And then there's the question of constitutionality, which I explore briefly in this Puget Sound Business Journal column.

Boeing Takes $150 MM Hit in Health Care Reform

A number of major corporations have acknowledged higher costs from the recently-signed federal health care reform legislation. As The Street reports:

From Deere(DE) and Caterpillar(CAT) to Verizon(VZ) and Medtronic(MDT), to AT&T(T) and 3M(MMM), U.S. firms have been issuing notices of upcoming one-time tax charges based on what the Obama administration refers to as the closing of a tax loophole.

Here's the impact on The Boeing Company, from the company's press release:

Boeing (NYSE: BA) today announced that it expects to recognize an income tax charge of approximately $150 million as a result of the recently enacted Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act. Beginning in 2013, Boeing will no longer be able to claim an income tax deduction related to prescription drug benefits provided to retirees and reimbursed under the Medicare Part D retiree drug subsidy. Although this tax increase does not take effect until 2013, accounting standards require that a deferred income tax asset be written down in the period legislation changing the tax law is enacted.

The charge is expected to reduce net earnings by approximately $150 million, or $0.20 per share, in the first quarter of 2010 as an increase to income tax expense and a reduction to the deferred income tax asset. Cash impacts of this charge will be realized over many years beginning in 2013.

Commerce Secretary and former governor Gary Locke responds to the spate of corporate filings in today's Wall Street Journal.

UPDATE Stanley Goldfarb, M.D., responds to Locke's op-ed here.

Passing Obamacare without a Vote?

The Washington Post this morning reports that House Speaker Nancy Pelosi has grown fond a a particularly ingenious (devious?) plan for passing national health care.

Instead, Pelosi, D-Calif., would rely on a procedural sleight of hand: The House would vote on a more popular package of fixes to the Senate bill; under the House rule for that vote, passage would signify that lawmakers "deem" the health-care bill to be passed.

At Olympia Business Watch, Jocelyn McCabe takes note.

They're delusional if they think "deem and pass" gets them off the hook. It's a technicality. They're still voting. After the president promised that health reform negotiations would be broadcast on C-SPAN for all to see, Congress crafted the bill behind closed doors and cut back-room deals (e.g. the Louisiana Purchase, Cornhusker Kickback). And now, after demanding an "up or down" vote on health reform, they're hurtling toward passage with a parliamentary trick that avoids a public vote. Accountability?

In National Review Online, Andy McCarthy explains the procedure, how it has been used in the past, and why the precedents do not justify its use now. He concludes:

When there's a real dispute, they have to pass the bill the regular, constitutionally mandated way: Both houses on the exact same text, with every legislator accountable for his vote.

If, instead, the legislative process becomes a farce that departs from the constitutional procedures we are entitled to enforce, then it no longer represents the consent of the governed. It is the first American principle that government derives its just powers only from the consent of the governed, and when it takes on a form that becomes destructive of the fundamental rights of the governed, it is no longer legitimate.

This Wall Street Journal/NBC Poll demonstrates why the Speaker would like to avoid a vote.

WashACE Friday Phone Conference Podcast is Up

Listen to it here

And thanks to the members and supporters who joined us this morning. I'm looking forward to next week's conversation.