Wednesday, March 16, 2016

Wednesday, March 16, 2016

Medicaid expansion saves money; Corporate Tax Swap; Louisiana’s Injustice System; and Higher Education Changes on the Table

Medicaid expansion saves money
Lost in the blur of Louisiana’s budget crisis is the happy fact that more than 300,000 low-income adults in the Pelican State will soon have health coverage thanks to Gov. John Bel Edwards’ decision to expand the program. But as Loyola University New Orleans President Kevin Wildes explains in a guest column for The Advocate, expanding the program will actually save the state money and help grow the economy.


First, at this time of a beleaguered state budget, Louisiana will save an estimated $100 Million next year if Medicaid is expanded, because of the beneficial federal payment structure. And expansion brings in over a billion dollars of new money to the state. According to a 2013 report by Families USA, the $1.1 Billion increase should, in turn, result in the creation of approximately 15,600 new jobs across the state and approximately $1.8 Billion in increased economic activity in 2016. These jobs would be high-quality jobs – healthcare, retail, tourism, leisure, hospitality and personal services generated in virtually every district in the state. Increased economic activity would lead to approximately $120 million in net new state and local tax revenue each year, and at the same time lower out-of-pocket healthcare costs would allow consumer spending in other areas.


Kevin Litten of Times-Picayune has a helpful explanation of how the $100 million in savings will materialize, as the state will trade expensive charity care for coverage that is 95 percent financed by the federal government. While the state will incur $51 million in new costs for the expansion population, that will be offset by  an estimated $155 million in savings  as the cost of treating uninsured adults, prisoners and making supplemental payments to hospitals will decline.


Corporate Tax Swap
A package of bills by Rep. Walt Leger of New Orleans  will significantly overhaul Louisiana’s corporate income tax structure starting in 2017 if voters support the measure next fall. The package won passage during the recent special session but is not expected to do much to address the state’s chronic budget woes. The Associated Press has more:


The package…would do away with a tax break that allows businesses to deduct the federal income taxes they pay from their state tax liability. In exchange, corporations would be taxed at a flat rate of 6.5 percent, rather than varying rates from 4 percent to 8 percent.


The amount of revenue likely to hit state coffers and the impact these changes will have on businesses are still unclear.


The state’s leading business lobbying group, the Louisiana Association of Business and Industry, didn’t take a position on the tax rewrite. But the organization said its impact “has not been sufficiently analyzed and there is potential for smaller businesses to bear the brunt of the proposal.” A financial analysis done by the Legislative Fiscal Office suggested the corporate tax revamp might boost state revenue slightly, though it warned the volatility of business taxes make the changes harder to forecast. Nonpartisan government watchdog group the Public Affairs Research Council of Louisiana called the restructuring “an ambitious corporate income tax streamlining package.” But it said the impact on businesses “depends on who you are.”


Louisiana’s Injustice System
Louisiana’s incarceration rate leads the world, and evidence continues to mount that poor people accused of crimes are having a harder time getting a fair shake from the justice system.  After years of cuts to funding for public defenders, more are likely on the way. Several judicial districts already are restricting services for fear of providing an inadequate defense for  people accused of serious offenses. The Economist elaborates on how widespread the practice is becoming:


Jay Dixon, the state public defender, says offices in 13 districts have imposed restrictions on their services; the one in Plaquemines Parish temporarily closed altogether. G. Paul Marx, a veteran defender whose office covers Acadia, Lafayette and Vermilion Parishes, says his payroll has declined from 62 lawyers in early December to 16 now. He estimates the number of defendants without representation at a whopping 2,300, rising by 300-400 a month (most are out on bail).


State funding is not the only unreliable source of funding. The majority of public defender funding in Louisiana comes from local court fees and traffic fines, creating some serious conflicts of interest:


Not just public defenders but Louisiana’s sheriffs and prosecutors, and the courts themselves, subsist partly on fees, fines and bonds imposed largely at judges’ discretion, mostly on defendants who plead or are found guilty. Thus, in a perverse reversal of the usual formula, public defenders routinely work on a “No lose, no fee” basis. Hurrying through cases benefits everyone. The risks were highlighted by a still-rumbling scandal over the judicial expense fund of the Orleans criminal court, meant to cover overheads using the court’s share of the revenues. An auditor’s report in 2012 found judges had spent hundreds of thousands of dollars from the fund on medical bills and insurance. The district attorney who blew the whistle recused himself from investigating, since he had enjoyed similar perks when he was on the bench.


Chief Justice Bernette Johnson of the Louisiana Supreme Court called for reform in her annual speech to the Legislature on Tuesday. The AP’s Melinda Deslatte was there:


…with one in every 86 adults behind bars. Johnson said that carries a price tag of about $600 million for the state. [She]…suggested more nonviolent, low-level offenders could be steered to pretrial intervention and drug treatment programs. The Supreme Court has been studying cost-saving efforts in other states, like South Carolina, to reduce the prison population. She also suggested Louisiana could save money by treating 17-year-olds accused of nonviolent crimes as juvenile offenders, rather than prosecuting them through the adult offender system.


Higher Education Changes on the Table
As Louisiana legislators continue to look for ways to cut and control spending, they filed a number of bills to control higher education costs associated with the Taylor Opportunity Program for Students. Without cost curbing measures, the program will cost the state $294 million next year. Advocate reporter Rebekah Allen elaborates:


Legislators have already submitted more than a dozen bills to try to rein in the cost of TOPS. Proposals include increasing the eligibility requirements from a 2.5 GPA (for core curricula) to 2.75 grade point average and moving the minimum ACT score from 20 to 21. Other proposals included forcing students to pay back TOPS if they lose eligibility and ending TOPS payments to students who attend for-profit schools like ITT College and private universities like Tulane. But the one with the most traction already is a bill that passed last year, by Sen. Jack Donahue, R-Mandeville, but was vetoed by then Gov. Bobby Jindal. This year’s version of Donahue’s measure would lock in the value of TOPS awards at its current level. So if a TOPS recipient receives $5,000 for tuition at a school this year, in the coming year the scholarship amount for students at that school would stay at $5,000, even if tuition increases. But Donahue stressed that it’s not a true cap, because the program continues to grow as more students are eligible. Instead, the bill decouples TOPS from tuition increases, which would curb some of growth in costs for the state.


Other bills take aim at the structure of higher education in Louisiana


State Sen. Conrad Appel, R-Metarie, sponsored one of the bills filed attempting to abolish the Board of Regents and the other boards governing the higher education systems. He said having one single educational board that oversees all the institutions, including two-year colleges and the historically black colleges and universities, instead of the five currently in place would reduce the competition for resources and administrative overhead. Similarly, Rep. Jay Morris, R-Monroe, has a bill that would allow the Legislature to close or merge campuses that have a graduation rate of less than 12 percent. The Legislature already has the authority to do this, but it requires a two-thirds vote. This change, which would first go to voters, would allow the closures with a majority vote.


Number of the Day

$100 million – Amount of savings in next year’s budget attributed to Medicaid expansion (Source: Times-Picayune)