Legislative Update, May 17, 2015

Legislative Update

May 17, 2015

Rep. Anne Donahue

 

We wrapped up the 2015 session passing a state general fund budget that was up by 4.1 percent, despite revenues that have increased only 2.4 percent. That vote came only a day after we passed an education bill that demands that schools restrain their funding to an average growth of two percent in each of the next two years.

Hypocritical? Clearly.

This update will have a lot of numbers in it, to attempt to sort some of it out. The general fund budget, as passed, rounds off to $1.469 billion. With special accounts added (including the transportation fund of $266 million), it goes to $2.354 billion. The Education Fund is $1.552 billion. The federal government contributes $1.929 billion. Thus, our total state spending budget for next year is $5.532 billion.

There were multiple variations on how to raise money. In the end, the $46.2 million in new revenue to balance the increased spending looks like this:

Income tax changes will raise $22.9 million. These will mostly affect only persons who itemize deductions from their income. Deductions will no longer be allowed for income that is spent paying state and federal taxes, and most other deductions will be capped.

The House decision to cap deductions for charitable donations and for high medical expenses, however, was reversed.

Instead, the final compromise accepted a Senate proposal on an “alternative minimum tax” of three percent for persons making more than $150,000 per year. That means that regardless of any type of deductions, the bottom line can never be less than a three percent state income tax.

Everyone will see a slight increase in the tax that is charged for items bought out of state (e.g., on the Internet), where a Vermont sales tax was not charged. This is the spot on your tax return where you can choose to pay the automatic assessment, or you can provide verification that you purchased less than that. The current rate is .10 percent. It will increase to .15 next year and .20 the year after, and then automatically increase based upon the consumer price index.

After income taxes, the next biggest revenue stream is expected to be the change in the sales tax food exemption. “Soft drinks” will no longer be considered food, and so will be subject to the regular six percent sales tax.

That is expected to raise $5.1 million for the general fund. Soft drinks have a broad definition; it’s not solely soda. They include all flavored and sweetened beverages (including artificial sweeteners) unless containing more than 50 percent juice. As a whole, taxing soft drinks will bring in $7.9 million, but a percentage of sales tax revenues go to the Education Fund, so $2.8 million of it goes to the Ed Fund.

Vending machine products will now be taxed at the same rate as restaurant meals (9 percent), which is projected to raise $1 million. A new program to garnish wages or attach bank accounts for unpaid taxes is expected to raise $2 million.

That’s the bulk of new taxes, but there is another $14.3 million in increased special funds or fees. A cigarette tax increase of 33 cents per pack will raise $3.2 million for several specific health care line items. An increase in the property transfer tax will raise $5.3 million for the water clean-up bill.

Filing fees for various court actions (filing a will in Probate Court, for example) will raise an added $.7 million for the judicial branch budget, and additional fees for agriculture and developers will bring another projected $2.1 million for the water bill. The routine increase in professional licensing and other fees will raise another $2.9 million.

The grand totals raise $30.4 million for the general fund, $2.2 for the Ed Fund, and $13.6 for specially targeted funds (including the $7.5 million water clean-up bill), making the total $46.2 million.

Is there good news in that?

Yes! The versions passed in the House totaled $55.8 million; the Senate, $50.9; so the final version was pared back slightly. The two biggest proposed increases that were eliminated were an increase in the assessment on small businesses that cannot afford to provide health insurance (the Senate proposed to raise $5.1 million with it), and the cap on charitable and medical deductions on income tax (the House income tax changes would have totaled $33.2 million in new revenue, rather than the final $22.9, as passed.)

Much was made of the report that we “closed” a budget gap of $113 million. That was based on an assumption of a much larger increase in spending. Although we reduced some of that increased spending, and increased taxes, we already are projecting a gap of $50 to $70 million in next year’s budget – assuming that we continue to spend at the same rate, and that revenues (including the new revenues sources) continue to grow at the same (lower) rate.

We can only change that trajectory by spending less or by growth in the economy as a whole. That leads to the importance of the economic development bill, which also passed on the last day of the session. It invests $425,000 in initiatives to spur growth.

 

Health Care Reform

The session began with a proposal from the governor to raise $90 million in a new employer payroll tax to fund major health care initiatives. The largest piece was a jump in Medicaid payment rates so that private insurance rates wouldn’t have to be paying for Medicaid underpayment – as they do now. The concept was flawed, but beyond that, the economy clearly could not tolerate that kind of tax increase.

That tax package proposal, however, included health care budget items that would normally have been included in the general fund budget. Leaving them out of the general fund meant two things. First, the general fund total was misleading because it did not include budget lines that would normally be included. Second, the most essential funds were placed at risk, since they were separated in a “stand alone” budget that required additional revenues.

The governor’s proposal left my committee reduced from $90 to $53 million; it left the House tax committee cut back to $20 million; and it left House Appropriations cut down to $10 million. The Senate cut it down to about $7 million, and it ended up about there. (The $3.2 in tobacco taxes is matched by federal funds.) That leaves no money invested in any reform efforts. It maintained the existing level of support for low income persons (those just above Medicaid eligibility) who purchase insurance on the Health Exchange. It provided tiny increases in some provider payments.

At the same time, we learned that Medicaid costs from use of services is “running hot” at about $15 million over budget in the current year, and projected to continue at that rate next year. That was not included in the fiscal year 2016 budget we just passed. As of this particular moment in time, tax revenues have shown a spurt upward. That, it is hoped, will cover the shortfall in the current year budget.

If we are very, very lucky, we will end up with a little bit of leftover in the current budget. If so, $5 million will be set aside first for low income heating assistance next winter, and then another $13 million will be set aside for additional Medicaid costs. (That was money that is supposed to go towards repaying the Teacher’s Retirement fund loan that we borrowed from ourselves last year… but that’s another, much longer story.)

 

Education Reform

The education bill deserves more discussion, and I will include it in a later end-of-session update. The short version is that it creates strong financial incentives to create larger school districts of at least 900 students. Since there is only one Education Fund, incentives for some means, in effect, financial penalties for those who move more slowly.

In addition, there is a spending increase threshold that averages 2 percent, but varies based upon how a school district’s per pupil cost compares to the state average. Northfield is just a hair below the state average and thus would be allowed slightly more; Berlin is a bit above, so it would be held to below 2 percent. If the threshold is exceeded, it triggers the existing excess spending penalty.

 

Childhood Immunizations

(This report was shared last week on Front Porch Forum.)

Before the final week of budget wrap-up, we had an intense debate over elimination of the philosophical exemption from required immunizations. I want to thank constituents from both sides who shared views on removal of the “philosophical exemption” from mandatory childhood immunizations. I also want to share my conclusion, which was that we had a better option for achieving the vital need to increase immunization rates. I presented a proposal for that option which was rejected by a razor-thin, 73-71 vote.

These are the comments I made in explaining my amendment on the House floor:

I grew up with a father who was deeply committed to civil rights. But he also taught us – and I did not know at the time that he was quoting a Supreme Court justice – that “your right to swing your fist ends just short of my nose.” We do not have the right to place others at risk of injury, and it is the obligation of society to protect those who are vulnerable to injury. It is clear from the medical evidence that if our levels of immunization are not high enough, other children in our day care centers or schools are placed at risk.

We also do know that throughout all of history, science has been capable of errors in what is believed at a point in time. I have deep sympathy for parents who are concerned about vaccines, despite current medical knowledge, because of my own experience with a medical treatment which was identified as being safe. After decades of research, the reports of serious adverse effect were declared to be “nonsense,” and as being based on a fringe, anti-medical minority view. I suffered severe and permanent side effects. In our state legislature, before I became a representative myself, when I testified about the need for state oversight, a medical expert testified that my perception of an adverse effect was solely based upon my underlying illness and an effort to seek attention. I continued my own research, and later met with a researcher who was a leader in the country on the treatment, and who told me about the emerging new evidence that now recognized that the effect I experienced was a rare, but actual, adverse effect resulting from that treatment. Patients today receive informed consent information about that reality.

So we need to understand what we are asking of parents. We are asking – we are mandating -- that they surrender the ability to choose what they believe to be in the best interests for the wellbeing and safety of their child – a decision that they otherwise have the right to make – in order to meet the greater good of others in society. Taking away individual rights in this way is something that we must do when necessary to protect others. In this situation, the evidence is clear that we must increase our immunization rates in this state. As a result, if this is the only way to achieve that, I support our obligation to do so.

But if there is another way to achieve that goal – in fact, to improve the likelihood of achieving that goal – without taking away the rights of parents to decide upon the best interests of their own children – then that is what we should be doing. This amendment is that other way. If this approach will increase vaccination rates, as I believe it will, it will meet the important goals of the underlying bill without interfering with that very small group of parents who would choose a different health care approach. And I believe it will be more effective in reaching that critical goal.

This amendment follows the evidence we heard in our committee that if we increase the barriers to access an exemption, it will reduce the rates of exemptions. Our own Commissioner of Health – and to be clear and not distort his position, he remains explicit that he believes we should eliminate the philosophical exemption – but he testified that the harder it is to seek exemptions, the less they will be used.

We have the evidence of that from Oregon, where in a single year, exemption requests dropped by 17 percent, based upon required use of an online module that took time to complete, and despite grandfathering those with existing exemptions. It offered an alternative of meeting with a doctor for that purpose. It only requires the process a single time. My proposal requires both the module and a consultation with a prescribing practitioner, repeated annually. It requires that a person affirm under penalty of perjury that they are following a health care practice – not just ignoring health care – that is based upon religious, moral or ethical beliefs. It thus applies to both ethical and religious beliefs.

The underlying amendment eliminates the philosophical exemption but leaves the religious exemption untouched, with merely the existing requirement of reading brief information and checking a box. We know that many parents will simply check “religious belief” instead of “philosophical objection.” Thus it is less likely to meet our common goal of increasing immunization rates.

I firmly believe in and support the importance of increasing those rates. I simply believe this is a better way to achieve it.

****

Please keep sending me your thoughts and concerns – they are important to me. Contact me any time via messages at home (485-6431) or by email: counterp@tds.net. You can read my past updates on my blog site, www.representativeannedonahue.blogspot.com.

 

 

Legislative Update, May 2, 2015

As we come into the home stretch of aligning Senate and House budget and tax bills, some are beginning to reference this as the “Year of the Alligator.” There is finally recognition of the impact of multiple years of setting budgets that do not match our rate of economic growth.

When spending increases at a higher slope than revenue growth, it creates a graph shaped like an alligator’s open jaw, ready to eat us. An increase in taxes only helps for a single year if the growth rates don’t change.

The Senate has now voted on its versions of this year’s spending and tax bills, which means that the clock has begun ticking towards adjournment. The remaining decision-making will take place in the conference committees between the two bodies, and will return to us with only a straight yes or no option.

Unfortunately, the major bill that has not moved yet is the economic development bill.

***

The Health Care Bill

This past week, the House added $12 million to the budget to pay for health care costs that were left out of the general fund. This divide and conquer process was a disingenuous way of increasing the state budget as a whole. I voted against it.

It included some essential items, but the added taxes to cover it (taxing candy and soda; increasing tobacco taxes) are projected to have a zero growth rate. Thus we opened the alligator’s jaw a bit wider for future deficits.

This was a mega-bill. It rolled up multiple policy directives, spending priorities, and taxes into a single bill. Some parts were very, very good, such as ensuring a mechanism to drop development of the Vermont Health Exchange computer system and join a federal-based exchange if it is not functioning properly by this summer.

The Green Mountain Care Board is working on payment reform, including reform that brings rates from different payers in line for similar services, and I got floor support for adding two clauses to this part of the bill.

The first explicitly bans the Board from reducing or limiting any covered Medicare services in this process. The second asks the Board to assess the pros and cons of protecting independent practitioners in their ability to set their own rates for private patients.

The most controversial part of the bill was the addition of electronic cigarettes to our laws and taxes on tobacco products. E-cigarettes allow people to take in nicotine without burning tobacco. So they are just as addictive, but less damaging to health.

The vapors they emit still carry some toxins, but they disperse in the air more rapidly, unlike the long-lingering effects of tobacco smoke. The strongest objection to them has been the illusion of “safety” and the resulting potential allure to teens as a new vehicle for getting them hooked on nicotine. The counter-argument has been the value they offer to some people in quitting tobacco.

The jury is still out on how we should regulate them. Last year, my committee placed restrictions to block access by kids, but did not ban them as part of the “second hand smoke” protections related to public places.

This is the kind of issue that really needs to come through the work of a committee, with expert testimony and the time to weigh all the factors. I objected to trying to address it based purely on opinions of legislators on the House floor.

However, an effort to ask the Health Department to gather information first was defeated, 79-59. I asked for the vote to be divided solely on the additional tax, and it passed on an extraordinarily narrow vote (extraordinary partly in that it broke party lines) of 70-67.

The length of the debate, combined with multiple roll calls on segments of the bill, resulted in two 10-hour days on the floor. With all of its parts assembled, the health care budget and tax bill passed the House on an 86-57 vote.

***

Immunizations

I hardly dare say it, but my committee will be taking up the Senate initiative to attempt, again, to remove the “philosophical exemption” clause from the state’s mandatory child immunization law. “Hardly dare,” because I know how passionately people feel on both sides of this issue, and that I will be barraged with calls from around the state.

Parents can currently have their child exempted from the array of vaccinations required before entering school for medical, religious, or reasons of philosophical objection. The more children who are exempted, however, the more other children may be placed at risk.

The issue pits personal liberties against broader social protections. I cannot commit in advance to voting a particular way, but I can commit to being deeply attentive to the testimony about the risk of harm that could result from either position.

I will also fight against moving quickly on the matter. There is no need to pass this bill this year with only a cursory review. I also believe that it is essential to have a public hearing. We owe it to people to hear them out.

***

Physician-Assisted Death

Very similar issues were at play when we debated repeal of the physician-assisted suicide bill last week. The personal liberty of having one’s doctor legally permitted to write a prescription to hasten one’s death during a terminal illness is pitted against the harm to society than can result if others are placed at risk of pressure or involuntary choices.

Two years ago, the law we enacted was very different from what even proponents had introduced. In a mucky process of concessions to win votes, many of the protections against potential abuse were stripped out.

In addition, the key data-gathering elements that have given many Oregonians comfort over the years that their law is not being abused were removed.

We believe -- data is not collected; it is anecdotal -- the law has been used twice thus far in Vermont.

One organization is aggressively marketing its support services for accessing such prescriptions, and reading its website reveals a frightening mind-frame. It tells patients that if a doctor says he or she does not support the law, it is a “red flag” that they may be unwilling to offer a terminally ill patient adequate pain relief or an early referral to hospice.

That would be unethical medical practice. The group is basically suggesting that a physician’s opposition to assisted suicide amounts to a risk that they practice medicine unethically.

Furthermore, our law (unlike any other) mandates that clinicians inform any patient with a terminal illness that a prescription to hasten death is among the array of options they have for addressing their illness – whether they want the information or not.

The result has extended to an apparent misinterpretation at some nursing homes that every patient (terminally ill or not) must be informed about this option repeatedly.

I raised these concerns on the floor in debate last week, because it is evidence that we are already seeing abuses in the law.

I also proposed an amendment to remove the clinician mandate. That issue goes to the heart of whether clinician participation is voluntary and whether we want to protect Vermonters from the perception that pressure is being placed on them. My proposal was ruled “not germane” to the bill.

Another amendment proposing to expand the data we gather and restore what the House voted to establish two years ago (but was stripped in the final compromise bill) was defeated. The final vote against repeal was 60-83.

***

Please keep sending me your thoughts and concerns – they are important to me. Contact me any time via messages at the state house (828-2228), home (485-6431) or by email: counterp@tds.net. You can read my past updates on my blog site, www.representativeannedonahue.blogspot.com.

 

 

Legislative Update, April 18, 2015

Rep. Anne Donahue

Legislative Update

April 18, 2015

 

We remain in a long “calm before the storm” period in the House right now, waiting for return of the “big bills” from the Senate: new taxes; budget; education reforms; water quality. When the conference committees and debates over Senate changes begin, it will signal that we are close to the end of the session.

There are some strictly policy bills moving, however. Likely next week we will debate the proposed changes to our system of child protection, and whether we should continue our experiment with physician-prescription suicide at end-of-life.

***

Guns

This week was all about the gun bill debate. There is a strong argument, beyond anything else, that this bill is unnecessary. Once the truly offensive proposal for private sales background checks was removed in the Senate, the two remaining pieces were very narrow, and certainly less objectionable.

Do they do anything of value, apart from achieving an “important first step” (in the words of proponents) towards greater gun control in Vermont? This nose under the camel’s tent was probably the greatest concern for many.

Part one establishes a state misdemeanor crime for something that is already a felony under federal law: possession of a firearm by someone with a prior felony conviction. The bill limited this new misdemeanor crime to prior violent or drug-related felonies.

The argument in support was that the feds aren’t willing to invest time in prosecuting the federal offense when it is solely a possession violation, unrelated to bigger federal crimes.

But if a convicted violent felon is already facing a potential 10-year prison term under federal law, will a Vermont two-year maximum penalty deter illegal gun possession? Unlikely.

Vermont’s law enforcement community wanted it as an added tool for prosecutions when the proof of an underlying crime is weak. Although it is unclear whether this will prove to be a useful tool, it is hard to argue against it, and I did support that separate subpart of the bill, which passed 89-50.

Guns and Mental Illness

It would be quite a stretch to suggest that a person in the midst of a psychotic break retained a Second Amendment right to purchase or possess a gun. No one was in dispute on that issue, and a person with an active mental illness is one of the many classes of persons banned under federal law.

Federal law extends that ban to persons who have ever been court-ordered to receive treatment, no matter how many years in the past. If states send the names in to the feds, they are listed on the National Instant Criminal Background Check System. I emphasize “criminal” because the majority of these folks have never even been accused of a crime.

This ban plays into enhancing stigma, because it is contrary to fact that persons with a mental illness present no statistically greater risk of violence – despite broad public perception. According to research, a tiny sub-group of persons have an increased risk at the time they are hospitalized and for a short time after release.

The only in-depth study of the effect of listing individuals on the database found a less than one percent possible reduction of violent crime. The study noted that when violence does occur, it is often when a person has never been under any court order because the illness had never been identified or treated.

About a quarter of states, like Vermont, do not currently require names to be sent in. The rest do, but also have what is called under federal law a “Relief from Disabilities” process. A person can regain rights once they are no longer a danger as a result of symptoms of the illness.

Interestingly, a U.S. Court of Appeals ruled last December that the permanent federal ban was unconstitutional if applied to persons in a state where there is no such process available; the ban flies in the face of what we know about recovery from mental illness, and is thus blatantly and unlawfully discriminatory.

The bill before us would require the names of those under court orders to be sent to the database, but also created a “Relief from Disabilities” process. So a key issue was, did it create a process that was legitimate, or something solely “on paper” that would continue to equate to a lifetime ban?

The second critical issue was whether any potential benefit of sending names in (that less-than-one-percent chance of benefit) was offset by the significant risk that the fear of losing gun rights would deter individuals from seeking mental health help.

A study just last fall commissioned by Vermont’s Department of Mental Health reported that this was a very valid fear. Even though the law would not actually affect anyone who voluntarily seeks help, perception is often stronger than reality.

Vermont has a very significant gun violence problem in one specific way. We have a very high and increasing rate of suicide, and currently the highest rate of increase is among men between the ages of 35 and 60. Of all gun deaths in Vermont 90 percent are from suicide, not accident or criminal violence. It is a public health crisis that has been largely unrecognized… until it became argued as a justification for this bill.

The reality, however, is that these deaths are not occurring among persons who were ever under court-ordered treatment. They are occurring because the gun-owning community is part of a strong culture that believes that men should “tough it out” if they are depressed; that continues to identify mental illness as a weakness; and that is far less likely to seek out help.

These conclusions are from the same Vermont study that recognized that mandatory reporting of names could further increase the fear of seeking help. Might we save a life at some point because someone is unable to purchase a gun because they were once committed to involuntary treatment and they are now on the database?  Perhaps.

Will we lose lives because individuals are less likely to seek help if they perceive their gun rights will be at risk, and since they are persons who have never been committed, plus already own a gun, wouldn’t be attempting (or blocked from) a purchase, regardless? More probably.

It was a key reason I could not support the bill.

Beyond that, the Relief from Disabilities process it establishes is problematic in many ways. A person can apply after the state has determined that they no longer meet the criteria for a continuation of the outpatient commitment order because the state can no longer meet the test to show they are a “danger to self or others.” (The test is met even if the person is not currently a danger, but might become a danger in the near future if they discontinue treatment.)

Although at that point the person can petition a court to have Second Amendment rights restored, they bear the difficult and costly burden of proving that they are well, even though the state has already determined that the treatment order is no longer necessary.

Coincidentally, just last week the Vermont Supreme Court ruled that the state cannot continue to take away a person’s rights if it can no longer show a risk of dangerousness. That case addressed the right to be free of government intrusion on personal autonomy.

The analogy to continuing to take away other constitutional rights without the state having the burden of showing dangerousness is clear.

I need to reference a prejudice of my own. I started this session worrying that the mental illness section of this bill would sail through, because targeting those with mental illness would be the “low-hanging fruit” that was easy to support. Indeed, gun control supporters portrayed it exactly that way, in disregard of research and fact, and playing on fear.

Most of all, I thought the gun-owning community – those tough, insensitive guys – would be ready to throw that crumb to the advocates.

I was wrong. I was deeply moved by how much these folks truly understood the issues at stake and the false assumptions that are based on stigma. Discrimination against those like me who have struggled with mental illness is still prevalent in society. They recognized that, and it became a fundamental part of their objections to the bill.

In one heart-to-heart with a member of the Vermont Federation of Sportsmen’s Clubs, when I expressed my gratitude, the member answered, “Of course we get it. Many of our members are Veterans who have struggled with PTSD.”

I owe an apology to them for the assumptions I made.

When this part of the bill was added to the felony-possession section, it lost 10 additional votes, but still passed 79-60 on the first day’s vote. The final vote was 80-62.

The Gun Shop Project

There is one good thing that is coming out of this bill, and that is the awareness of the New Hampshire Gun Shop Project, and the soon-to-begin Vermont Gun Shop Project.

It is the one thing that can truly make a difference in our suicide crisis. Its genesis was a gun shop owner in New Hampshire who was distraught about the death of a person who bought a gun from him. He teamed up with gun owner groups and suicide prevention experts to develop a program of education and resource materials.

More than half the gun shops in New Hampshire now participate. It is, most importantly, a program about empowering the gun-owning community to support members who may be in crisis, as part of a caring community of friends.

I shared information about this project earlier this year with Chris Bradley of Northfield, the current president of the Federation, who enthusiastically endorsed it – and reminded me that safety is one of the fundamental objectives of the work of the Federation.

It was Chris who first testified in the Senate to explain the program, and it ended up becoming a part of the bill. It didn’t need legislation; one of its strengths is that it is a self-generated, voluntary-participation project.

But it doesn’t hurt that our Department of Mental Health will be charged with helping to gather interested parties together to coordinate its implementation in Vermont. So I am grateful that the Federation and other Vermont gun rights groups were so quick to volunteer a leadership role, and I made a little speech to that effect on the House floor Friday.

***

Please keep sending me your thoughts and concerns – they are important to me. Contact me any time via messages at the state house (828-2228), home (485-6431) or by email: counterp@tds.net. You can read my past updates on my blog site, www.representativeannedonahue.blogspot.com.

Legislative Update April 5, 2015

Legislative Update

Rep. Anne Donahue

April 5, 2015

 

Where to begin, in the list of new taxes?

None of them are smack-you-in-the-face taxes. They are the little ones that pile up from behind the scenes, but by the end of next week they will likely add up to $63 million in new revenue in order to enable more spending. When you start putting these things together, there are some obvious ironies. There have been many media sound bites that reference the deep cuts in spending this year -- $56 million from the general fund – but the general fund actually went up by $68 million in spending. The cuts were reductions from projected increases, not from the existing base.

That increase amounted to a 4.8 percent increase in the general fund. This week, however, we passed a bill to restrict school boards to stay below a 3 percent increase in their budgets. This was in response to the “call from voters” to address unsustainable tax increases. What’s good for the goose is apparently not good for the gander.

***

Lining Up the Taxes

The deficit between projected spending and projected revenues this year was $113 million. Two weeks ago the House addressed this by cutting the increased spending by $56 million, raising taxes and fees by $35 million, and using $25 million in “one time” funds. One-time funding means it is not a repeating source of revenue. It won’t be there next year, so we will start next year with that amount as a new deficit.

Most of this year’s one-time money came through paying for general fund items in the capital construction budget. Thus we deferred construction needs in order to avoid further general fund reductions, and will start the fiscal year 2017 budget with a $25 million hole. The hole will stay that “small” only if we restrain that budget’s increase to actual revenues, something we have not achieved for six years now. Thus, the cycle continues.

The new taxes in this bill came through reducing what can be included as state income tax deductions. Our current policies say that we shouldn’t count as income (thus, shouldn’t tax) the money you had to spend on paying income taxes; the money you have to spend on high medical expenses; the money you spent repaying a home mortgage or student loan; and income you receive but give away to charities.

We all have a choice of using the “standard deduction” that simply discounts a percentage of income without have to list any specific items. Those who have higher amounts of this kind of spending, however, can receive a higher deduction if they list out (“itemize”) the deductions from income. About a third of Vermonters itemize deductions. Under this bill, any money you use to pay taxes would now be taxed. You can still deduct the others, but only to the amount of two-and-a-half times what your standard deduction would have been. I voted no.

More Spending, More Taxes

In most years, our state spending is divided into four buckets: the education fund (combined statewide property tax plus income and part of the sales and other taxes); the transportation fund (mostly gas taxes and motor vehicle fees); the capital bill (major projects that are paid with long term bonds); and “everything else,” which is the general fund. This year, we have removed items that would normally be paid for in the general fund into two new special categories.

One category is increases in health care spending. If we had included this as usual as part of the general fund budget, it would have increased the deficit by that amount of spending – in this case, by another $20 million – and living within our means would have meant sorting out all of our state priorities within that single revenue and spending bucket.

The other new bucket is the water quality bill. I think there was greater justification for accounting for that separately, because it is a major new initiative to clean up our many impaired lakes and streams.

More About Water

Virtually everyone agrees that we have a crisis in our water quality. Beyond what we want for ourselves… shhhhhh… don’t let the tourists know that Vermont -- Vermont! -- has polluted lakes and streams. On top of that, we are under a threat from the federal Environmental Protection Agency that they will force us to do it their way, if we don’t do it ourselves.

The bill we passed last week focuses on all three of our big pollution contributors: farm run-off, highway and roads run-off, and run-off from the development of land. It sets a number of new standards, and includes hiring new positions for education and enforcement. The $8 million annual price tag would be covered through a wide assortment of new fees and taxes, including farm assessments, development fees, and a small increase in the property transfer tax. For the first time, small farms (not yet defined) will require certification and an annual fee.

Some of us argued that there were other places we could get the money without new taxes. Specifically, we have a large housing and conservation fund, and if saving our water quality isn’t part of conservation, I don’t know what is. We could have deferred purchasing additional conservation land while working on water cleanup. I voted for that alternative funding, but when it failed, I did vote to support the bill as a whole, taxes included.

The Coming Health Care Tax

I’ve written at length in past updates about the $56 million expanded state spending in health care that my committee passed (over my opposition), to be paid for with a payroll tax plus a 2-cent-per-ounce tax on sugar-added drinks. We were asked by the Speaker to cut the total back to $20 million, and the Ways and Means Committee was told to find that amount in new taxes. We kept the same priorities, but cut the investments back.

The shell game is such that one part of this bill now includes an item that was cut from the general fund budget! In other words, it wasn’t a cut… it was a transfer to save general fund revenue for other spending, and to move it into this “new taxes” bucket. (The item was our existing subsidy for those with low income, but above eligibility for Medicaid, to make health care more affordable for those who are buying insurance products on the exchange – something I strongly support.)

Last week, Ways and Means dropped the payroll tax, which had been the governor’s proposal; reduced the sugar-beverage tax to a half-cent-per-ounce tax and added diet soda to it; and proposed taxes on several other items and another cigarette tax increase. The sugar-tax change turns it into being just another new tax. The fight-obesity rationale that my Health Care Committee used is eliminated when the tax is lowered to a point that it won’t affect buying patterns…. and when diet soda is added. That bill is expected to be on the House floor on Thursday and Friday.

***

Education Reform

From my perspective, don’t expect anything in our education reform bill to have an impact on school taxes any time soon. If creating larger supervisory unions over time saves money, it won’t happen for a while. The proposed cap on school budgets – that spending limit that we find impossible to live by in the legislature – was deferred for a year in the bill as passed. The cap may have been unfair for some, but it would have held tax increases down.

The big problem we face in education funding is our attempt to run a statewide system, yet also allow local towns to set their own budgets. It is a combination that is unworkable, because no town can actually control its own local tax impact. Increases are driven by what every other town spends as well, and by how a town’s property value assessment is compared to others (the “common level of appraisal.”) This bill does nothing to address that core problem, and an alternative to establish regional administrative districts that would set and vote for a budget as a district – which I supported -- failed on a 37-83 vote. This was a rare year where we had momentum for fundamental change, and this bill doesn’t achieve it. I voted no.

When we debate education reform, there is always one refreshing aspect. There are no party-line divisions. The bill passed 88-55, but many votes lined up based on small or large school district representation, rather than based on Democratic, Republican or Progressive perspectives.

***

Much Yet To Come

Sitting in the House, it is easy to forget that nothing we pass is anywhere near being a “done deal.” The Senate often comes out with very different approaches. Those get resolved in a madcap process in the last week or two of the session, and the governor still has veto power. Beyond the money bills, there are many policy issues yet to be decided.

The House, last week, agreed to require “federal prevailing wages” for capital construction bids. It sounds worthy to protect construction workers, but creates two different problems: more bids will likely go to out-of-state companies (thus, counter to helping Vermont workers) and the higher costs will mean fewer projects to go out to bid.

Next week we will be debating whether to include teachers in the category of “too essential to permit strikes” (as with police and rescue services) with a bill that would ban both striking and school-board-imposed contracts.

Among the major Senate bills under review in the House are improvements to our child protection statutes, addition of gun restriction provisions to state law, and same-day voter registration.

***

 Please keep sending me your thoughts and concerns – they are important to me. Contact me any time via messages at the state house (828-2228), home (485-6431) or by email: counterp@tds.net. You can read my past updates on my blog site, www.representativeannedonahue.blogspot.com.

 

Legislative Update, March 21, 2015

It was good news this week when the administration reported to our committee that it has finally agreed to consider using a federal health insurance exchange if Vermont Health Connect does not become fully functional by this May. Next week, we will begin looking at proposed bill language that would establish a clear time line for this decision-making process.

This follows a week after agreeing, under growing pressure, to allow individuals to enroll in Health Connect plans directly with carriers next fall. So there may be light at the end of the tunnel. These are both “fixes” that I have been fighting for.

Important news for Berlin and Northfield: the House Fish, Wildlife and Water Resources Committee has decided that it will not take up a bill that would have allowed towns to prohibit fishing, swimming and boating on their drinking water sources that are located in other towns.

This bill was brought by Montpelier representatives to gain control over the use of Berlin Pond. The committee determined that these decisions require the consistency of state, not local oversight, since water is a public trust.

Meanwhile, a number of policy bills occupied House floor time in the week after the crossover deadline for House bills heading to the Senate. Next week is the deadline for money bills. Most House Committees will now spend the rest of this session reviewing bills sent over by the Senate.

Here is a sampling of House bills passed and sent to the Senate:

Revenge Use of Sexually Explicit Photos

Taking photos of someone who is nude or involved in sexual activities in places where they have an expectation of privacy is already illegal. But what if one consents to pictures being taken (“just having fun,” or because it’s within a trusting relationship, “just between us,”) and when a relationship turns sour, the pictures get posted on Facebook in revenge – or worse yet, for profit?

The point of this bill is to make that a crime, ranging from misdemeanor to felony depending on the level of harmful intent of the person doing the posting. When technology changes, and a new means of people harming other people emerges, we need new laws to address it.

There is always a balance required by the First Amendment. What you do in the town square (that is, with no reasonable expectation of privacy), can’t be blocked from being filmed as it happens or from being transmitted later. I introduced an amendment to help clarify this in order to protect the integrity of the new law, and it was adopted on the floor.

Accessible Roads for Trailer Parks

There is a good amount of law on the books to protect the rights of mobile home park tenants to have safe premises, but concerns arose after Irene about the failure of some owners to maintain safe road access for emergency vehicles. This bill automatically deems it a safety hazard if there is not reasonable access, and allows for withholding of rent or for fines up to $10,000 for a single violation.

“Reasonable” (to the tenant) was the sticking point for me: that isn’t a very clear standard. As any of us living on dirt roads know, that there can be times, whether in mud season or in the middle of a snowstorm, that roads are impassible. It is the town that determines what is reasonable to maintain safe access, not any one of us as an individual – and we can’t withhold property taxes if we disagree with the town.

Thus despite supporting the intent of this bill, I but voted no on the first vote; it passed on a 95-47 roll call.

The next day, we received additional information about the mechanisms within existing law that enables the owners to resolve problems, and that provide eternal review. Based on this, I was, along with others, able to shift to support the bill on its second vote; the roll call was 117-24. Details can matter!

When Do Kids Become Adults?

Vermont is only one of two states in the country that allows the start of the prosecution of any level of crime by a 16- or 17-years-old to be in adult court. Most state systems require serious crimes to go to adult court, and allow a Family Court to send other felony charges to adult court, but Vermont allows total discretion by prosecutors on that decision including for misdemeanors.

Among other things, it means that if the court later decides that the situation is more appropriate for Family Court, it’s already too late in terms of the public record. A 16-year-old making a youthful mistake may already have his or her name in the paper as an arrested criminal.

This bill requires the initial charge filed by law enforcement to be cited as a juvenile offense (other than in serious crimes); then the prosecutor can file it in the court he or she deemes appropriate. This is still far less protective than 48 other states, since the prosecutor, not the court, makes that decision. But it is a step forward. I voted yes.

This went hand-in-hand with a bill the week prior that banned a sentence of life without the chance for parole for crimes committed before age 18. It doesn’t mean that an offender cannot be held for life imprisonment, but it means that there must at least be the opportunity for a parole board to eventually consider whether a release is appropriate. I also supported this.

Limited Liability Corporations

This bill rewrote the law on the licensing and functioning of a type of corporate entity. It was 80 pages long in the calendar, and is a good example of a type of bill that a representative cannot fully understand – either by reading it or listening to the floor presentation – without having been part of the detailed committee consideration. How does one decide how to vote? There is reliance on the committee process and the reassurance of an 11-0 vote by the members of that committee. It passed on a unanimous floor vote.

Emergency Involuntary Procedures

Last year, we addressed the difficult balance between individual rights and involuntary treatment when a person with a mental illness is objecting to the use of medication. This year, we looked at a similar issue when a court is not involved, because there is an immediate emergency regarding self-harm or harm to others by a person within a hospital.

Vermont sets a “best practices” standard that is above the “floor” set by federal rules, and this bill clarified certain parts of requirements under state rules. I was concerned that we were not including children under these protections, and offered an amendment that included them while also allowing variation where the best practice standard might differ for children. This amendment was accepted unanimously on the floor.

Town and School Budget Reports

The week before town meeting, there was a Front Porch Forum exchange on the subject of our state law regarding the distribution of town reports. The Government Operations Committee took a look at the issue this week, and concluded that the law is clear: a town can either individually mail or deliver the reports within 10 days in advance, or it can – by vote of the residents – give notice of where it is available, within 30 days prior to town meeting.

It appears that many towns, like Northfield, have recognized that individual delivery is too costly and making it easily available in public locations makes more sense. But they haven’t necessarily held the required vote to do so, and don’t have it available 30 days in advance.

It seems that the state should either expect the existing law to be followed, or change the law to follow the change in standard practice; the committee will continue to consider this issue.

Major Bills Pending

There are major bills getting media attention because they were voted on by committees, but that will not actually reach the House floor until next week or later because they have a secondary or third committee that must review them, most often based upon taxes or spending. These include the education funding reform bill (with proposed spending cap), the transportation funding bill, the water quality bill, and the ban on teacher strikes. Underlying all of them is the general fund budget, which is projected to be up for debate on the floor this Thursday and Friday.

Please keep sending me your thoughts and concerns – they are important to me. Contact me any time via messages at the state house (828-2228), home (485-6431) or by email: counterp@tds.net. You can read my past updates on my blog site, www.representativeannedonahue.blogspot.com.

 

Special Health Care Bill Update, March 14, 2015

My committee (House Health Care) passed a major bill this week, so this is a bonus week update for those interested in reading a very in-depth report on this multi-piece bill.

We also passed a bill that represents a change in policy and very good news for individuals who have been forced to enroll for health insurance on the dysfunctional Vermont Health Connect system even when they were not applying for subsidies.

The big bill included the sugar-added beverage tax. I received a number of responses to my request for feedback on that issue, and not surprisingly, there were a wide range of opinions. All of them, however, had productive thoughts or insights that helped broaden how the issue might affect Vermonters – whether positively or negatively.

I did not support the bill, but it is also important to know that the context included other parts of the bill and alternatives that were discussed.

The New Spending

First, the bill is focused on $47 million annually in new spending for a list of specific health care initiatives. When combined with federal matching funds, this brings the total budget of new expenditures to $91 million, annualized. The governor’s health care proposal this year was to impose a .7 percent payroll tax for a list of similar initiatives. Our bill includes two revenue sources: the two-cent-per-ounce sugar tax, and a .3 percent payroll tax. In effect, our committee bill substituted part of the payroll tax for the sugar tax.

There are two other changes from the original budget proposal from the governor. The committee bill repeals the current “employer assessment” levied against employers who do not provide health insurance.

Some people have felt that the payroll tax would mean “double dipping” from these employers. This is because, at least in theory, the payroll tax on employers who do currently offer insurance will be returned to them through lower health insurance premiums because Medicaid will be reimbursed at a higher level, reducing the amount private insurance carries part of Medicaid costs (the “cost shift.”) They will be “held harmless” from the impact of the new tax. The payroll tax on employers who do not currently offer insurance will not benefit them through lower insurance rates (since they don’t offer insurance.) Thus, also maintaining the assessment would doubly penalize them for not providing coverage.

Repealing the payroll tax, which would have raised $18.3 million, means that the addition of $47.2 million in new spending over a full year requires raising at least $65.5 million in total revenue to create a balanced package. The new payroll tax would raise $39.7 million, and the beverage tax is projected to raise $30.9 million.

Those are the figures when rolled out for a full year. Since it most pieces would not begin until next January, covering the half year in the upcoming budget requires $29.8 million in new state spending ($56.6 in new initiatives, with the federal funds added.) The tax projections are $17.8 million from the payroll tax and $17.8 from the beverage tax, minus $4.4 million from the elimination of the employee assessment in the fourth quarter.

Moving the Medicaid Cost Increases

The other change from the governor’s original proposal with the .7 percent payroll tax is that our committee bill does not include the cost of the $16 million increase in existing increased Medicaid expenses, which really does belong in the existing budget, not a budget for new initiatives. The administration now agrees with that perspective.

However it is important to realize that this $16 million increases the amount of new revenue or cuts that other committees will have to identify beyond the governor’s proposed cuts and revenues, since it was originally proposed to be funded as part of the payroll tax. The other addition to the gap beyond the governor’s original proposal is the $18 million in revenue shortfall reported in January, thus $34 million in total.

On to the vote:

Our chair allowed for recognizing committee members’ positions on the significant separate issues through straw polls.

We first voted on the policy directions of initiatives in the bill. It further supports the Blueprint for Health costs for coordinating care for chronic health conditions; reduces the price disparities between state payments for health care (Medicaid) and private insurance payments; increases subsidies for low income individuals buying insurance on the Exchange; focuses on specific support for enhancing universal access to primary care; provides the resources for increased oversight responsibilities of the Green Mountain Care Board; and provides an inflationary increase to health care service providers not covered by the Medicaid increase.

Some of these initiatives do not have consensus support, in part because they would help support a future single payer financing structure for health care. They are initiatives that I do support – they are investments in better health care and less spending over time -- and to the question, “if resources were not an issue, how would you vote?” I voted, “yes.”

We then voted on the use of the two-cent-per-ounce sugared beverage tax as a revenue source for the bill. Note that this did not use any of the revenue to fund other programs that have been suggested as linking to the tax purpose, such as making fruits and vegetables more affordable. It also includes no funding for a public education campaign.

I told the committee that I would be ready to seriously consider this tax if it was proposed after first having an aggressive education campaign about the health risks of significant added sugars. It’s what we did, for example, with nicotine – and still do, as a combined education and tax effort. To spring it on consumers without doing that first, I think, is unfair and counterproductive. Given our budget shortfall, I would even support a small beverage tax in order to fund such a campaign. That approach did not receive committee support.

The other issue of particular concern is the impact of any really major tax differential between Vermont and our surrounding states. That is counterproductive to our critical need for economic development – something essential to addressing our structural budget deficit. So I voted “no” on this straw vote.

The same issue rings true if we were to become the first state to impose a state payroll tax, regardless of good motives or policy efforts. We do not stand in isolation, and what might be otherwise argued as good policy is bad policy if it puts us in a significant economic disadvantage compared to other states. I voted no on that component as well, and thus no in the formal vote on the bill as a whole as well.

Many More Steps to Go

Note that this is only a first step in a long process. I think our committee has set itself up to have wasted all of the time we spent in developing this bill, given the realities of our bigger budget picture.

This bill will next travel to the House Ways and Means Committee to assess the tax proposals. Will some survive? There is a question as to whether there is much support there for either the sugar tax or the payroll tax. At the same time, that committee will without doubt be assessing some new revenue sources as a part of the existing $34 million gap (or $112 million, if you do not start by assuming the governor’s revenue proposals will be accepted.)

Ways and Means will also have to look at sustainability. The sugared-beverage tax revenue amount is only a rough estimate, and will raise less over time if it succeeds in its purpose of reducing consumption. So we will have started new programs that will grow in cost, and they will require other, additional sources of new revenue to keep them going in the future.

After Ways and Means, it goes to House Appropriations. That’s the committee already “spilling blood” (in one committee member’s words) in terms of cuts to balance the budget even assuming some new tax revenues.

Will Appropriations embrace the $30 million in additional state budget spending for the half year that would be covered in the fy 2016 budget? (And then a commitment to $47 million to continue in the following year?)

Every penny of that $30 million, along with the existing $34 million gap, must be filled by other, even deeper cuts, or through proposed additional new taxes, or both, just to get through the current year. I think that my committee was irresponsible to even suggest to our colleagues that a $30 million combined spend and tax-to-pay-for-it package be added to the current fiscal crisis.

Whatever the House ultimately passes, all goes to the Senate for scrutiny.

So you have not heard the last word on the spending or the taxes – sugar and otherwise – that left my committee on Friday afternoon.

****

Direct Enrollment

I referenced some good news at the very start of this update: last week we also passed a bill that will permit individuals to enroll for health insurance directly from the insurance carriers, instead of from the broken “Vermont Health Connect,” as long as they are not applying for subsidies. (Federal law requires that enrollment for subsidies go through the computer exchanges.)

The insurance products will the same as those on the Exchange. This will take effect beginning with the next open enrollment period next fall. This is the same process that we allowed for small business last year, but we were forcing individual purchasers to continue to enroll through the Exchange.

This is a reversal of a policy the state and legislature had insisted upon from the beginning of the Exchange.

Just a few weeks ago, my committee debated this issue. The governor’s office opposed it, insisting the Exchange would be working soon. The three Republicans tried to push back, but the best we could get at that time was agreement to allow direct enrollment for this fall only, and only if the system was still not working by mid-summer.

Under the onslaught of bad publicity and pressure over the ongoing level of dysfunction, the administration had a change of heart, and our committee chair and other committee members immediately followed suit. 

 

Legislative Update, March 8, 2015

Rep. Anne Donahue

Legislative Update

March 8, 2015

 

Having a week away from the legislature at about the halfway point of the session gives a window to look at issues not immediately in front of one’s own committee. We will soon begin to spend more time voting on bills on the House floor, and less time deeply submerged in our committee specialty areas.

The biggest task – always our most significant responsibility – is establishing the state’s budget, and it remains hard to predict how this year’s $112 million deficit will be addressed.

I do want to correct myself from my last update. I passed along misinformation stating that there was an added hole of $16 million due to increased Medicaid enrollment. That hole is, in fact, part of the $112 million. It was confusing because it is a hole that the Governor’s budget proposes to fill as part of a .7 percent payroll tax in a separate package that also adds new health care spending.

Beyond that, however, are dozens of other issues and challenges: the education fund and property taxes, addressing child protection services, gun control proposals, and the sugar-added beverage tax, to pick only a few.

***

Education. Just before the break, the House Education Committee put forward its reform bill. It does not propose radical change to our current combination property tax-income tax funding mechanism. It does put more pressure towards creating larger school districts, although the debate continues over whether this is important to either quality or cost containment or both.

The key language is the requirement that towns develop “integrated education systems” that include an average daily membership of at least 1,100 students in prekindergarten through 12^th grade by 2019 unless granted a waiver by the State Board of Education.

To put those numbers in perspective for our area, the current Washington South Supervisory Union (Northfield and Roxbury) has about 650 students: too small. Washington Central (Berlin, East Montpelier, Worcester, Calais and Middlesex) has 1,490: just fine.

Who might Northfield be able to partner with? Montpelier is growing and expects to reach about 1,000 students by 2019. Williamstown currently has about 550 students.

This is not a proposal that would mean closing schools, but a single governance structure would be making those decisions. Are Northfield or Williamstown students best served by their current high schools that may be more limited in what they offer based on size? If these discussions move to real-life, there will be a lot to consider.

As far as budgets go, the state legislature likes to point to local town decisions, but your school boards – your neighbors – are the ones trying to keep those numbers as low as possible. There aren’t a lot of people willing to take on that tough job, as board vacancies attest. Changing the funding system to make voters “see the connection” between their vote and their taxes won’t necessarily reduce costs.

That’s partly because local taxes can get driven up because other town budgets increase. That is a part of the system that has to be built in in some way because of the need for equity in education: poorer towns can’t be left with inadequate budgets, so we must have a statewide component.

Yet unless budgets change, reducing property taxes only means increasing other taxes, and most Vermonters are already paying based upon income.

The House bill shows no real appetite for a radical revision to the current system. So that’s my not-very-optimistic, but trying-to-be-honest, appraisal of the prospects for any major changes in education funding this year.

***

Child Protection. There has been a great deal of legitimate concern over the deaths of two toddlers last year whose families already had involvement in our state child protection services. A special legislative committee took testimony last summer and fall, and came back armed with proposals to improve our laws.

I am always a bit fearful of “reactionary” bills: those we pass after something bad happens. They run the risk of over-responding to a narrow issue, and creating unanticipated new problems. We do not live in a perfect world, and sometimes bad things do happen that, when we try to fix them, we make worse.

A frequent comment last year was that Vermont had gotten “out of balance” in the challenge of weighing parent’s rights against what is in a child’s best interests. The data don’t necessarily bear that up: our rate of termination of parental rights of children ages 0-3 is in the top five states in the nation.

The Senate has now passed S. 9, and the House Judiciary and Human Services Committees will be taking it up. Most of the bill includes solid, practical steps to increase the sharing of information and the ability to intervene appropriately.

I do have concern with some changes in language, and hope the House will scrutinize it carefully.  Physical injury has been redefined to mean “any impairment of physical condition by other than accidental means.” (Any? What does that mean?)

Risk of harm now includes “leaving a child without developmentally appropriate supervision.” (“Developmentally appropriate”? How is a parent supposed to interpret that?)

“Sexual abuse” has been clarified to be identified as behavior defined in our criminal laws, but includes behavior that “constitutes a potential violation” of those laws. (What is a “potential violation”?)

In our important desire to protect children, I fear that we sometimes forget that removing a child from his or her home can itself be extremely traumatic to a child. I am not weighing parents’ rights in looking at this balancing. I am weighing the right of a child to be protected from over-zealous interference from the state.

It also matters what we offer a child as the alternative. We know it is damaging to children to bounce them from one home to another. In Vermont, 24 percent of children are moved three or more times in the first 12 months of foster care, compared to an average of 14 percent among other New England states.

So this bill needs careful monitoring.

***

Gun Control Proposals. The very controversial universal background check provision that would have affected private sales has been declared dead in the Senate, but two other provisions in the bill remain under consideration.

One creates a parallel state crime to federal law for gun possession by a person with a violent felony record (federal law is for any felony). The other requires reporting the names of persons who are court-committed for mental health treatment (outpatient or inpatient) to the federal data base. (Under federal law, such persons may not possess or be sold guns.)

Both of these, on the surface, sound completely reasonable; both require digging deeper. Do we actually have a problem?

On average, among all deaths from gun violence in the state (about 50 per year), three percent are accidental, seven percent are homicide, and ninety percent are from suicide. The suicide data is not new to me. Counting all means of suicide, we lose almost 100 Vermonters every year. This far more than motor vehicle deaths and includes many young Vermonters, and yet with much less effort invested in prevention.

Providing names to the data base doesn’t address that; it addresses only the fear of a higher risk of violence to others, which is actually almost statistically nil. It also only addresses persons who have received treatment, rather than those who may be at higher risk because they have not.

Most solutions that appear simple, are not.

***

The Sugar-Added Beverage Tax. Not diet soda, but yes, sports drinks. (Remember the old days, when we were being warned about the dangers of artificial sweeteners in diet beverages?)

What is the motivation here? It depends on who you ask: a “sin tax” (like alcohol) that raises revenue by taxing something that you don’t need and is bad for you; or public health initiative that aims to promote healthy behavior (like cigarette taxes) and raises money as a side benefit.

From a health perspective, there is little doubt that we take in far too much sugar and it is hurting our health, which hurts all of us by helping to drive up health care costs. Drinks are hardly the only source of sugar. It’s hard to find a loaf of bread to buy that doesn’t have added sugar. But they are the most visible and concentrated part of the sugar-added market.

This is a big tax: two cents per ounce is 64 cents for a 32 ounce bottle of soda. It really is intended to try to change behavior. And no one has to pay the tax if they don’t want to: just don’t buy the stuff. If there are going to be new taxes of some sort voted in as part of filling the budget gap, that may make this one less offensive than others.

Is this an appropriate role for government, to not just educate, but try to force us to be healthier? Is mandatory exercise next? (Except that I gave up my prime source of physical activity, downhill skiing, because I was running up health care system costs with my propensity for injuries.)

I’m actually somewhat split on this one, and would welcome constituent feedback.

***

Please always feel free to share your opinions on this or other topics before the legislature. You can leave a message at any time by email (counterp@tds.net) or phone (485-6431) or at the state house (828-2228.) My updates can be found at www.representativeannedonahue.blogspot.com

Legislative Update, February 22, 2015

Legislative Update

Feb. 22, 2015

Rep. Anne Donahue

 

In case anyone is counting, the official budget shortfall has reached $130 million, without counting anything towards Lake Champlain clean-up. We started the year at about $95 million in the red for the coming budget year, but shortly afterward, the new forecast was down by another $18 million.

It has now been officially recognized (as I suggested it needed to be, two weeks ago) that the $16 million in state dollars in new Medicaid caseload has to be counted as part of the deficit, because it is a cost that reflects continuation of a current program.

If we didn’t count it as deficit, we would be pretending we didn’t raise new taxes to fund it, which is the way the governor’s budget presented it.

Our economic engines just haven’t revved back up, so our spending is catching up with us. So how do we even begin to address these numbers?

Most committees have been told that they must find additional cuts beyond what the governor proposed. My committee – health care – has a whole list of increases proposed by the governor that would be paid for through his proposed payroll tax, and we have been told we need to begin to prioritize them in case we cannot do them all.

They are mostly very good initiatives, but I find it hard to imagine any of them as being more important than reducing the amount we will be cutting from essential human services. It is almost inevitable that there will be proposals for some tax increases as well as further cuts when the majority party presents the budget and tax bills several weeks from now.

Here’s what the proposed health care expansions include:

The Blueprint for Health. This is Vermont’s signature health care program to create community health teams to support primary care practices in integrating care for people. It was experimental at first (can we provide better care and save money?), but is beginning to prove its worth, particularly with high-cost chronic illnesses that really need good coordination of care.

If you compare Blueprint practices with others, the cost increases for care are on a slower slope. However, it requires an investment to create the health teams, and it requires a small per patient payment to the providers for the extra time they spend coordinating services.

Although it started as a Medicaid initiative, Vermont has succeeded in making it an “all payer” initiative. Private insurers and Medicare now contribute to the pool of money that makes it work.

Now it faces two problems. The percentage of Vermonters on Medicaid has increased, as part of the effort to get every Vermonter insured. That means the Medicaid share for the community health teams needs to be increased proportionately, since it has more patients in the pool. Otherwise we are adding to the cost shift onto private payers.

The amount of money that the primary care practices receive for providing the coordination of care ($2 per person per month) hasn’t gone up in years, and we all know that costs have gone up.

So those are two of the pieces in the health care budget: increase those two funds by $2 million.

Insurance subsidies. Uninsured Vermonters have dropped almost by a half, down to 3.7 percent, in the year since the insurance exchange (Vermont Health Connect) has been open. About two-third of those folks were eligible for Medicaid – which is what caused our caseload growth. However, many of the others were eligible for federal subsidies to help pay for health insurance.

Vermont chose to provide added support above the federal level, but it still leaves a pretty big affordability gap for low and middle income folks who do not get insurance from their jobs and are buying their own. So another budget item is an increase in those subsidies, at a proposed price tag of $2 million.

The Cost Shift. I’ve discussed this quite a bit. The governor’s budget proposes to not increase the cost shift (and to not leave a $16 million hole), through funding the Medicaid increases with the proposed payroll tax (that’s the new $16 million), but to also attack it more directly by increasing what the state pays providers for Medicaid patients.

That would be an increase of $14.5 million in payments. It actually isn’t a pure increase to providers to get closer to actual cost. A good part of it just keeps up with current cost increases and thus prevents an increase in the cost shift.

The chairman of the Green Mountain Care Board, Al Gobeille, addressed the cost shift with our committee last week, and used the term “price differential” instead of cost shift to describe the problem that we need to address. We shift the cost to private payers to make up for the fact within overall health care spending that we underpay what we are buying, but that does not change the fact that the prices being paid are radically different.

That does not make for a rational, or honest system, and it is something that Gobeille thinks is essential to fix.

In addition, the Health Care Advocate’s office has a shortfall of about $40,000 to stay even with the expansion of issues that it needs to be on top of to protect consumer rights.

The Green Mountain Care Board itself needs money in three buckets in order to do three new things the governor wants done, totaling about $1.5 million. First is to study whether the board should be regulating our health care system as though it were a public utility, which would make it more formal – almost like a court – in how it functions.

The second is to prepare the application for an “All Payer” waiver to the federal government.

The third is a directive to move forward with setting rates for professional services – something it was empowered to do under Act 48 (the universal health care bill), but hasn’t acted on yet, given how full its plate has been.

What is an “All Payer” waiver? Here are two things it is not (despite the rumors): it is not a mechanism to pull Medicare funds into a Vermont-controlled health fund and take over the administration of Medicare. It is also not a step that locks us in to moving to a single payer system, although it would, indeed, make it easier to do so in the future.

Medicare would continue to control Medicare payments, just as private insurers would continue to maintain their separate balance sheets, and the state would maintain the Medicaid budget.

However Medicare and private insurers work as completely independent systems right now. In our Blueprint for Health model for primary care, those three payer groups all come to the table to develop the plan to act in a unified way in how to support the community health teams and the Blueprint practices – creating a more uniform care delivery system.

The All Payer waiver would mean the federal government would sit down at the table and share in the same kind of planning for the whole system. It would include a guarantee that Medicare would not pay any less than is due and owing for what it pays now, and would not reduce any services that Medicare enrollees receive.

The private insurers would do the same thing; they’ve already agreed to the concept. Gobeille calls it a “coalition of the willing” to create better integration. The “waiver” basically is the federal government waiving its normal “we are our own system” approach in order to become part of a joint approach.

My bottom line question: if we never moved to a step where private insurance was shut down because Vermont took over all health care spending (the “single payer” plan), could this exist as a way of coordinating among various funding streams, without taking them over? In other words, it is a better system, all on its own?

Gobeille said, yes, and I think that in understanding it that way, it does make sense.

Act 48, the single payer plan, is still on the books. The governor said he didn’t believe it was possible to do right now. He did not say he was throwing out the long-term intent.

My own position has never been far from that. I have simply not believed it was ever feasible unless and until we were not trying to go it alone as a tiny state with tiny purchasing power. If not the whole country, at least a significant region would need to be participating.

Rate setting for doctors: So what about that second piece, having the state establish physician rates around the state?

Gobeille is the one in charge of doing it, but he doesn’t think that’s the right way to develop a more uniform system. He thinks there should be standards and values that are applied, but not individual professional rates. I think that’s a far better approach, and I will be suggesting language to my committee next week to revise the Act 48 language accordingly.

All of these new budget items, in the governor’s plan, come from a new payroll tax that could produce double the revenue by drawing down federal Medicaid matching money. The theory is that this would raise enough money to do the new stuff while also cycling the payroll tax money back to employers through the reduced private insurance premiums that should result.

Vermont would be the only state in the country imposing a state payroll tax. That’s not a very good way to be competitive in drawing in business and rebuilding our economy. The legislature as a whole has been making big noises about not being in support of that plan.

It was also developed before we discovered we were going to have an extra $18 million shortfall in the budget.

But then, where would the money come from to do any of this, given that we are already $130 million in the hole? And that’s without counting the absolutely essential work we need to do to restore the water quality of our lakes and rivers.

It’s no wonder we are hearing so many new revenue proposals floating around, such as the new sugary drinks tax.

We didn’t get into this situation in a year, and we probably can’t get out of it in a year. But major cuts will clearly have to be a part of the mix. So I’m hard-pressed to consider supporting any new health care spending, however much I think it is the right thing to do, knowing that – even if one assumes some new tax proposals -- it will result in even bigger cuts elsewhere.

Please keep sending me your thoughts and concerns – they are important to me. Contact me any time via messages at the state house (828-2228), home (485-6431) or by email: counterp@tds.net. You can read my past updates on my blog site, www.representativeannedonahue.blogspot.com.

Legislative Update, February 8, 2015

Rep. Anne Donahue

Legislative Update

February 8, 2015

 

Once one is plunged into the complex details of our health care system, it can be difficult to take a few steps back and provide a useful “big picture” about the challenges and options we face. At this stage of the session, major bills are not yet reaching the House floor. We are all digging into details in our committees. Mine is the Health Care Committee, so I will try to share some of the facts without going too far into the weeds.

To start: the Governor’s proposal to cut back the cost shift (which contributes to increased insurance premiums) by imposing a payroll tax on businesses (which would, in theory, then result in reduced insurance premiums).

What is the cost shift?

It begins when we, as a state, decide to provide health coverage for those in poverty. That is defined in Vermont as earning less than $15,650 a year for a single person, and $24,250 a year for a family of four. But then we don’t have the money to pay for what we want to buy. So we require health care providers to give the care anyway. They lose money.

They are all non-profits, and can’t just close their doors. So they charge private insurance rates that are higher than what it costs for the service, in order to balance their budgets. (You have probably seen your insurance “explanation of benefits” that lists the discount from the full price of the service. But that is like a store doubling its price list and then giving a 30 percent discount. The price list is far higher than the actual cost.)

The insurance companies (virtually all non-profits as well, in Vermont) set their rates based on how much they have to pay. Thus, anyone buying health insurance is paying a part of the Medicaid budget because of the inflated price charged to the private insurance companies. The cost of the underpayment of Medicaid “shifts” onto the private insurance rates.

This means businesses that provide insurance for employees, as well as individual purchasers. Since most insurance is bought by employers, they are the ones paying most of this cost shift.

Of course, it isn’t really the employers paying. Health insurance is considered part of one’s compensation package, which also includes salary and any other benefits offered. So you, the employee, is actually paying for the cost shift.

Think about the last time you looked for a job. You probably didn’t look only at salary. You looked at whether health insurance was included. Employers compete based upon total compensation packages. As many have become painfully aware in recent years, businesses can’t give unlimited increases in compensation, so as premiums go up, they usually begin to increase the employee’s share of the costs.

Ironically, we, the employees, who pay for underfunded Medicaid through lost compensation, are pretty much the same people as we, the taxpayers, who started the whole cycle by not wanting to pay the full cost (in taxes) for the Medicaid we are buying. This is what the model I’ve attached demonstrates.

This explanation of the cost shift is an oversimplification.

It leaves out even some of the very basic additional pieces: for example, the fact that many employers do not offer health insurance. In addition, the total cost shift is much larger than just Medicaid. Medicare – which is all federal money -- doesn’t pay full cost either, although it pays more than Medicaid.

It also ignores other inequities. If we paid full cost for Medicaid in our taxes, it would be based on our progressive tax rate: the more you make, the higher the percentage of your earnings you pay. When we pay for it through our compensation, the CEO and the maintenance person are contributing the same amount – so it is a much lower percentage of the CEO’s earnings than that of a low wage earner.

So, on to the Governor’s proposal.  

The Governor suggests addressing the cost shift through a payroll tax to begin to increase Medicaid to the Medicare rate (still lower than actual cost.) This doesn’t actually reduce the cost shift. The only way to do that would be to pay 100 percent of the cost of Medicaid services in our individual taxes (shared between state and federal taxes.)

What it does is to make the tax shift more transparent. Instead of being hidden in the insurance rate, the Medicaid shortfall would be paid through the new payroll tax. What it still hides is the fact that you and I are ultimately paying for it, because businesses don’t pay taxes. Only people pay taxes – it’s just that sometimes it’s more hidden because the cost is passed on through higher prices for good or lower employee benefits.

The tax of .7 percent would raise about $40 million. Since it’s being used for Medicaid services, it can be matched with federal Medicaid funds, so the fund becomes about $90 million. The theory is that we can then take the $90 million and use enough of it to pay towards Medicaid services so that insurance rates go down, and thereby pay it back to employers by the same amount as what they paid in the tax. That would still leave us with a lot of extra new money.

One result would be that all businesses would be paying. Those that currently give generous health benefits might save money overall. Those that give none would have a new tax burden, and since these are usually small businesses that couldn’t afford to offer health insurance, they will have a hard time affording the new tax.

There is a very big question involved:

Is the cost shift such a clean money flow that money paid in on the Medicaid side will flow back out to reduce premiums at the same level? The answer is a definite no, as far as an equal dollar-for-dollar, but the unknown is, by how much? Our Joint Fiscal legislative experts say that it is very questionable that it will have a major effect on insurance rates.

And then, this week, we found out how the Governor wants to use the $90 million. Only $25 million would go towards paying health care providers closer to the cost of their services – in other words, towards the existing cost shift, even though employers are paying in $40 million.

About $20 million will go to new expansions of various state initiatives to reduce overall healthcare spending (which could save us some in future cost increases), and $5 million to administer the new tax. There’s $5 million in “unspecified,” which leaves $30 million to go.

That $30 million will go to “new caseload.” That means it will go to the increase in the number of people that have enrolled in Medicaid through Vermont Health Connect.

This increase is generally a good thing. We have cut our uninsured population by almost half in the past two years, mostly through getting eligible people onto Medicaid. But yes, it costs money to do this. We don’t have the money in the state budget to pay for it. So we will use the new employer payroll tax to pay for it.

The Governor’s staff – with a straight face – says that this $30 million counts towards addressing the cost shift, making it $55 million in all, compared to the only $40 million employers will be paying in. Why would it count?

If we don’t have the money to pay, they said, then we would have to balance the state’s books by reducing what we pay the providers even more. That would increase the cost shift even more. So this is a prevention strategy: employers will be paying the tax in order to prevent the cost shift from getting bigger! This is like protection money: pay up, or you’ll get beat up worse.

Why would we do it this way?

Without this payroll tax to pay for the increased Medicaid costs, we would have a $16 million hole in the budget, because this scheme is part of the Governor’s plan to fill our $100 million deficit.

There are only two other ways to fill that hole.

One would be to find other areas to cut back, and live within our means.

The other would be to raise taxes to pay for the increased Medicaid cost, and the Governor says he has heard the message from Vermonters: no new taxes.

Hmm? What exactly is a new payroll tax?

 

***********************

I welcome your thoughts on this or any other subjects before the legislature. You can contact me by message at the statehouse (828-2228), at home (485-6431) or by email (counterp@tds.net.)  My complete file of legislative updates can be found at www.representativeannedonahue.blogspot.com