Northwest Arkansas legislators see a notable lack of regional issues when they convene in Little Rock on Monday for a session headlined by more than a billion dollars worth of statewide health care decisions.
“Our priority is everybody’s priority,” said Rep. Greg Leding, D-Fayetteville.
The state faces an estimated $138 million shortfall in the next fiscal year alone in its Medicaid program, which primarily serves the elderly and children in poverty. Legislators will also consider a $900 million expansion of Medicaid under federal health care reform.
“Almost every other monetary issue depends on how we resolve this,” House Speaker Davy Carter, R-Lonoke, said of health care in a Jan. 7 preview of the legislative session. The total state budget proposed by Gov. Mike Beebe is $4.7 billion.
Lawmakers and community leaders named a few other issues as priorities for the region, including education spending, both for public schools and for higher education. They may consider a change in the state’s school funding formula in light of a recent Supreme Court decision.
The Legislature also may restructure the state’s lottery scholarship program. The lottery’s revenue has declined after the opening years, stabilizing at a lower level than necessary to support the program as it exists.
Higher education spending is the first to feel the squeeze when budgets get tight, said state Sen. Uvalde Lindsey of Fayetteville. Sen. Jon Woods, R-Springdale, agreed.
“There’s not a lot of regional issues we’re all coming together on to push, but the one thing we are getting together on is to make sure that the University of Arkansas and NorthWest Arkansas Community College get the funding they need,” Woods said.
The amount of money involved in the health care decision should not obscure the fact the state’s fiscal condition is very sound, Woods said.
“There’s a lot of gloom and doom in the talk about health care,” he said. “People are forgetting that the state has a $300 million surplus. There’s no danger of us having to raise taxes. We can pay for services and cut taxes. It doesn’t get any better than that.”
Closing the Gap
The health care question that will get answered first is how to close the estimated $138 million gap between state Medicaid spending and the existing level of state appropriations for the program, said Sen. Cecile Bledsoe, R-Rogers. Bledsoe is chairwoman of the Senate Public Health Committee, which will oversee any legislation regarding Medicaid when it comes before that chamber.
“We’re going to take those issues separately and find the money for the $138 million shortfall, getting that settled before we take up the Medicaid expansion,” Bledsoe said.
The existing Medicaid recipients are largely residents of nursing homes and children — the state’s most medically fragile populations. They get first priority, she said.
The national economic recession is the root cause of the program’s rising costs, Lindsey said. The program covers people in poverty. Ranks swelled as unemployment grew. Also, states have to pay a part of the costs. That share is based on per-capita income compared to the national average. Wages fell in other states faster than in Arkansas during the worst of the recession.
“The federal share of Medicaid for us dropped from 75 percent to 70 percent,” Lindsey said. “Every 1 percent cost us $50 million.”
The Medicaid shortfall is actually greater than $138 million, but the gap would be closed in the governor’s budget by use of reserve funds of cash.
“I don’t have a problem with using one-time money to cover the costs of this ongoing program because the shortfall will close as the economy improves, and it’s already improving,” Lindsey said.
Growing Medicaid
The issue of expanding Medicaid is a new question. Federal health care reform enacted in 2009 was upheld in a U.S. Supreme Court decision in 2012. However, the court ruled states could not be forced to join in the proposed expansion of Medicaid. That is now a decision for the Legislature.
If passed, the measure would expand the health care program by an estimated 250,000 people in Arkansas. The federal government would bear all the costs of the expansion for three years. Those same 250,000 would have to pay for their own health insurance or face federal income tax penalties if the state does not expand Medicaid.
The question of whether to expand cannot be answered while the program itself remains in flux, Bledsoe said.
“There was a New York Times article that threw us all on our ear, when some members of Congress questioned whether we could afford to have the federal government pay all the costs for three years as they promised,” Bledsoe said. “It’s not clear yet whether they will keep their promises.”
Leding and other supporters of the expansion note the program was never designed to be optional. The portion of the program upheld by the court will heavily cut other federal health care spending. These cuts are expected to largely pay for the Medicaid expansion.
Arkansas health care providers, particularly hospitals, will see major cuts in revenue from other federal programs such as Medicare and get no new money if Arkansas does not accept the expansion, Leding said.
Bledsoe and Leding agreed the expansion question is particularly important for Northwest Arkansas because of the concentration of hospitals and other health care providers. Benton and Washington counties are major regional centers for health care. Washington County trails only Pulaski County in the amount of benefit local health care providers would receive if Medicaid is expanded, Leding said.
“Uncompensated care,” or necessary medical care extended to patients without the means to fully pay for it, is a major problem for health care providers that expansion of Medicaid would largely address.
Both Carter and Senate President Pro Tem Mike Lamoureaux, R-Russellville, have said the expansion is not likely to pass unless the federal government is willing to allow some changes, including possible drug testing of recipients.
School Funding
A $55 million increase in state spending for public schools is included in Beebe’s budget. That would be an increase of about 2 percent. The increase was recommended by a committee of lawmakers and education experts that meets before each session to assess what education needs, as prescribed by a state Supreme Court order.
The state cannot ignore that recommendation without violating the court order, Lindsey said.
“I don’t think public education is at risk, but prekindergarten is under a different structure,” he said.
Prekindergarten classes are supported by the governor and many lawmakers as vital to improving the state’s education. However, a prekindergarten program is not mandated by the courts.
The state constitution’s requirement the Legislature fund an adequate and equitable system of public education does not include preschool any more than it covers higher education, Lindsey said.
Also, a recent state Supreme Court decision threatens to upend the way the state funds schools districts — a funding formula agreed to after almost 20 years of court fights.
The recent case involved what happens when a local school district collects more in property tax money than needed to meet the minimum amount of per student spending required by law. The state has kept the excess money in the past. The Arkansas Supreme Court said in November it belongs to the district that collected it.
The court’s decision undermines the funding formula, Beebe said. Although lawmakers can change state law and still keep the excess, Beebe believes that weakens the stature of the formula from a constitutional decision upheld by the court to a purely legislative one.
David Matthews said he respectfully disagrees. Matthews represented the Rogers School District in the 2002 lawsuit that largely shaped school spending in Arkansas. As long as the state adequately funds every district, the courts standard is met, he said.
Northwest Arkansas lawmakers interviewed said they would review the court’s finding in the session, but are inclined to authorize the state to keep such excess funds.
Money For College
Regional lawmakers agreed that all the demands on the state budget puts money for higher education at risk.
“Part of the reason for that is because, in everybody’s mind, higher education institutions have other revenue sources,” Lindsey said. “They can raise tuition. That’s why the state’s percentage of higher education spending has gone from a high of 60 percent to 40 percent today” as a share of the budgets of state-run colleges and universities.
“The problem is that these increases are pricing education out of the reach of the common folks, with is self-defeating,” Lindsey said.
Increased risk to the higher education budgets comes at a time when the state’s lottery scholarship program faces a scaling-down. Lottery returns have cooled after the lottery was first introduced in 2009.
A legislative committee recommended last month scholarship amounts be cut to $3,300 a year per student from $5,000 at the state’s four-year universities and $1,650 a year from $2,500 at two-year colleges for first-time recipients.
Those amounts are still more than the state Department of Higher Education recommended in light of lottery earnings. The department recommended $3,000-a-year scholarships at the universities and $1,500-a-year scholarships at the colleges for first-time recipients.
The need to revise lottery amounts gives lawmakers an opportunity to re-assess the program as a whole, Lindsey said. He is interested in the proposal by Sen. Johnny Key, R-Mountain Home, to increase scholarship amounts as student progress toward a degree.
“Start them at $2,000 a year as freshmen and add $1,000 a year, giving them greater incentive to get a degree,” he said. “The purpose of scholarships is not to get people in the door to a college. The purpose is to get them a degree and a skill to improve their lives and the state.”