Minimum Wage

New Health Cooperative Leading Way in Providing Exchange Coverage

Kentucky is continuing to gain national recognition for its success in expanding health insurance coverage, most recently in a Gallup poll showing Kentucky had the second-biggest drop of all states in the share of its population that is uninsured. Most of those gaining coverage are eligible for Medicaid, but people buying insurance through Kynect are also finding it very affordable, with an average premium for those receiving tax credits of only $88 a month after the credits are applied.

One factor helping make costs affordable may be the creation of a new health insurance cooperative owned by its members that is scooping up most of the new enrollees.

According to recent state data, 85 percent of those who are fully enrolled through Kynect signed up for Medicaid, or 441,164 of the 520,604 enrollees. Of the remaining 79,440 individuals buying private coverage through the exchange, 62,220 or 78 percent have chosen a plan through the Kentucky Health Cooperative, with the remainder choosing a policy offered by a for-profit insurance company.

That means of all the Kentuckians who have signed up for coverage through Kynect, only 3 percent are with a for-profit insurance plan like Humana or Anthem.

Cooperatives were established by the Affordable Care Act (ACA) after the attempt to create a public option on the exchanges didn’t get enough support in Congress to pass. The fallback idea was that coops—which must be governed by their members—would introduce more competition to the marketplace in states with fewer for-profit insurers. They could compete with those insurers in part because their focus could be affordable coverage for their members without concern for profit margins and dividends for shareholders. The ACA included loans to get the cooperatives off the ground, and the Kentucky Health Cooperative received an $81 million loan.

Coops exist in 23 states, though their share of new enrollees varies across the country. Kentucky’s coop is one of the more successful ones, so successful that it is now expanding into West Virginia.

The market created by the exchanges is new and evolving, and it will be interesting to see if the next round of new sign-ups mirrors the first batch when open enrollment returns November 15, and what prices will look like. But for the time being, Kentucky’s new cooperative has been successful at offering a consumer-owned and attractive alternative to what the big insurance companies are putting forward.

Kentucky Revenue Receipts Suggest Slow Growth

State Lawmakers Rally to Raise Minimum Wage

New Year-End Data Show Kentucky’s General Fund Continuing to Erode

In order to maintain investments in education, health, safety and other services that our citizens, businesses and communities rely on, Kentucky needs revenue growth that keeps pace with the economy. But the latest data show that General Fund revenues are continuing a decades-long trend of erosion, affirming once again that structural problems with the tax system are obstacles to moving our state forward.

As seen in the graph below, General Fund revenue has fallen from 7.3 percent of the state’s economy in 1991 to 5.9 percent in 2014. Since Kentucky has about a $161 billion economy, a one percentage point drop in this number is equal to about $1.6 billion in lost state tax revenue in a budget that only equals $10 billion.

General Fund as Share of Economy July 2014
KCEP analysis of data from the Office of the State Budget Director, Bureau of Economic Analysis.

Why are resources shrinking relative to needs? Because despite the well-studied effects of too many costly loopholes, breaks and exemptions in Kentucky’s tax system, we have yet to enact tax reform that generates sufficient new revenue in a sustainable way. Unless we fix those problems, then even during good economic times, revenue will fall short. In fact, experts who testified to the Blue Ribbon Commission predicted that in the absence of tax reform, the gap between what we need to maintain current services and what our revenue system generates will grow by an additional $1 billion by 2020.

The trend is not irreversible. There are specific policies and vital principles that can be the basis of a good tax reform package. Kentucky just needs leaders who are willing to take action.

Revenue Growth Will Need to Pick Up to Hit 2015 Forecast

State revenue is now expected to grow only 1.3 percent for the first three quarters of the new budget year that began in July, according to a just-released state interim forecast. If that happens, revenue would have to grow at an exceptionally strong 9.6 percent rate in the fourth quarter of the year to hit the state’s revenue forecast and avoid another budget shortfall.

Due to a $91 million shortfall in the budget year that just ended, the governor took $50 million from various accounts across state government—including the Board of Nursing and a fund intended to clean up underground petroleum storage tanks—and withdrew $21 million from the already deteriorating rainy day fund. Because of that shortfall, General Fund revenue growth will have to be 3.6 percent for fiscal year 2015 rather than the 2.6 percent growth that was originally projected. But the interim forecast suggests hitting that target might be difficult.

Kentucky’s current budget is vulnerable in the case of another shortfall, not only as a result of the small rainy day fund, but also because it is already transferring $302 million from restricted funds across state government, and previous budget cuts have been substantial.

After weak growth in budget year 2014, the interim forecast suggests the individual income tax will regain some strength, growing at 3.3 percent for the first three quarters. However, the state expects sales tax revenue to decline 0.6 percent over that period and revenue from property taxes, cigarette taxes and coal severance taxes to continue their decline.

Interim revenue forecast means strong growth needed

Op-Ed: Cutting Tax Rates Proving to Be a Fad Hurting State Budgets

Published in the Lexington Herald-Leader on August 1, 2014

Before going on a fad diet, it’s best to check out how other folks are doing on the plan. Are they looking good and feeling more energized, or do they appear weak and tired, in danger of reducing their metabolism and harming their long-term health?

There’s a fad diet going around state legislatures that would cut the most vital and fair source of fuel for investments in education, public safety and health — the income tax — under the misguided belief that doing so will create jobs.

You don’t have to be an expert on the short- and long-term cost-effectiveness of state income tax cuts to know they’re a bad idea. Just take a look at how Kansas and North Carolina are doing on the plan.

In 2012, Kansas slashed its top individual income tax rate by 24 percent, among other cuts, with the promise that doing so would attract jobs to the state. That’s about a $20,000 annual tax cut for the state’s wealthiest citizens, on average.

But instead of revving up the economy’s engine, Kansas is creating jobs at a slower rate than the national average. The cuts also helped create the $338-million revenue shortfall in budget year 2014 Kansas is struggling with, leaving it without enough resources to pay for basic needs like education and health care.

We Kentuckians know all too well how insufficient revenue leads to cuts in vital services like child care, to underfunding of our public schools and to mounting higher education costs for families.

We also know that as our lawmakers try to mitigate the short-term effects of revenue losses, they pass the costs to the future. Past decisions to underfund our pension system, for instance, have led to the crisis we face today.

North Carolina is another example of dieting gone wrong. That state lowered its income tax rates in 2013; created a single rate for everyone, regardless of ability to pay. The state ended budget year 2014 with $445 million less than it needed to provide services to the state’s residents.

Even deeper cuts that went into effect in July are expected to cost the state $1 billion by 2016. Furthermore, it looks like the high-income “job creators” whose rates were cut by 25 percent are not returning the favor: North Carolina is adding jobs at a sluggish pace, workers are still leaving the labor force and most new jobs pay low wages.

North Carolina’s story is especially tragic since it had long been a shining example for the rest of us in the South for its robust, forward-thinking investments in education that strengthened its economy. Now, it’s at risk of rolling back that progress.

So why doesn’t the fad tax diet work to create jobs and grow states’ economies?

The truth is that the tax code is just not a big factor in the decisions that people and businesses make about where to live, work and invest. People don’t move that much in general, research shows, and those who do are driven by job opportunities, family considerations, housing costs and the weather.

Businesses decide where to locate based primarily on the skills of the work force, strength of the roads and other infrastructure and access to suppliers and markets — not taxes.

In other words, tax cuts reward people and businesses for decisions they make based on other factors, while draining investments in the factors that do matter.

We all know that a good health requires a balanced diet and a decent amount of exercise.

Likewise, a vibrant state requires a variety of healthy revenue sources to make the investments in education and other areas we need to grow, including an income tax that asks the wealthy to chip in their fair share.

Here in Kentucky, we should redouble our efforts to make our economy healthy through fair and adequate tax reform, and ignore phony advice about what works.

Anna Baumann is research and policy associate at the Kentucky Center for Economic Policy, based in Berea.