Tiny Fraction of Wealthiest Kentuckians Gain from Tax Cuts in Health Repeal

The House plan to repeal healthcare reform, known as the American Health Care Act (AHCA), provides a tax cut to the wealthiest people while reducing the number of Americans with health coverage by an estimated 24 million, according to the Congressional Budget Office. Because Kentucky has relatively few high earners, we benefit even less from the tax cuts than almost any other state even while Kentucky has among the most to lose from people becoming uninsured under the plan.

Two of the biggest tax cuts in the AHCA are repeal of taxes on investment income and earned income that apply only to people who make more than $200,000 a year.

Cutting those taxes would benefit only 1.4 percent of Kentuckians, according to an analysis by the Institute on Taxation and Economic Policy (ITEP). That’s less than half of the three percent of Americans who would receive tax cuts. Of all the states, only West Virginia has a smaller share of the population getting tax cuts, at 1.2 percent.

ITEP estimates that in Kentucky 91 percent of the tax cuts will go to the top 1 percent of people, who will receive an average cut of $11,060. The total tax cuts in Kentucky amount to $193 million while $5.8 billion in tax cuts would go to high-income people in California and $4.2 billion in New York.

See the table below for more information on who benefits from these tax cuts:


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The American Health Care Act Would Effectively Eliminate the Medicaid Expansion

New Reports Highlight Kentucky’s Gains in Care and Health

Despite claims that Kentucky’s coverage gains were not met with access to care and better health, several recent reports and other data show quite the opposite is true. The well documented decline in the share of Kentuckians without health insurance is already reaping other rewards.

Access to care is increasing

Kentuckians are able to get to the doctor more than before. According to a recent Commonwealth Fund ranking of state health systems, Kentucky jumped from 47th in the country to 39th between 2013 and 2015, in large part because healthcare access and affordability both grew:

  • Adults who went without care because of cost dropped 34 percent.
  • Adults with a usual source of care increased by five percentage points.
  • Low-income, at-risk adults who went without seeing a doctor dropped by four percentage points.

A report by the Harvard School of Public Health showed that along with increased coverage among Medicaid eligible adults in Kentucky and Arkansas (states that expanded Medicaid eligibility), access to care also grew more than in Texas, which did not expand Medicaid. Several measures showed that these expansion states outpaced the non-expansion state:

  • Access to a primary care doctor increased 12 percentage points.
  • Regular care for chronic conditions among Medicaid eligible adults in Kentucky and Arkansas grew by 12 percentage points.
  • There was a 12 percentage point decline in skipping medications due to cost.
  • Reports of receiving poor or fair quality healthcare declined by 7 percentage points.

The final of a series of reports by SHADAC (commissioned by the Foundation for a Healthy Kentucky) outlining the implementation of the ACA in Kentucky showed several improvements in access for Medicaid expansion enrollees between the first quarter of 2014 and the third quarter of 2016:

  • Quarterly colorectal screenings for cancer increased from 3,152 to 5,550, a 76 percent increase.
  • Breast cancer screenings per quarter rose from 5,453 to 8,920, a 64 percent increase.
  • Preventive dental services rose from 19,340 to 33,782, a 75 percent increase.
  • Hepatitis C screenings grew from 1,208 to 4,011, more than tripling (which is important as the CDC found many Kentucky counties at risk of a Hepatitis C breakout).
  • Substance Use Disorder treatments grew tremendously from 1,504 to 12,319, a 719 percent increase.
  • Similarly, diabetes screenings grew from 442 to 3,579, a 710 percent increase.

More generally, the SHADAC report showed that access to care has grown among Kentuckians. Between 2012 and 2015

  • There was a five percentage point increase in the share of Kentuckians who reported visiting a healthcare provider last year.
  • Even as the number of people receiving healthcare coverage increased, the share of all Kentuckians who said they could find a provider that took their insurance held steady at just under 98 percent. This suggests that access to care did not, in fact, decline with the increase in number of people covered.

Health outcomes are improving

Results from these three reports also showed that as people have gotten insurance, their health has improved as well. The Commonwealth Fund ranking reported that between 2013 and 2015:

  • Breast cancer deaths per 100,000 dropped from 23.4 to 20.9.
  • Infant mortality deaths per 100,000 dropped from 7.2 to 6.4.
  • Hospital admissions for pediatric asthma per 100,000 dropped from 167 to 117.

Similarly, the Harvard study reported health improved more for Medicaid eligible adults in Kentucky and Arkansas than in Texas:

  • There was a five percentage point increase in adults who reported having excellent health.
  • Although not a direct measure of health, there was a six percentage point decline in people using the emergency room. This could be because people are no longer using it as a normal source of care, and it could mean that people’s conditions are not worsening to the point where they need emergency care.

The SHADAC report showed several areas that demonstrate improved health outcomes between 2012 and 2015:

  • Hospital admissions per 100,000 for asthma-related conditions fell from 68 to 58.
  • Hospital admissions per 100,000 for hypertension (high blood pressure) fell from 58 to 44.
  • The share of Kentuckians who smoke dropped 2.3 percentage points from 28.3 to 26 percent.

Providers are getting paid

Another important measure for how coverage is translating into care is how much money is being spent on providing health services. Kentucky spent nearly $5.8 billion in 2012 to pay for care given to Medicaid enrollees. By 2016 that amount had risen to $10 billion, and covered over 400,000 more people. Most all of those dollars went to hospitals, clinics, pharmacies, long-term care facilities, and many other kinds of healthcare providers.

Source: Data from the Kentucky Office of the State Budget Director.

This influx in funding has made a huge difference for providers who otherwise might not have been paid for the care they offered. While there has been an increase in people receiving care, there has also been an increase in patients who can pay for their care. Uncompensated, or charity care has dropped 67 percent since 2012 according to SHADAC.

Source: SHADAC “Final Report: Study of the Impact of the ACA Implementation in Kentucky.”

Coverage is not an end goal in and of itself, but it does help people get to a doctor when they need to, which in turn helps to improve health. It is clear that Kentuckians have used the coverage they gained to get to a doctor, and there is already evidence of improved health outcomes. Stripping coverage away from 24 million Americans, including hundreds of thousands of Kentuckians, will make healthcare access much worse.  Instead, lawmakers should be pursuing ways to build on our coverage gains and ensure everyone can affordably see a doctor when needed.

Charter School Legislation Passes, But Questions and Concerns Remain About Funding

The Kentucky General Assembly gave final approval to charter schools in the waning days of the 2017 legislative session after heated and lengthy debate in both chambers. The approval came in two parts, with the operating provisions included in House Bill 520 and the funding provisions in House Bill 471. The funding provisions in HB 471 raise new questions about how the funding for charter schools would actually work and many of the concerns we previously expressed continue as charter schools will inevitably divert funding away from our state’s existing public schools.

Implications of Inclusion of Funding in the Budget Bill

HB 471 amends the Support Education Excellence in Kentucky (SEEK) portion of the 2016-2018 state budget for fiscal year 2018. Because language included in the budget expires at the close of the second year of the biennium, the charter school funding language in HB 471 will expire on June 30, 2018. The inclusion of this language in the budget — rather than in the permanent statutes — is significant for two reasons. First, the General Assembly will have to address charter school funding again before July 1, 2018. Second, the fact the funding scheme is temporary in nature should cause concern for any entity considering the possibility of establishing a charter school in Kentucky since upon reconsideration, the entire scheme could change. The lack of certainty around funding will make it very difficult for potential applicants to plan for and project future funding, which is required as part of the initial application.

Funding Provisions Unclear and Concerning

When considered together, the funding provisions in HB 471 appear to be a mix of new language requiring a different approach for the allocation of funds to charter schools, combined with language that remains from the original version of HB 520 — but that doesn’t work well with the new approach. Without further explanation about how the various funding components are intended to work together, it is not possible to determine exactly what funding a local charter school will receive, or what resources a local district would be required to give up. In addition, given the limited time these provisions will be in effect, it is unlikely that any charter school would actually receive funding under these provisions. It takes time for charter applications to be developed, prepared, submitted and reviewed and for a school to actually become operational.

Although similar to the funding language included in HB 520 as introduced, the language in HB 471 does include some significant differences. We were concerned about the language in HB 520 because it required a local school district to transfer a proportionate share of “gross state and local revenues” to the charter school, which we interpreted as meaning all revenues that were not specifically excluded.  HB 471 establishes a different starting point for funds to be transferred to a charter school:

  • A basic explanation of the primary funding mechanism for charter schools in HB 471 is as follows: All charter schools, regardless of authorizer, are required to receive a proportionate share of “funding calculated pursuant to KRS 157.360” to be allocated to the charter school in the “same manner as the school allocation model used by the local school district.”
  • KRS 157.360 establishes the base funding level for the SEEK formula, which is an amount established by the General Assembly in the budget bill, divided by the prior year’s statewide average daily attendance. This number is often referred to as the guaranteed base per pupil funding amount. In addition to the guaranteed base funding, the SEEK formula also includes additional amounts for at-risk children, exceptional children, and transportation costs. SEEK funding is provided through a combination of state and local funds, with property poor districts receiving more state funds than property rich districts.
  • The specific reference to KRS 157.360 would seem to limit the funding that flows to a charter school to the guaranteed base per pupil funding plus the additional amounts, since those are the only funding streams specifically addressed in KRS 157.360. However, other language included in the bill indicates that this is not what the General Assembly intended. Limiting the funds transferred to charters to just those addressed in KRS 157.360 would result in far less money being transferred than would be the case under the broader directive that local districts are to use the same allocation method as is used for other schools to determine the amount of funds to send to the charter school. This is true because school districts receive funds from many other sources in addition to the SEEK funding that are allocated and distributed to schools within the district.

Adding to the confusion, HB 471 excludes some funds received by local school districts from amounts that must be transferred to charter schools, including funding generated to support capital items and capital construction, local Tier II funds levied by school districts, transportation funds (in some cases, see additional discussion below) and a three percent authorizer fee. These exclusions made sense under the original language of HB 520, where districts were required to transfer a proportionate share of “gross state and local revenues” to a charter school. However, they don’t make sense under the revised requirement in HB 421 that districts allocate funds to charter schools in the same manner as any other school in the district. As noted previously, districts generally do not allocate funds to schools based on specific funding streams. How this would all actually work in practice is unclear and therefore it will be difficult for school districts to understand what is expected.

To confuse things even further, HB 471 includes a requirement that “public charter schools shall receive any education funds derived from occupational license fees on a proportionate per-pupil basis.” It is unclear whether this transfer must occur in addition to, or as part of the general allocation from the local district to charter schools. School districts may levy occupational license taxes as one of the options to generate the revenues that make up the required local effort to participate in the SEEK program. It is unclear why  this specific tax was identified as a separate revenue source for charter schools, since it is already included as part of the local funding for base per pupil revenue — leading to “double counting” of this revenue source. Further, only nine districts have elected to impose this levy, so if it is an additional transfer of dollars it would only provide additional funding for charter schools in those nine districts, raising the question of equity.

HB 471 also has language requiring that: “A public charter school shall receive a proportionate share of moneys generated under federal and state categorical aid programs for students that are eligible for the aid and attending the public school.” It isn’t clear whether this directive represents a required component of the allocation formula developed by the district to distribute funds individual schools, or if it is a directive that funding be provided in addition to that provided under the allocation formula.

With regard to transportation funding, if the local school district provides transportation to charter school students, the district retains transportation funding. If the local district does not provide transportation, it must transfer a proportionate share of its transportation funding to the charter school based on the number of charter school students that need transportation. The transportation component of the SEEK formula is only partially funded by the state, and it isn’t clear whether the district must transfer just the state portion, or the entire amount determined under the formula for each transported student. There are some variations included in HB 471 for collaborative and regional achievement zone charter schools.

Broader Funding Concerns Remain

Since there is no new funding is included in HB 471, the broader concerns that we expressed previously about the redirection of resources from our already underfunded public schools and further reductions in already deficient transportation funds remain. In addition, under HB 471, locally generated resources will be transferred to charter schools operated by independent boards that are not elected by the people of the district, depriving local citizens of the ability to hold those expending local funds at the charter school accountable.  It is also still concerning that HB 520 retains provisions allowing the mayors of Lexington and Louisville to authorize charter schools, and that HB 471 requires that funds for a charter school authorized by one of the mayors be transferred to the mayor for distribution to the charter school.  This transfer of education funds outside of the education system to an authorizer that has never been involved with or directly responsible for public education raises troubling questions.

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Funding and Accountability Concerns Still Apply to Senate Version of Charter Bill

An amended version of House Bill 520 passed the Senate Education committee this morning and is now heading to the Senate floor. The changes made to the bill were relatively minor and the concerns we expressed previously still apply.

The changes made to the version of HB 520 that passed the Senate include clarification around definitions (for instance, which mayors can be authorizers); when a traditional public school can convert to a charter; teacher qualifications; and the lottery process that occurs when more students are interested in attending a charter than the school can serve.

However, the big funding and accountability concerns we raised previously still apply to the somewhat revised version of the bill:

  • There are no details about how the charter schools would be funded. Even the details about transportation funding that were included in the previous version were omitted. It is unclear whether or not a separate bill addressing charter funding will be introduced later today.
  • The mayors of Louisville and Lexington can still be authorizers even though their missions do not extend to education in Kentucky.
  • The diversion of scarce public school funding to charter schools would still negatively impact existing public schools.
  • There would still be inefficiency created by the increased bureaucracy of adding another school with a separate operating structure within the existing system.

In addition, the bill would continue to allow for-profit (often out-of-state) charter education service providers to gain from Kentucky’s scarce public education dollars.

Our state needs greater investment in our existing public schools — not a new policy that diverts scarce resources away from them with a lack of evidence for better overall performance. Despite some claims to the contrary, per-student funding for K-12 education has declined considerably in recent years.

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