Op-Ed: Leaked ACA Repeal Plan Is Radical and Dangerous

This column originally ran on Insider Louisville on March 3, 2017.

The fate of health care in Kentucky lies with what Congress does around Medicaid and the Affordable Care Act (ACA). Full repeal of the health reform law would cause the number of uninsured Kentuckians to triple according to the nonpartisan Urban Institute, dramatically increase uncompensated care costs at hospitals and lead the individual market for health insurance to collapse.

Republicans in the House say they will try to push new legislation very soon, possibly even next week. A leaked draft shows its provisions fall far short of repairing the damage repeal would do in Kentucky. In the case of Medicaid, it would mean not only an end to the ACA’s Medicaid expansion but jeopardized coverage for all 1.3 million of the state’s Medicaid beneficiaries — including seniors, people with disabilities and children.

The leaked draft shows a plan to use ACA repeal to radically restructure and cut Medicaid funding and coverage. Their proposal would convert the program to a per capita cap or block grant — ending Medicaid as we know it, and shifting huge costs to Kentucky’s state budget.

Capping federal funding for Medicaid would mean far less money for Kentucky over time. The state would then have to decide who would lose coverage and how to ration care among the families, seniors and people with disabilities now covered by Medicaid. That would hurt Kentuckians’ health and increase uncompensated care costs for our communities’ hospitals – putting thousands of jobs at risk.

Medicaid would no longer be flexible for when problems arise. Today, federal funding increases when needs arise, whether due to a public health crisis or a new but expensive prescription drug coming onto the market. Under a cap, Kentucky would be on its own to bear all of those additional costs. For example, federal funding wouldn’t have increased in response to Kentucky’s opioid crisis.

And these coverage reductions and limits are all to pay for tax cuts for the wealthy. The House plan relies on Medicaid cuts to finance hundreds of billions in tax cuts for high-income households, drug companies, insurers and other large corporations: its math doesn’t work unless cuts to Medicaid help foot the bill.

These harmful consequences are why the AARP, Republican and Democratic governors across the country and the American Hospital Association have all warned against capping Medicaid.

The House plan would also make it virtually impossible for Kentucky to maintain its Medicaid expansion. The House is apparently proposing to end the ACA’s enhanced federal funding for Medicaid expansion for new (or returning) enrollees after two years. That means as current enrollees are cycled off, Kentucky would have to pay three times the current cost to enroll new or returning people, something our state lawmakers are likely unwilling to pay for.  

Whether a state ends expansion immediately or ends coverage for new enrollees in a few years, the final result is the same. Over 400,000 Kentuckians would ultimately lose access to health insurance, tens of thousands of people would no longer get treatment for opioid addiction or other substance use disorders and hospitals would see their uncompensated care costs skyrocket back up to pre-ACA levels, which were $2 billion more than they are today.

Kentucky’s congressional delegation holds major responsibility in the outcome of this debate, and have an obligation to do the right thing given how important Medicaid and the ACA have been to Kentucky’s health and economy. Senator McConnell and other members of our delegation should not support the House approach — or any other approach that increases Kentucky’s uninsured rate and caps and cuts Kentucky’s vital Medicaid program.

Big Funding Concerns with Amended Charter Bill

The amended version of House Bill 520 — the charter school legislation that passed the House today — rightly prohibits virtual charter schools, but other changes made to the bill raise new issues and concerns. There are big problems and unanswered questions with how the funding for charter schools will work, and funds for existing public schools — which are already stretched thin — continue to be in jeopardy.

Here are some of the changes made in HB 520’s committee substitute:

  • Changes that addressed concerns expressed about earlier drafts:
    • Virtual charter schools would be prohibited.
    • Students who live in one school district could not enroll in a charter school located in another district, unless districts are combined to establish a regional achievement academy, in which case students from all districts within a defined boundary could enroll in the charter school. The language only applies to “one or more contiguous counties, each with four or more local school districts.” Based on this definition, the only counties that would qualify to establish a regional achievement academy are Kenton and Campbell Counties.
  • Provisions that cause additional concerns and questions:
    • In addition to local school districts serving as the authorizers for charters, the mayors of Louisville and Lexington could be charter school authorizers.
    • Other than one provision related to transportation described below, all details about how charter schools would be funded have been removed from the bill. This complete removal of direction about funding raises more questions than it answers because now there is absolutely no guidance about how charter schools will receive money to operate, or what local districts will be required to contribute.
    • With no funding provisions included in the bill and mayors being added as potential authorizers, the bill as passed by the House simply doesn’t work if a mayor does authorize a charter school. The mayor does not have access to school district funding, nor does a mayor have the legal ability to require a school district to transfer funds to a charter school. Yet the charter contract is between the authorizer and the charter school.
    • Mayors in Kentucky are not in the business of education (this is not the case in some states where mayors serve as authorizers and also are responsible for the school systems); their offices and staffs are not equipped to provide the review and oversight required by the legislation. Nor can a mayor, acting alone, “adopt by resolution all charter approval or denial decisions in an open meeting of the authorizer’s board of directors” as required by the legislation.
    • A school district would not be required to provide transportation to a charter school located within the district; however, a new concern is raised because if the district declines to provide transportation, the portion of the SEEK (core funding) money devoted to that purpose must be transferred to the charter school, thus further depleting an already woefully underfunded component of the SEEK formula.
    • The general concerns about the strain on funding that charter schools place on public school districts remain under the legislation passed by the House, along with concerns about the inefficiency created by the increased bureaucracy of adding another school with a separate operating structure within the existing system. Our public schools are already underfunded, and charter schools will only exacerbate these issues.

Kentucky needs an approach to education that strengthens our public schools and improves educational opportunities, not one that siphons already-scarce resources and shields them from public accountability.

Tax Credit Doesn’t Help Kentucky Schools and Kids

A recent op-ed from the sponsors of private school tax credit proposals in this year’s General Assembly suggests the program would help provide educational opportunities to families in need and save the state and local schools money. But “Ed Choice” tax credits are simply back-door private school vouchers aimed at shifting resources. They reduce the dollars available for public education, limiting schools’ ability to help low-income children succeed.

The Legislative Research Commission is the source of the $76 million price tag on the bills in the program’s sixth year. In a recent blog of ours critiquing the proposal, we noted that $76 million is about the same as what Kentucky budgeted for Family Resource and Youth Service Centers (FRYSCs) and extended school services for kids needing additional instruction in 2017, combined.

If the legislature were to extend Ed Choice beyond that year, the voucher program could grow to cost an enormous $233 million by its 10th year. And grow, it would – language in the bill increases the size of the program by 25 percent every year at least 90 percent of the available credits are claimed. A similar program in Florida, which has the same language, has seen its costs grow from $229 million in 2013 to $559 million this year. Maximum usage of the available credit is essentially guaranteed since wealthy people can actually make money by “donating,” as we noted in our blog. Individuals who are subject to the federal alternative minimum tax can make a profit of more than $200,000 by stacking the generous 90 percent state level credit with federal deductions.

Ed Choice advocates argue that rather than losing revenue because of the tax credit vouchers, state and local school districts will come out ahead financially. This argument is based on the idea that scholarships to private schools cost less per pupil than a public education. However, these hypothetical savings fall apart upon closer examination. One reason is that, when students switch from public to private schools, public districts cannot proportionally reduce fixed costs on things like facilities, maintenance, debt service and transportation.

Also, alleged savings don’t appear because a large share of Ed Choice scholarships go to families whose kids already attend private schools, or who would go to private schools anyway. Kentucky’s proposed program does not target students who are currently enrolled in public schools. And the eligibility criteria would allow a family of 4 making $91,020 a year to qualify – almost $22,000 more than median income for a family that size in Kentucky. Programs in other states that do not target low-income students end up instead serving families with kids already enrolled in private schools.

Similarly, though students with Individualized Educational Plans (IEPs) and students with developmental disabilities would be eligible, the program does not ensure scholarships would go to families who have the greatest difficulty covering the costs associated with education alternatives. Nor does it provide oversight or accountability for how those resources are spent.

Another fundamental problem with Ed Choice involves an attempt to circumvent Kentucky’s constitution. A key provision of our constitution expressly prohibits “any fund of tax now existing” from going toward “any church, sectarian or denominational school.” Ed Choice tries to skirt this prohibition by funding vouchers through a back-door mechanism that avoids any direct payment of tax dollars to private schools. This complicated mechanism hands over to wealthy people — who “donate” money to the scholarship program — the ability to redirect large amounts of public dollars to private education, with many of the students receiving scholarships to attend religious schools. Though other states have been able to circumvent similar clauses by arguing that tax credit subsidies do not constitute the direct expenditure of state funds, Kentucky lawmakers should resist this transfer of resources away from our already underfunded public schools to private religious schools.

The Ed Choice tax credit is a poorly designed policy that would further reduce the monies available to help all Kentucky children succeed.

Program Guides At-Risk College Students

Undocumented Immigrants Contribute $37 Million Toward Investments in Kentucky Each Year

Undocumented immigrants living in Kentucky pay $36.6 million in state and local taxes each year, according to a new report from the Institute on Taxation and Economic Policy. These substantial tax contributions should be acknowledged as lawmakers consider the economic and social impact of immigration policy and enforcement in the U.S. – including a recent executive order that expands the groups of immigrants prioritized for removal and a surge in deportations that involved 53 arrests in Kentucky, many of the detainees lacking criminal records and others with only minor offenses.

At an effective state and local tax rate of 6.9 percent, undocumented immigrants in Kentucky are actually paying more as a share of family income than the wealthiest 1 percent of all Kentuckians who pay only 6 percent. Their robust annual contributions are comprised of an estimated:

  • $11.3 million in personal income taxes. Evidence suggests at least 50 percent of undocumented workers file income tax returns using special “Individual Tax Identification Numbers” and many more contribute through payroll deductions.
  • $5.2 million in property taxes. Kentucky’s undocumented immigrants have an estimated homeownership rate of 21 percent and they also pay property taxes indirectly when landlords pass costs through in rent.
  • $20.1 million in sales and excise taxes. Immigrants living, working and raising families in the Commonwealth are subject to taxes on gas, clothes, electronics and other items.

It is also of note that while undocumented immigrants pay these taxes, they are not eligible for many public benefits other Americans receive: the Earned Income Tax Credit, Social Security, SNAP (formerly known as food stamps), Medicaid and Medicare, for example, are unavailable to undocumented immigrants.

Undocumented immigrants’ substantial tax contributions in Kentucky would increase an additional $16.1 million (for a total of $52.7 million) under comprehensive immigration reform that provides a pathway to citizenship. The majority of the increase – $13.5 million – would come from income taxes. Not only would legal status provide a conduit for full compliance with income tax laws, but it would also improve immigrants’ earning power through increased access to jobs, education and skills development.

Across the U.S., undocumented immigrants pay an estimated $11.7 billion in state and local taxes toward their local schools, road and bridge repair, public safety, libraries and more. That contribution would rise by $2.2 billion under comprehensive immigration reform.

Read ITEP’s full report, with state by state data.

Charter School Bill May Be Stalled in Kentucky Legislature

Layers of Concern in Funding for Charter Schools

There are many reasons to be concerned about funding for charter schools as proposed in HB 520. Local public school districts could lose control of a number of different resources and funding streams in the required transfer of monies to charter schools, adding stress to their budgets and including the loss of monies that may have nothing to do with the services charter schools offer.

Traditional public schools lose authority to direct resources under HB 520

On the surface, HB 520 seems to safeguard traditional public schools from large financial losses by giving them the sole ability to authorize charter schools. Presumably, a local school district would not approve a charter school if it didn’t think it was in the best interest of the district as a whole. However, HB 520 includes provisions that would override the authority of the local district:

  • It provides a generous appeals process that would apply to the denial of an initial charter application, as well as virtually any subsequent decision made by the authorizer that a charter school disagrees with.
  • It allows the state board of education to act upon its own motion regarding any aspect of a charter agreement, meaning the state board could approve a charter school over the objection of a local school district with no recourse for the local school district.
  • It includes virtual charter schools, which could result in a deep loss of resources for multiple local districts without their input; the physical boundaries that would prevent widespread enrollment in a physical charter school would not exist for a virtual charter school.

Resources subject to transfer are extensive

With regard to the breadth of resources and funding streams that are at stake for these local districts, HB 520 requires that:

School districts shall transfer state and local funds to public charter schools on a proportionate per pupil basis after local capital outlay funds, transportation funds, and a three percent (3%) authorizer administrative fee are excluded from gross state and local funds.

HB 520 does not define the term “gross state and local funds”, however the general accounting definition of “gross” when used in relation to revenues or funds means the total amount received before any deductions or allowances.  The implications for local school districts are far-reaching.

It appears that amounts received or generated for the following purposes would likely be eligible for transfer to a charter school on a “per pupil” basis under the bill:

  • State funds received and local levies generated to support funding under the basic school funding formula known as SEEK, including funding enhancements attributable to specific student populations — such as kids receiving free and reduced lunch, children with disabilities, and those receiving home or hospital instruction (reduced by the statutory carve out for the transportation component);
  • Local Tier I and Tier II proceeds, along with any state Tier I equalization funds. Tier I and Tier II revenues are generated through tax levies imposed by local school districts to provide additional funding beyond that provided by the SEEK formula;
  • “In lieu of” payments received by the district from entities exempt from taxation such as the Tennessee Valley Authority and the owners of other property exempt from taxation;
  • Tuition payments from out of district students;
  • District activity funds;
  • Earnings from investments;
  • Professional development funds that provide teacher and staff training;
  • Preschool funds for three and four year-olds;
  • Extended school services that provide afterschool programs;
  • Funding for textbooks;
  • Safe schools funds directed to campus safety;
  • Successful school rewards funds;
  • Education technology funds;
  • Teacher internship funds;
  • Principal internship funds;
  • Writing program funds; and
  • Dropout prevention funds.

It is important to note that these funds could be transferred to charter schools whether or not the services or programs the funding was provided to support are being provided by the charter school. For example, will virtual charter schools receive a portion of funds for extended school services programs, textbooks and safe schools programs even though they may not applicable to charters’ missions? And school boards may choose to levy higher taxes under Tier I and Tier II only to see a portion of the resources go to distant schools, especially in the case of virtual charters.

And this list is not exhaustive. There are many other funds and accounts school districts have that could be included in the gross amount to be divided on a per pupil basis and transferred under HB 520.

An important example concerns funds related to capital construction. The only carve out provided in the language of HB 520 related to capital items is for “local capital outlay,”  generally defined as the $100 per pupil allocation provided as part of the SEEK formula.  However, there are many other capital-related funding streams, including the required “nickel” for districts to participate in the School Facilities Construction Program and other “nickels” levied by districts specifically for capital construction that could be included. Inclusion of these funds in the amount transferred to charter schools would be particularly detrimental to local districts, as they are typically needed for, and specifically devoted to, paying off bonds or other longer term capital obligations.

Much is at stake for the funding of our existing public schools in charter legislation. It is important for lawmakers to clearly understand the funds subject to transfer from local public schools to charter schools under HB 520 — and how those losses would impact our already-underfunded public school system and the students who depend on it for their education.

 

 

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