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Tax Law

State Net Capitol Journal – January 14, 2013

Budget & Taxes

HEALTH REFORM LAW DOESN'T HALT MAJOR RATE HIKES: One of the main objectives of the Affordable Care Act was to stem the rising cost of health insurance for American consumers. But that hasn't stopped health insurance companies from seeking and obtaining big premium increases across the country. 
In Florida and Ohio, insurers have secured rate increases of at least 20 percent for some policy holders, which can add several hundred dollars a month to their bills. And in California, Aetna, Anthem Blue Cross and Blue Shield have proposed increases this year ranging from 20 to 26 percent for some customers. 
The double-digit increases are coming just two years after the 39 percent rate hike Anthem Blue Cross sought in 2010 that helped spur the ACA. They're also coming despite evidence that the overall cost of health care has slowed to single-digit growth in recent years as the weak economy has forced consumers to put off treatment. PricewaterhouseCoopers, for instance, projects that health care costs will increase only 7.5 percent next year. 
But insurers say medical costs for some of their policy holders are rising considerably faster than the average. 
"We need these rates to even come reasonably close to covering the expenses of this population," said Tom Epstein, a spokesman for Blue Shield of California. 
Some state insurance regulators also say the rate hikes are justified. Susan E. Voss, insurance commissioner of Iowa, for instance, said there may be no reason to deny Wellmark Blue Cross Blue Shield the 12 to 13 percent rate increase it has requested for some customers, on top of a 9 percent increase granted to the nonprofit insurer last year, because hospital mergers in the state have allowed providers to negotiate higher prices. 
"There's a four-letter word called math," she said. 
Federal officials say consumer health care costs would be even higher without the health reform law, which requires review of rate increase requests of 10 percent or more and requires insurers to spend at least 80 cents out of every dollar they collect in premiums on actual care and refund any excess to customers. 
"Insurers have already paid $1.1 billion in rebates, and rate review programs have helped save consumers an additional $1 billion in lower premiums," said Brian Cook, a spokesman for Medicare, which is helping oversee implementation of the ACA. 
According to a federal report issued in September, insurance rates were reduced by almost three percentage points on average. 
But some say the rate review process reveals the wide disparity in rates between states where regulators have the authority to deny rates deemed to be excessive and those where regulators lack that power. Regulators in New York, for example, recently invoked their authority to hold rate increases in the individual and small group markets under 10 percent this year. California regulators, meanwhile, won't be able to do much more than check the double-digit rate requests there for technical errors. 
"This is business as usual," said the state's insurance commissioner, Dave Jones, who his pushing for state legislative action to give him the authority to deny excessive rate hikes. "It's a huge loophole in the Affordable Care Act." (NEW YORK TIMES) 
CONGRESS APPROVES SCALED DOWN SANDY RELIEF: The first legislative action of the 113th Congress was the approval of $9.7 billion in aid for the victims of Superstorm Sandy. The package was a fraction of the $60.4 billion package tabled by the 112th Congress days earlier over House Republicans' concerns that the proposal was a "slush fund" for questionable infrastructure projects and unrelated programs. 
New Jersey Gov. Chris Christie (R) blasted his GOP colleagues for that decision, saying, "There is only one group to blame for the continued suffering of these innocent victims: the House majority and their Speaker, John Boehner." 
Boehner has promised a vote on $51 billion in additional Sandy aid on January 15. But that proposal is likely to draw far more scrutiny than the $9.7 billion measure, which garnered unanimous approval in the Senate and a 354-67 vote in the House. 
The victims of Sandy may be able to count on at least one of those 67 Republican "No" votes going the other way on the larger aid package, however, that of U.S. Rep. Steven Palazzo (R-Mississippi). The second-term Congressman, who represents parts of his state's Gulf Coast ravaged by Hurricane Katrina, was excoriated in an editorial in the Biloxi Sun-Herald for his vote. 
"Seldom has a single vote in Congress appeared as cold-blooded and hard-headed as one cast by Rep. Steven Palazzo, R-Miss., last week," the editorial began. It went on to say that seven years ago, while serving as "the chief financial officer for the Biloxi Public Housing Authority when Hurricane Katrina hit, Palazzo called for immediate federal relief. 'Send us money,' he said in 2005, 'so we can put our families back together and do our part to rebuild our community'.... That Palazzo would rather make a political or philosophical point than help put 'families back together' and rebuild communities, as he once put it, is both shameful and offensive." 
After touring parts of New York and New Jersey affected by Sandy last week, Palazzo issued a statement pledging his support for the residents of the region. 
"Now is the time for the federal government to provide immediate relief to those affected by the storm. I am fully committed to providing the relief they so desperately need," he said. (CNN POLITICS, THE HILL, STATE NET, CHRISTIAN SCIENCE MONITOR, USA TODAY, BILOXI SUN-HERALD

CA'S BUDGET DEFICIT GONE! For the first time since the start of the recession, California doesn't face a budget deficit. That was the rather astonishing news Gov. Jerry Brown (D) declared last week. 
"This is new. This is a breakthrough," he said. 
But the governor acknowledged the state's fiscal health isn't assured, especially given the uncertainty of the federal government's fiscal affairs and the yet-to-be-determined cost of federal health reform. His scenario also doesn't line up with the state Legislative Analyst's Office, which suggested in November that the state will face a $1.9 billion shortfall. Brown suggested a projected surge in personal income tax will eliminate that deficit. Even so, Brown said the state still must be cautious moving forward. 
"It is best to maintain a very solid budget and a good reserve...or we'll go back to the boom and bust, borrow and spend," he said. 
He added that he wasn't ready to restore funding for social service programs that had been cut during the recession. 
"That kind of yo-yo political economy is not good," he said. "I want to advance the progressive agenda, but consistent with the amount of money the people made available," referring to the new income tax rates on high earners and temporary hike in the sales tax approved by voters in November. 
In keeping with those remarks, Brown released a $97.7 billion spending plan for the fiscal year that begins July 1 calling for small increases to education funding but holding the line on pretty much everything else. 
The governor's approach drew praise from some Republican lawmakers, whose party now encompasses less than a third of California's Legislature. 
"I always appreciate it when the governor's the adult in the room," said Assembly Republican Leader Connie Conway (R). "We certainly agree with his theme of fiscal responsibility. It's a good one, something that's been important to Republicans, always." 
The response of Assembly Speaker John A. Perez (D) was somewhat more measured. 
"This is a good starting point," he said. "But it is that, it's a starting point." (SACRAMENTO BEE, CALIFORNIA LEGISLATIVE ANALYST'S OFFICE, LOS ANGELES TIMES, STATE NET) 
STATE-LOCAL JOBS REVERSAL: After five years of slashing their workforces, state and local governments will add workers in 2013, according to Mark Zandi, chief economist for Moody's Analytics Inc. By the fourth quarter, they will have replaced about 220,000 of the half million employees they've shed since 2007, he projects. 
"The bloodletting on the state- and local-government level has finally passed through," said Jim Diffley, chief U.S. regional economist for IHS Global Insight. "They're no longer subtracting from growth." 
State and local government payrolls may not get much of a boost in the nation's most populous state, however. California Gov. Jerry Brown's (D) 2013-14 budget envisions a public workforce remaining relatively flat, increasing by only about 6,300 positions, mainly in higher education. (BLOOMBERG NEWS, SACRAMENTO BEE) 
BUDGETS IN BRIEF: The administration of LOUISIANA Gov. Bobby Jindal (R) announced $165.5 million in cuts and other fiscal changes last month aimed at closing a budget deficit caused in part by higher-than-projected education costs. The biggest cuts will be to the Department of Children and Family Services and Department of Health and Hospitals (NOLA.COM). • VIRGINIA Gov. Robert F. McDonnell (R) has proposed replacing the state's gas tax with an increase in the sales tax. The term-limited chief executive, who ran for office on a pledge not to raise taxes, is hoping to solve a problem his recent predecessors couldn't: convincing the state's tax-averse population to pick up more of the tab for their congested transportation system - before it runs out of money in 2017 (WASHINGTON POST). • Six months into the fiscal year, NEW JERSEY's state budget is $705 million short of revenue projections. Analysts are still trying to determine how much Superstorm Sandy contributed to the shortfall (NORTHJERSEY.COM). • OREGON Gov. John Kitzhaber (D) signed legislation last month agreeing to keep the state's so-called "single sales factor" corporate tax benefit in place for Nike Inc. in exchange for the company's promise to invest $150 million in the state. The deal, HB 4200, was the sole aim of a special session convened on Dec. 14 (OREGONLIVE.COM, STATE NET). The federal government has agreed to allow MAINE to make cuts to its Medicaid program, but not by as much as Gov. Paul LePage (R) was seeking. The state will only be able to make about a quarter of the $20 million in cuts it had requested (BANGOR DAILY NEWS, STATE NET). • PENNSYLVANIA looks to have taken in more gambling revenue than every other state but NEVADA for the second year in a row. The state's casinos reported $2.47 billion in slot machine revenue for 2012, according to statistics released by the Pennsylvania Gaming Control Board (PITTSBURGH POST-GAZETTE). • A tentative agreement on the so-called "container royalty payments" shipping companies share with dockworkers on each ton of cargo they handle helped avert a strike at 14 ports along the East and Gulf Coasts last month. The shipping companies and the International Longshoremen's Association now face a new deadline to finalize the deal: Feb. 6, when the contract they extended for the ongoing negotiations expires (NEW YORK TIMES).

- Compiled by KOREY CLARK

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