Medicaid could end in Alabama under devastating cuts in a proposed General Fund (GF) budget that the Alabama House’s GF budget committee approved Tuesday, State Health Officer Don Williamson said. About one in five Alabamians would lose their health coverage, including nearly half of Alabama’s children and about 60 percent of the state’s seniors in nursing homes.

Medicaid would lose 23 percent of its state funding, or $156 million, next year under the budget that the committee approved Tuesday. Lost federal matching money would increase the loss significantly.

Those cuts likely would lead to the closure of Children’s Hospital in Birmingham, as well as dozens of other hospitals and nursing homes across the state. “If Alabama chooses not to have a Medicaid program, you will see an impact on the health care system that you can only begin to imagine,” Williamson said Tuesday.

Cigarette tax increase, other revenue bills fail to gain traction

The vote came after key parts of Gov. Robert Bentley’s plan to raise new revenue to prevent massive GF cuts went nowhere during a tense day in the House’s GF budget committee. The panel voted 8-7 Tuesday to reject a plan to increase the state cigarette tax by 25 cents per pack (from 42.5 cents to 67.5 cents). A bill to increase the business privilege tax on large corporations was on the agenda but did not come up for a vote.

The committee recessed for several hours after the cigarette tax vote. When it returned late Tuesday afternoon, a frustrated Rep. Steve Clouse, R-Ozark, who chairs the committee, offered an amendment to concentrate GF budget cuts in the Medicaid program. Committee members approved the change 10-4 and then OK’d the budget on a voice vote. The GF budget now awaits action in the full House.

Democratic committee members strongly condemned the proposed Medicaid cuts. “To take and use Medicaid as a pawn, I think is totally unfair,” said Rep. John Knight, D-Montgomery. “Other agencies should be on the chopping block.”

Knight urged legislators to be honest with the public about the need for new GF revenue to support vital services like health care, child care and public safety. The Legislative Black Caucus will not vote for tax increases without adequate long-term GF revenues, Knight told the Montgomery Advertiser.

Clouse criticized several Democratic lawmakers’ votes against the cigarette tax bill, telling the Advertiser that Democrats had supported a tobacco tax increase during the regular session. “I came with a fair budget that level-funded Medicaid,” he said. Clouse said he does not support deep Medicaid cuts but said Alabama needs to have a debate about the program’s future.

Lawmakers OK transfer of education revenues to shore up General Fund

Both the House and Senate’s GF budget committees approved bills Tuesday to transfer use tax revenues from the Education Trust Fund (ETF) to the GF. The use tax is equivalent to a sales tax on goods bought outside the state for use within Alabama. It is commonly discussed in the context of Internet or mail-order purchases.

The House committee voted to transfer both use tax revenues and some funding obligations to the GF, resulting in a net loss of $50 million to education and a net GF gain of the same amount. The Senate bill would transfer use tax revenues but not the accompanying obligations. That would reduce education revenue (and increase GF revenue) by more than $200 million.

Alabama’s education funding is still well below pre-recession levels. The state’s per-pupil K-12 spending in 2015 was 18 percent lower than in 2008, the second worst decline in the nation, according to the Center on Budget and Policy Priorities (CBPP). Alabama’s per-student higher education cuts from 2008 to 2016 are also the nation’s second worst, the CBPP found.

Bentley has proposed to “backfill” the ETF’s revenue loss by ending the state income tax deduction for FICA taxes paid to support Social Security and Medicare. But this bill has not yet been set for a committee vote, and many press reports suggest it is unlikely to pass.

Bill to ‘un-earmark’ mental health, DHR money advances in House committee

The House’s GF budget committee also approved a bill Tuesday to “un-earmark” revenues dedicated to five state agencies and shift the revenues into the GF. Nearly 90 percent of the transfers under HB 46, sponsored by Rep. Allen Farley, R-McCalla, would come from mental health and the Department of Human Resources (DHR). Other services affected would be public health, veterans’ affairs and forestry.

Bentley’s budget plan would provide additional GF money to help the agencies cover the un-earmarked amounts. But neither the current Legislature nor future ones would be obligated to do so under HB 46. Advocates for children and for people with mental illness are deeply concerned about this idea.

By Carol Gundlach, policy analyst, and Chris Sanders, communications director. Posted Aug. 4, 2015.04