Weekly Update 3-20-09 (3)

Transportation Budget Passes Ohio Senate, Conference Committee Hearings Scheduled Next Week The Ohio Senate concluded hearings on the Governor's $7.6 billion Transportation Budget proposal (HB 2) this week. Am Sub HB 2 passed 22-9 in the Ohio Senate, and is now scheduled for a Conference Committee to work through the differences. The Senate version was dramatically different than the Governor's proposal and the House-passed version, and is a preview of what is likely to occur with the main Operating Budget (HB 1) in the coming weeks and months. On Tuesday evening, the Senate Highways and Transportation Committee passed an omnibus amendment, which among other issues, removes the Department of Public Safety (DPS) from the Transportation Budget. The Senate determined the Transportation Budget source of funding is derived from the state gas tax. DPS no longer receives funding from this revenue and should therefore be included in the main operating budget with the other state and executive agencies. Senators were also concerned that not enough time would be allowed to properly study the impact of the numerous fee increases before the March 31st deadline. Of those fees, approximately $106 million were earmarked to deal with a fiscal shortfall in the Ohio State Highway Patrol. Public Safety is concerned there will be a shortfall of $25.6 million due to the delay in collection of the proposed fee increases if their budget is included in the operating budget, which does not go into effect until July 1, 2009. The Senate also removed Governor Strickland's proposal for primary seat belt law enforcement, use of speed cameras in highway construction zones, creation of local Transportation Authorities (TIA), new toll roads, and elimination of $54 million in payments to gasoline wholesalers and retailers. The Senate version did keep the Governor's proposal to allow the Ohio Department of Transportation and Ohio Rail Development Commission to apply for the $8 billion in federal grants available for rail passenger service. However, the Senate version requires approval by the General Assembly to spend the money. In the House version, the Controlling Board would have the authority to release any federal funds the agencies receive. This proposal allows the state to compete for federal stimulus dollars to invest in passenger rail service connecting the state's three largest cities. The bill is now scheduled for Conference Committee next week for Tuesday, March 24th, Wednesday, March 25th and Thursday, March 26th to consider the differences between the House and Senate versions of the bill. By law, the bill must be enacted by April 1, 2009. Medicaid Budget The Ohio House Subcommittee on Health and Human Services heard testimony this week regarding Medicaid related issues in the operating budget HB 1. State Medicaid Director John Corlett offered testimony regarding the Governor's proposed franchise fee increases on nursing homes, hospitals and intermediate care facilities for the mentally

retarded. The current proposal would collect $892 million in fees, and would generate an additional $2.155 billion in federal medical assistant payments (FMAP). Mr. Corlett told the committee that the Administration opted for franchise fee increases as a way to draw down matching FMAP to benefit the entire entitlement program and avoid rate increases and other less desirable actions. He also testified that without the fee increases, the state could lose as much as $3 billion in federal Medicaid assistance funds over the next biennium. Without these fees, the Administration believes it would have only two options: 1.) eliminate some number of optional services for adults for the Medicaid program currently covers; and 2.) reduce reimbursement rates for all Medicaid providers. After several weeks of testimony from only the Administration, the Committee members were able to hear testimony from representatives of the organizations impacted by the fee increases. Each group provided testimony to educate legislators regarding the negative fiscal impact the fee increases will have on their operations, their patients, and their access to care. In addition to its concerns regarding the fee increases, the Ohio Hospital Association (OHA) provided witnesses to testify on the "non-contracting" provision in the Governor's proposal. Under this provision, the state sets an artificial payment rate ceiling for managed care contracts, that eliminates the need for managed care plans to negotiate with hospitals. It mandates that every Medicaid hospital provide services to every managed care enrollee, regardless of whether the hospital has a contract with their plan. Currently, Medicaid fee for service, reimburses hospitals at 86% of the total cost of care. Hospitals are concerned that by establishing a less-than cost payment rate as the Medicaid managed care standard will only benefit the plans. The Ohio Association of Health Plans (OAHP) responded that the provision is a positive development and will increase Medicaid access and participation. On a separate issue, Medicaid managed care plans proposed a sales and use tax as a replacement for the Medicaid managed care fee set to expire October 1, 2009. They also testified regarding their concerns of a pharmacy benefits carve out from the Medicaid Managed Care program. They believe the pharmacy benefits should be left to the managed care plans in order to provide a comprehensive program in order to deliver the most cost-effective service. The state proposes a $200 million savings if the pharmacy benefits are managed directly by the state. The Republican Committee members asked questions regarding their concerns that a fee increase is a tax, and believe the Administration is balancing the budget on the backs of the providers. The Democrat members, who now hold the majority, are supportive of the Democrat Governor's proposals, however they did convey concerns regarding the harm the increases could do to the access of care. Overall, they believe during the current economic crisis, everyone must do their part to help balance the budget.

Primary and Secondary Education Budget

The House Finance & Appropriations Subcommittee on Primary and Secondary Education wrapped up its hearings this week, having heard from over 300 witnesses over the last few weeks. This Subcommittee took a slightly different approach from the rest of the subcommittees by holding Monday hearings in different parts of the state including Akron, Marietta, and Dayton in addition to its regular Statehouse hearings. The subcommittee felt this allowed it to gain greater input from the residents of the state and gain a better understanding of what needs to be done to fix the school funding problem in Ohio. This week the panel heard testimony from charter schools, e-schools, gifted child programs, and wellness coordinators. One surprising development was that the Democrats on the committee seemed more open to the idea of charter schools than in the past, especially those that operate as non-profit entities. The committee was attracted to the flexibility these schools have in creating a curriculum that meets individual student needs. The committee also heard testimony from the Ohio Association of School Nurses, who claimed the Governor's proposal to allow licensed practical nurses to serve in the school nurse position runs contrary to national standards and recommendations. Next Steps for the House Budget Process Each of the five Subcommittees of the House Finance & Appropriations Committee must prepare a report for the full committee this week. These reports, along with general testimony, will be debated in the full committee beginning next week, and continuing into mid-April. The full committee plans to vote on a final version of the bill on April 21st. For more information, please visit our new website and VLOG at www.publicpolicyadvocates.com