Governor kicks off special session, asks lawmakers for healthcare reforms, reserve fund

Lawmakers dealt Gov. Asa Hutchinson a rare setback on Monday (May 1) after the legislature kicked off a special session initially expected to last three days before lawmakers head back to their hometowns.

Immediately after the lawmakers adjourned the regular session of the 91st General Assembly following a 30-day recess, Hutchinson quickly laid out his brief agenda for the First Extraordinary Session of 2017 that calls for reforming the state’s Medicaid and healthcare programs and the creation of a long-term “rainy day” fund to bolster Arkansas’ credit rating.

“The list of items on this call is short, but they are significant and very necessary,” Hutchinson told House and Senate members gathered together in the lower chamber.

The popular Republican governor, who was able to get all 13 of his legislative priorities enacted into law during the regular session, said he now wants the legislature to expand on four major items that lawmakers took up in the 2015 special session. That list of items included work, personal responsibility and employer opportunities for employers in the state’s Arkansas Works program, as well as improving costs savings for the state private health insurance program created under the Affordable Care Act, otherwise known as Obamacare, he said.

“Last year when I called you into special session to create the Arkansas Works, we focused on four areas of reform … These four themes continue at the heart of the legislation that is before us today,” he said. “But we are now taking a more bold approach to each of these guiding principles.”

SEEKING A ‘PATH OUT OF POVERTY’
In laying out his plan, Hutchinson presented work referral statistics from the Arkansas Works program for the first quarter of this year. According to the governor’s chart, nearly 107,000 Arkansans have been referred to state Department of Workforce Services’ program. Of that total, 3,669 have accessed DWS’ services and 2,991 have been hired for a new job.

“This shows me there are people who want to work but need assistance in training to be ready to move into the workforce,” he said. “But it also shows we need to implement a mandatory (work) program because 97% are not accessing those services … 97% who should be going to DWS are not doing that.”

Hutchinson said the waiver he will request from the Trump administration will require healthy Arkansans under 50 years old without children to have a job, be enrolled in a drug or alcohol addiction program, or be involved in worker training, an educational program or community services before accessing state welfare programs.

“We are not punishing people by requiring them to find a job to access services or finish their education or seek treatment for addiction. To the contrary, success in any or all of these areas will open the door to new opportunities,” he said. “I believe that the path out of poverty is through the halls of schools and the walls of the workplace.”

FUNDAMENTAL CHANGES
As expected, Hutchinson asked lawmakers to pass legislation allowing state policymakers to use federal Medicaid dollars to purchase private health insurance for Arkansans with incomes up to 100% of the federal poverty level, not the previous 138% of the federal poverty level.

“This is a fundamental change to entitlement policy,” said Hutchinson.

To achieve his goal, the governor said 60,000 of the approximately 320,000 citizens who are now enrolled in public healthcare through the former private option will move from the Medicaid portion to the federal healthcare marketplace. The former private option, now Arkansas Works, is the state program that uses federal Medicaid dollars to purchase private health insurance for low-income Arkansans. It was created after the U.S. Supreme Court ruled states could choose whether to expand Medicaid coverage under the Affordable Care Act. Arkansas obtained a waiver from the federal Centers for Medicare and Medicaid Services (CMS) in order to purchase private insurance rather than simply expand Medicaid.

The federal government is paying virtually all of the Medicaid expansion’s costs, Hutchinson said. But starting in 2017, the state is responsible for 5%, a number that increases to 10% by 2020. By transferring 60,000 Arkansans to the federal marketplace, Hutchinson said the state will save more than $66 million over four years.

Hutchinson argued that his proposal was not a “cost shift” for taxpayers, but would allow Arkansas workers to move into employer-sponsored healthcare programs that preserve federal and state tax dollars.

Later in the afternoon, House Bill 1003 by House Speaker Rep. Jeremy Gillam, R-Judsonia, which would amend Arkansas Works to reduce the income eligibility limits to 100% of the federal poverty level, received a “do pass” recommendation from the House Public Health, Welfare and Labor Committee. It now goes to the full House for approval on Tuesday (May 2).

Representatives of the Arkansas Democratic Party were not pleased, saying the bill was “regressive” and “detrimental” to working Arkansans who have displayed a clear need for additional assistance in accessing and maintaining healthcare coverage.

“This is purely a political move. This doesn’t seem like a move based on fiscal policy. This is playing to the base and it’s hurting working Arkansans in the process,” said DPA Chairman, Rep. Michael John Gray, D-Augusta. “The Governor is telling any Arkansan who aspires to make more than $12,060 a year that they are on their own. He’s telling every hospital, that is just now beginning to rein in costs of uncompensated care, here’s another roadblock. For every health insurer, who wants to enter the Arkansas marketplace, here is one more market disruption.”

LONG-TERM RESERVE FUND
The other special session item Gov. Hutchinson asked lawmakers to take up in the three-tier special session is legislation to create a $105 million long-term reserve during periods of economic downturns. In presenting his proposal, Hutchinson highlighted a report by George Mason University that shows Arkansas ranked near the bottom of all 50 states for being the least prepared for handling revenue declines during future recessions.

“There are three reasons I think this is important. The state’s financial strength and its resilience, an improved credit rating and economic development,” he said.

Hutchinson said Arkansas’ lack of reserve funding is the reason for the state’s’ current S&P Global AA stable bond rating, which he said is hampering the state’s ability to reduce debt, gain access to new financing and attract new investment and economic development.

“I believe if you support the creation and strengthening of these funds over time …, our bond rating will improve and this will allow us to issue bonds or do future projects at less cost and lower interest rates,” he said.

After Hutchinson finished his speech, the state Joint Budget Committee immediately took up Senate Bill 5 and House Bill 1005 that would transfer funds of $105 million from the Arkansas Health Century Trust Fund to the newly created Long-Term Reserve Fund.

Through an initiated act campaign in 2000, Arkansas voters passed the Tobacco Settlement Proceeds Act that funded the Arkansas Tobacco Settlement Commission and other programs, including tobacco control and cessation activities, expanded Medicaid services, and development of the Minority Health Commission. In addition, monies from the tobacco settlement provided core funding for the Arkansas Health Century Trust Fund, which have been gaining in interest for nearly 17 years.

Sen. Jim Hendren, R-Gravette, and Rep. Joe Jett, R-Success, the respective House and Senate sponsors, echoed Gov. Hutchinson’s sentiments that a long-term contingency reserve would help the state achieve S&P Global’s “AAA” bond rating, the highest possible score.

“The purpose of this is when the state rolls into a recession, there is a process that can access these funds,” Hendren said. “My hope is we can grow the account three or four times the amount over the years.”

LEGISLATIVE PUSHBACK
But several Republican and Democratic lawmakers raised concerns about several provisions in the legislation to create the reserve fund, including a change in the requirement to spend it from a 2/3 majority to a simple majority. Some lawmakers also questioned whether the contingency fund is a reaction to Gov. Hutchinson’s announcement on Friday that the state will be about $70 million short of revenue expectations in the current fiscal year, which ends June 30. Category B funding will be cut this year, but state government jobs and state services are not expected to be impacted.

“This is just a cover for the revenue shortfall. The state has some serious financial issues,” said Sen. Bryan King, R-Green Forest.

Following the sometimes animated discussion, the joint budget panel failed to approve the governor’s proposal by a vote of 23-20. Rep. Jett said he believes keeping the 2/3rd majority requirement in the legislation would help the measure get the required 29 votes needed for approval when the Joint Budget Committee meets Tuesday at 8 a.m. About that same time, the state Department of Finance & Administration is expected to release state revenue figures for the month of April.

Gillam’s House Bill 1002, which incorporates provisions from the Arkansas Medical Marijuana Amendment of 2016 that was passed during the regular session into the Arkansas Constitution, was approved by the House Rules Committee. HB 1004, which provides oversight of the Arkansas Health Insurance Marketplace to the Legislative Council, was also approved by the House Insurance and Commerce Committee. Both bills now go to the House on Tuesday for floor votes.