Arkansas Legislative Preview: Health care, trust fund and education

Editor’s note: The following is the second of three articles by Talk Business Editor Roby Brock, who is a content partner with The City Wire, about nine big issue areas most likely to dominate activity during the 88th Arkansas General Assembly. The Assembly convenes Jan. 10. Link here for the first article in the series.

Today, we examine another round of issues that will receive plenty of legislative attention in part two of our three-part series.

MEDICAID & HEALTH CARE

We may still be a legislative session away from a dire Medicaid financial crisis, but Gov. Mike Beebe and a cadre of public health legislators don’t want to wait until 2013.

The distressed economy has pushed more onto the Medicaid rolls than many imagined. Stimulus funds have helped plug gaps in funding, but those funds are soon to run out. With unemployment expected to remain high, prospects for Medicaid recipients to decrease is largely unanticipated.

There will be a push to find more efficiencies in the Medicaid system through streamlining processes and new technology. However, at some point in the near future, benefits will have to be reduced or revenues raised. The choice may come down to kicking grandma out of the nursing home or reaching deeper into taxpayers’ pockets.

In a larger context, the implementation of federal health care reform at the state level promises a few fireworks. Many newly elected legislators, especially Republicans, rode in on a wave of anti-health care reform.

But the state is under a federal mandate until either Congress overturns the law or the U.S Supreme Court reverses the law’s trajectory. Public health and state insurance officials are moving full-steam ahead to meet federal regulatory goals.

State lawmakers looking to apply the brakes may have no jurisdiction to do so and as the money for instituting the changes is coming from the feds, there may be little ability to stop the speeding train.

UNEMPLOYMENT TRUST FUND & ECONOMIC DEVELOPMENT
The state of Arkansas is expected to be about $450 million in debt to the federal government by the end of 2011 for money borrowed to pay laid-off workers.

A state unemployment trust fund, supported by employer taxes, was tapped dry in 2009 due to fast-rising jobless claims. The inability to replenish the fund led to mandatory borrowing from the feds, and in 2011, interest on those borrowed funds must begin being paid back.

Business and labor groups are trying to hammer out a deal, but can’t seem to find common ground. If they don’t reach a compromise, the federal government is likely to impose a solution on Arkansas businesses. Major employers, like Wal-Mart and Tyson Foods, would prefer a state fix versus a federal one. Expect some jobless benefits to be scaled back to bring Arkansas in line with its regional counterparts. However, the counterbalance — raising taxes on businesses — isn’t likely to garner much legislative support.

Of course, a solution for Arkansas’ jobless problem – state unemployment is near 8 percent – is to create new jobs. The Governor’s quick action closing fund of $50 million has been a big gun in Beebe’s economic development arsenal. Look for the legislature to at least replenish it; there may even be an effort to expand it.

Arkansas will bring a few more new economic development ideas to the table in 2011, mirroring what other states are doing. Incentives will likely pass — they are only implemented if the business comes to the state and performs at the levels it promises — but giving up existing revenue, such as knocking more off of manufacturers’ utility sales taxes, will be a tougher sell.

EDUCATION
Since K-12 education and higher education account for nearly 70% of the state’s budget, it just wouldn’t be a regular session without legislative activity in this realm.

Expect a lot of tinkering with aspects of the Lake View decision, such as the minimum enrollment thresholds for school districts to survive. In the end, nothing much will change.  The threat of re-opening the old legal wound and the fact that a circuitous process exists to make changes to Lake View will keep the status quo.

Attorney General McDaniel is pushing hard to end the long-running desegregation case in central Arkansas. This effort, combined with civil rights litigator and freshman Rep.-elect John Walker’s first term, will make the case an interesting issue to follow.

Also, higher education officials are looking at substantial changes to the funding formula for two-year and four-year schools, but if the economy takes an unexpected downturn, college campuses will bear the brunt of the financial cuts.

TOMORROW: Lottery, highways, ethics, and a few surprises.