The Fayette County Commissioners expressed concern over future financial stability this week as they looked over the projected losses in revenue due to the removal of sales tax on Medicaid managed care organizations (MMCO) as part of the state’s budget.
Following a decision last year by the Obama administration, Ohio legislators were told the state was no longer allowed to collect sales tax on MMCO as of July 1 of this year, when the current budget would expire. Due to this decision, the result is a loss of millions in revenue for all local county governments and eight transit authorities.
“The way I understand it, if you are on Medicaid you have managed care organizations that help ensure the treatments you are getting makes you well, or that you are getting better,” Fayette County Commissioner Dan Dean said. “Well sales tax was allowed to be levied on the fees that were being paid to them and then the state would use that money to help match the Medicaid pull down from the federal government.”
As the Ohio House of Representatives was creating the budget (House Bill 49) for this year, they decided the counties would be assisted with the transition away from the sales tax with one check from the state for the end of 2017 and the entirety of 2018. This check would be the final money ever to be received as part of the sales tax on Medicaid managed care organizations. Dean said Tuesday the county is expected to lose $602,000 on an annual basis – an estimation by the state.
“In one year the state said they would make us whole,” Dean said. “Well Fayette County is deemed to be in better shape, we get more sales tax than other counties do because of our location. So the state says that in that calculation, and it is a hard one to figure out, to make us whole (or in other words to replace that $602,000 lost, Dean said), $392,000 makes us whole. The state is getting at that we should be able to recover quicker, I think.”
The state arrived at this number based on several factors. The Medicaid portion of the sales tax covers approximately 7 percent, by one estimation, of the entire sales tax revenue collected by the county. With other counties relying on up to 25 percent of their sales tax base from Medicaid, Fayette was shown to not require as much money as other local governments, such as Vinton County for example. Vinton County’s sales tax revenue is made up of 24.58 percent from the sales tax levied on MMCO and they will be receiving close to $2.8 million of transitional aid.
Another factor in determining the amount of money to be received during this transition is the state’s estimation on annual incremental absorption rates. Fayette County will absorb 4 percent a year of the loss.
“The options the state had was they could have taxed all managed care organizations equally and then it would have been allowed,” Dean said. “But since the state was only taxing the ones that dealt with Medicaid, the federal government said it wasn’t allowed. Now the state made themselves whole by increasing the franchise fee for all hospitals, so the state would not actually feel the loss.”
Governor John Kasich signed a veto message on June 30 with 47 items included that he wanted removed or changed with House Bill 49. One item he wanted removed was the increase in the franchise fee. He said in his veto message that requesting a change puts an already approved waiver in jeopardy and risks the loss of $615 million net benefit currently permitted by the waiver. This particular veto and around 10 others were voted on by the House and overrode, pending similar votes in the Senate.
“In November and December of last year, Governor Kasich reached an agreement with the federal government to fund the portion of state income tax that was lost, and did not for whatever reason negotiate the local government and transit authority piece with that,” State Senator Bob Peterson (R) said. “I wish that had happened but it didn’t. The budget that both the House and Senate passed in June included a request to have the federal government fund the portion of local government that was not discussed. Kasich vetoed that amendment like he did with other items.”
Peterson said that in July, the House voted to override that veto, meaning that the state government would have to make the increase franchise fee request if the senators approved it. He said he went with several county commissioners to a meeting in Washington D.C. about a month ago where they were told “pretty directly” that they would not fund the local government and transit authority portion of lost MMCO sales tax.
“So my belief is that if we override the veto then we would request from the federal government but we would be getting zero dollars,” Peterson said. “We would not be helping to solve the problem with local government. So the legislature has been discussing this with the administration and we have identified $50 million dollars that we think can be put toward counties and transit authorities. We are hoping that if the economy does better than projections, that we would increase that amount available.
“Collaboration and working together to find the answer to difficult questions has been the process over more than a month,” Peterson said. “Fayette County has been blessed with conservative leaders. Whatever happens they will be in a lot better of shape than most counties because of the work of Dan (Dean), Tony (Anderson), Jack (DeWeese) and the other local elected officials, and the decisions they made.”
With representatives like Peterson and Scherer working through bills at the state level, and seemingly no additional help coming from the federal government, the county commissioners recently talked to local villages about how they can assist. Since the commissioners took over the county EMS five years ago, they have paid close to $600,000 a year to keep it running. The commissioners, with the anticipation of losing the sales tax dollars, have reached an agreement to help fund the EMS services in the county through 2018 with each village and incorporated area paying a small portion. Unfortunately, unless they can continue to make deals such as this and find funding through other means, the EMS service will be difficult to continue to pay for.
“They are sharing the burden, and this was something we have never asked them to do in the past because the county could do it alone,” Dean said. “But this year, in light of the shortfall we are heading into, we have asked them to participate and we are thankful the leaders in the cities and townships have stepped up and backed it.”
The commissioners mentioned other tough decisions that will have to be made, including funding for the new jail. Dean said the county will have to “tighten our belts.”
Dean thanked Representative Scherer because the House did pass legislation to pull back Kasich’s veto. Dean said the commissioners have been in communication with Sen. Peterson on House Bill 49 and said he understands their concerns. The commissioners also said that as the Senate continues to consider House Bill 49, they would encourage Sen. Peterson to continue to look at the impact on the counties he represents.
“That might be kind of harsh to say, we back Senator Peterson, he has done so much for us,” Dean said. “But in this instance we would hope that he would do what he can do to get as much of the money as he can back into the county’s hands.”
Reach Martin Graham at (740) 313-0351 or on Twitter @MartiTheNewsGuy