LETTER: Time running out; uncertain status for bed tax and budget

Last week, the House of Representatives met for three days and acted on only five relatively minor pieces of legislation. Now just seven legislative days are left in the session, with plenty of unfinished business – most importantly final action on the budget for the remainder of fiscal year 2010 and the annual budget for fiscal year 2011 – remaining to be addressed.

While the Appropriations Committees have worked hard to balance the budget by identifying areas of unnecessary spending, the leadership has still failed to deal with Georgia’s systemic problems of the past eight years on both the revenue and spending sides of the ledger. Revenue problems can’t be fixed with new taxes or fees while the sweetheart tax breaks of past years aren’t reevaluated. Again I call for zero-based, program-oriented budgeting; the days for dealing with this crisis in an effective manner are running out.

Within the past two weeks, the health care community and the legislative leadership caved in to Gov. Perdue’s persistent demand for a “bed tax” increase on hospitals and their patients to make up a portion of the state’s Medicaid deficit. As the House majority had done a week earlier, the Senate voted 31-15 on April 1 to approve a 1.45 percent tax increase, estimated to bring in $169 million in new revenues.

In the face of significant opposition from both sides of the political aisle, it took the Senate leadership all of April Fools’ Day to twist enough arms and secure enough votes to pass the tax increase. After it became apparent that threats of holding certain Senators’ legislation hostage would not be enough to change the outcome of the vote on HB 307, Senate leaders sweetened the deal by adding an amendment that would repeal the state’s insurance premium tax sometime in the future when the state’s reserve fund exceeds $500 million.

That amendment, at least in theory, would reduce state revenues by $75 million to $350 million per year, thus giving insurance companies a huge tax break at the same time the state is adding a tax on health care services when neither Georgia hospitals nor their patients can afford it. If that sounds like strange public policy, you must realize that this is a deal that had nothing to do with policy and everything to do with politics.

By making HB 307 “revenue neutral,” the amendment gave many Senators political cover and an excuse to break their pledge against voting for a tax increase.

While the ploy was successful in getting the tax increase through the Senate, that success may be short-lived. Gov. Perdue immediately weighed in on the tax break for insurance companies, lashing out at the Senate for trying to “curry favor with a Washington, D.C., special interest group” by adding the amendment “that triggers yet another provision contingent on the first signs of economic growth. The unpredictable revenue impact of these provisions should not be added to a bill of this magnitude. I believe this discussion would be more appropriate for the tax study committee that is scheduled for this summer.” For once, the governor and I agree that irresponsible fiscal policy such as this could endanger the AAA bond rating that Georgia enjoys on Wall Street – better late than never.

The following day, House Speaker David Ralston threw more cold water on the Senate’s action by announcing that he intends to rule the insurance tax break amendment as non-germane to HB 307, thus sending the issue back to the Senate. Speaker Ralston said, “I am disappointed they amended the bill in a way to include a change that is likely unconstitutional and non-germane to the underlying bill … This is not a time to make last-minute changes to major legislation by adopting proposals which have not had a thorough discussion.”

When the General Assembly returns from Easter recess, the future of the bed tax increase is completely unknown as the Senate has to go back to the drawing board. Let’s remember that the health care community had strongly opposed this tax increase for two years, until just recently when the governor threatened to take the even more severe actions of reducing Medicaid reimbursements by 10.25 percent and eliminating the sales tax exemption for nonprofit hospitals. Perhaps now is the time for the legislature to look at the state’s private contracts – including the $1 billion-plus, no-bid contract that Gov. Perdue awarded to AT&T and IBM.

The legislative process involving the bed tax increase would have to leave a bad taste in the mouths of anyone who follows state government. It’s no wonder that folks are so dissatisfied with partisan politics these days and have a greater understanding for what it means for an elected official to serve and vote independently
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The one bright spot in this situation that I see is this: if the Senate leaders are having this much trouble passing the bed tax increase, maybe they will have as much difficulty passing the $100 million plus in “fee” tax increases the House majority approved a week earlier.

Inter-Basin Transfers: Last week, the Georgia Chamber of Commerce, which is heavily influenced by big business in Metro Atlanta, announced its opposition to HB 1301, sponsored by Rep. Tom McCall and myself, which would greatly restrict inter-basin water transfers – surprise, surprise. Although local chambers do not seem to be saddling up with the Georgia Chamber on this issue, the powerful Atlanta influence is still strong in the legislature. Rep. McCall and I continue to seek legislation to amend with the provisions of HB 1301, but so far the chair of the Natural Resources Committee has refused to allow any votes.

Rep. Alan Powell (D-Hartwell) represents the 29th District (Franklin, Hart and Madison counties) in the Georgia House of Representatives. Contact him at 507 Coverdell Office Building, Atlanta, GA 30334; by phone at 404-656-0202 or by e-mail at alanpowell23@hotmail.com. For more information, visit www.alanpowell.net.