Has the Senate Become Addicted to Writing Hot Checks?

02nd Aug 2017

There are many quotes about the Great Deity and paying cash.  My favorite is from “The Taking of Pelham 123”

Ryder: I talked to God.

Walter Garber: That’s good, what did he say?

Ryder: He said I should trust in Him, all others pay cash. How soon can you get it down here?

I am truly concerned for our collective Senate.  They seem to be hooked on writing hot checks.  Back in my younger years when my friends and I were living on the financial edge, we would occasionally write an NSF check.  What my friend Craig counseled me is it is the same penalty for a small check as a large check, “so you might as well aim big.”  Has my friend Craig been talking to the Texas Senate or more particularly, the Senate Finance Committee?

During the regular session of the 85th legislature, they wrote a check that at least for the moment, they cannot cover–totaling a whopping $7 billion (all funds) shortfall in Medicaid.  The intention, as in sessions past, is to back-fill the shortfall when the 86th Legislature convenes in early 2019.  However, the arrearage does not stop there.  If the Children’s Health Insurance Program, which covers health insurance for a large number of the State’s Children is not reauthorized with the current enhancements in federal participation (which is looking slim), then the Medicaid related shortfall will jump another $800 million.  That brings us to $7.8 billion shortfall just for Medicaid and CHIP.  Keep up because it is a fast and bumpy ride and about to get worse.

Enter SB19, a worthy piece of legislation designed to amend the Education Code to require the Texas Education Agency (TEA) to, subject to appropriation, provide an annual bonus to each classroom teacher with at least six years of teaching experience at the beginning of the school year during which the bonus is provided. The bill would require the amount of the bonus to be established by appropriation, which may be based on the number of years of teaching experience.  The authority to provide bonuses would apply beginning with the 2018-19 school year (the upcoming biennium).

Here is the kicker: the bill would transfer from the Health and Human Services Commission $193 million in General Revenue appropriations made by Senate Bill 1, 85th Legislature, Regular Session, for the 2018-19 biennium to TEA to be used by the agency to provide:

  • a bonus of $600 to be paid in September 2018 for each classroom teacher with at least 6 but less than 11 years of teaching experience at the beginning of the 2018-19 school year; and
  • a bonus of $1,000 to be paid in September 2018 for each classroom teacher with at least 11 years of teaching experience at the beginning of the 2018-19 school year.

“HHSC is granted authority with respect to the strategies and programs from which the funds would be transferred, and depending on the approach adopted by HHSC to execute the transfer there could be an additional cost to supplemental appropriations in fiscal year 2019 and certain other methods of finance, including Federal Funds, could be affected.”  The Chair of Senate Finance had intended that funding would be taken from amounts to be paid to Managed Care Organizations by a mechanism that would delay payment to MCOs.  Not deny payment, but to pay them late.  However, this shortfall rose, by any other name, is a check that cannot be covered and will have to be made up in the next biennium.

In addition, the bill would transfer from the Health and Human Services Commission $212 million in General Revenue appropriations made by Senate Bill 1, 85th Legislature, Regular Session, for the 2018-19 biennium to the Teacher Retirement System of Texas (TRS) to be used to provide support to participants in the Texas Public School Employees Group Insurance Program (TRS-Care) by:

  • reducing costs for participants, including premiums, deductibles, and prescription drugs, during the 2018 and 2019 plan years; and
  • reducing the premium and maximum out-of-pocket cost for an enrolled adult child with a mental disability or a physical incapacity during the 2018 and 2019 plan years.

Again, “HHSC is granted authority with respect to the strategies and programs from which the funds would be transferred, and depending on the approach adopted by HHSC to execute the transfer, there could be an additional cost to supplemental appropriations in fiscal year 2019 and certain other methods of finance, including Federal Funds, could be affected.”

Such statements as mentioned above, given the amount being taken and the anticipation that federal funding would be impacted, can only mean one thing… take the funding from Medicaid. The hurt goes deeper than this though.  Medicaid is a state/federally matched program with the state paying about 40% and the federal government covering about 60%.  So, the $405 million above taken from HHSC equates to just under a billion dollars in total Medicaid funding.

It can be argued, as my friend Craig advised me, that if you are going to write a hot check you might as well make it a whopper.  Well, the Senate has exceeded even my friend Craig’s expectations.  Here is hoping the Comptroller can generate enough revenue to cover these hot checks, that could total as much as $8.8 billion (with a “B”).  If not, the forecast is dire since to cover these hot checks, then severe cuts will be made in 2019.  We are out of good will at the bank.

 

Thomas Valentine

Texas Insight


For more resources on the Medicaid shortfall, see another blog from Tom Valentine: Medicaid… Pay me Now, or Pay me Later