Wednesday, April 13, 2016

What happens to education spending if GOP hardliners kill Medicaid expansion

Posted By on Wed, Apr 13, 2016 at 6:30 PM

click to enlarge THE ARKANSAS SENATE: Ten votes standing in the way of health care for 267,000 people. - BRIAN CHILSON
  • THE ARKANSAS SENATE: Ten votes standing in the way of health care for 267,000 people.

With the legislative fiscal session underway, Arkansas's state budget is once again being held hostage by a small minority of hardline Republican senators who insist on reversing the expansion of Medicaid (a.k.a., the private option; a.k.a., "Arkansas Works") that now provides insurance to some 267,000 low-income Arkansans.

Gov. Hutchinson and other private option supporters of both parties have been arguing for weeks that killing the Medicaid expansion will do more than just hurt the people now receiving health coverage. By removing at least $142.7 million from the state budget (and likely much more), it will also send shock waves throughout the rest of the public sector, prompting cuts of 3 to 5 percent across all state agencies. And because schools comprise such a large portion of state outlayseducation stands to take a major hit.

In the life-without-Medicaid-expansion budget draft laid out by House Speaker Jeremy Gillam on Monday, around $30 million would be yanked from K-12 public schools. Gillam, a Republican, supports the private option. (Here are the overall hypothetical budget changes he presented; here's a document detailing cuts to the Public School Fund.) About two-thirds of that $30 million would come from cuts to three programs: 
  • $5 million from the Arkansas Better Chance program, which provides preschool tuition subsidies for families.
  • $9 million from National Board Certified Teacher stipends, a program that rewards highly trained educators.
  • $7 million from the Arkansas Public School Recognition Program, which rewards high performing schools.
In addition to the blow to K-12, higher education institutions would lose an additional $19.4 million, on net (see below for an explanation). Another $2.1 million would disappear from various ancillary educational functions of the state, including the Education Department, AETN, the School for the Blind and School for the Deaf and more.

Understanding what exactly those cuts entail requires some background on how Arkansas funds its schools, and what can and cannot be slashed. Hang around the education committee at the Capitol and you'll hear frequent invocation of the word "adequacy" as a sort of Biblical commandment of the state budget. Adequacy refers to a baseline amount of funding the state provides for K-12 public schools, a (very large) sum considered sacrosanct for fiscal purposes: Arkansas must pay the cost of an "adequate and equitable" education for its children before it pays for anything else, from roads to health care to prisons. When facing a major budget shortfall like the one the anti-Medicaid minority wants to foist upon the state, legislators can make cuts where they see fit — but not to anything included under the adequacy umbrella. For more background, see the 15-year-long Lake View school funding case decided by the Arkansas Supreme Court in the early 2000s.

So what is and isn't a part of adequacy? That can be a little vague, surprisingly, but some items are clearly off limits — most prominently, foundation funding, which is the per-pupil amount which pays the vast bulk of teacher and staff and administrator salaries in the state. At $2.05 billion, foundation funding dwarfs everything else in the public school fund, and indeed just about everything else in the state budget, which is around $5.33 billion. The foundation funding line item is on the second page of Gillam's document detailing education cuts. You'll see that foundation funding is not to be cut, because it can't be (thanks to Lake View). Foundation funding isn't the only item included under adequacy, but it's the big one.

Meanwhile, pre-kindergarten programs aren't considered part of adequacy. This is why ABC funding has been allowed to stagnate for years and years with no cost-of-living adjustment; foundation funding gets adjusted each year for inflation, as per adequacy requirements. It's also why pre-K will likely be among the items on the chopping block if the hardline Tea Party minority in the Senate gets its way and kills the private option. Same with National Board Certification and the school recognition program.

It should be noted that these cuts are all hypotheticals: Speaker Gillam is showing what it might look like if the state budget is reduced by $142.7 million, as the Tea Partiers want to do. Were these specific hypotheticals chosen for political reasons? Of course they were. The Public School Recognition Program, with its connotations of merit pay, reflexively appeals to "education reform" cheerleaders like those at the Democrat-Gazette editorial page just this week. More pointedly, a champion of that program happens to be one of the ten intransigent senators vowing to end Medicaid expansion, Sen. Missy Irvin (R-Mountain View). National Board Certified Teacher stipends were recently preserved after an outcry from teachers over a proposed regulatory change that would have limited payments distributed under the program. Cuts to pre-K, like cuts to foster care, sound awful to just about everyone.

In other words, the governor and his allies are trying to appeal to specific interest groups in sounding the alarm on cuts. Nothing wrong with that. Of course, as Max pointed out earlier this week, Hutchinson and his fellow establishment Republicans usually seem to believe any and all shrinkage of state spending is a good thing, and can always be compensated for by rooting out bottomless reserves of "waste, fraud and abuse" lurking in state government.

So, while Gillam and Hutchinson are undoubtedly on the right side of the private option fight, take their protestations of concern over strapped state budgets with a grain of salt. Note the irony here in the governor criticizing private option foe Sen. Bryan King for waving away concerns over budget cuts with the tried and true "waste, fraud and abuse" party line when Hutchinson himself said in January he'd pay for a big chunk of his supposedly "revenue neutral" highway funding plan with unspecified "increased efficiency measures." That's the same magic wand they're waving.

One final point on higher education. Gillam's life-without-Medicaid-expansion budget indicates a decrease of around $4.8 million to institutions of higher education. But the more accurate number is much higher — around $19.4 million. That's the sum of hypothetical cuts to every institution of higher ed in the state except one, the University of Arkansas for Medical Sciences, which gets a $14.6 million increase from the state. At first, this appears to partly offset the cuts to two- and four-year schools. But the increase is illusory; UAMS isn't actually getting a windfall.  The institution stands to suffer a crushing blow if the private option goes away, and the $14.6 million is just intended to stem the bleeding a bit. 

The hospital at UAMS, like so many hospitals around the state, relies tremendously on the private option. Before Medicaid was expanded, the state spent tens of millions in public funds on uncompensated care to institutions like UAMS, prisons and community health clinics. The private option gave insurance to many of those patients, meaning the state was able to drastically reduce what it sent to such institutions. If 250,000+ Arkansans lose insurance, UAMS' incidence of uncompensated care shoots back through the roof to pre-2014 levels, cutting deeply into its bottom line. In other words, one way in which the private option helps the state budget is by reducing uncompensated care expenditures — and if Medicaid expansion is killed, the state will have to help UAMS make up the difference. Or maybe the Tea Partiers would rather see it shut down, too.

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