Capitol Comments

States Tackle OPEB Obligations

2009-11-14T07:33:00-05:00

By Mary Branham

California is facing massive budget problems by any measure. And among the major problems it faces is a $100 billion liability in its public retirement plans, said Jason Dickerson, principal fiscal and policy analyst, California Legislative Analyst’s Office.

Dickerson said local governments in California have taken action to reduce retiree benefits for current and future employees, as well as current retirees. That hasn’t gone over well, he said, and the state has no plans to take similar action.

The state has worked with the California Highway Patrol unions toward a plan in which officers will pay into the California Public Employee Retirement System—or CALPERS—trust fund in an effort to address some of the unfunded liability for that group. It won’t cover all of the annual required contribution, however, he said.

And that’s only a small part of the CALPERS liability. Dickerson said state officials face some difficult decisions.

“The choice is whether they believe we can afford this type of pension system even longer,” he said.

That’s a choice many states are having to make, and some are making changes to address those pension shortfalls.

Utah, for instance, has addressed state employees’ other post-employment benefits—sometimes referred to as OPEBs—in an innovative way. The state uses a formula to take an employee’s accrued sick leave to come up with an amount that will go into a health reimbursement account for that employee. That plan replaces the previous benefit in which the state paid the employees’ full monthly health insurance premium.

Alzheimer’s, Diabetes Driving Health Care Costs

2009-11-14T07:29:00-05:00

By Mikel Chavers

When it comes to expensive chronic diseases driving health care costs, the issue gets very personal with Alabama Sen. Vivian Davis Figures. That’s because her mother is suffering from Alzheimer’s disease and her mother-in-law died from Alzheimer’s disease.

Alzheimer’s disease costs $148 billion in health care every year, said Stephen Geist, regional director for the California Southland Alzheimer’s Association. That means someone will be diagnosed with the disease every 70 seconds—and that’s going to be an increasing burden for states to bear.

Geist said states—particularly in the Northwest—will experience an estimated 81 percent to 127 percent increase in Alzheimer’s cases in the next 15 years. Yet only 11 states currently have a state Alzheimer’s plan, according to Geist.

California is working on one slowly but surely, he said. “The others are going to be taken by surprise.”

That’s not to mention the 9.9 million unpaid caregivers who often foot the bill to take care of loved ones with Alzheimer’s. Sixty percent of caregivers are women, he said.

Geist recalls one caregiver in particular—a more than 80-year-old woman on her knees on a tiled floor trying to change her 92-year-old husband’s dirty diaper, because her husband has Alzheimer’s and can’t participate in his own care

Along with Alzheimer’s, diabetes is also driving health care costs, according to Dr. Fran Kaufman, chief medical officer with Medtronic Inc., an associate of The Council of State Governments.

Type 2 diabetes is increasing mostly due to obesity, Kaufman said. And what’s worse, it’s a disease that requires multiple interventions, making it costly to manage.

“But if you don’t control your diabetes, your complication rate is significantly increased,” Kaufman said. Even though Type 2 diabetes can be prevented through lifestyle changes, “if we can’t prevent this, then we’ve got to have better ways to effectively manage it,” Kaufman said.

The money spent on diabetes between 2006 and 2007 nearly doubled, according to Kaufman. In 2007, $174 billion was spent on diabetes in the U.S., she said.

“This is not about me alone in a room with a patient and a family,” Kaufman said. “It’s about how to manage (and) whether someone lives a healthy lifestyle and has access to good health care.”

Genographic Project Traces the Family Tree Back to Africa

2009-11-14T07:23:00-05:00

By Mary Branham

Many folks have traced their roots but not many can go back 60,000 years.

That’s something Spencer Wells and the National Geographic Genographic Project are doing. Wells, a population geneticist, discussed the project during the opening plenary session Friday.

Genographic scientists collect DNA samples from people around the globe to paint the picture of human migration. Wells said using the samples, scientists are able to explain the pattern of human diversity.

His project goes much deeper than the average person tracing his or her family tree.

“No matter how well you know your family history, everybody hits a brick wall” at some point, he said.

The Genographic Project has traced the human origin back to Africa; in fact, to three potential ancestors living at the same place at the same time, Wells said. For that reason, the project is keenly interested in indigenous peoples, he said. But that doesn’t limit the project.

“It’s the human story,” he said. “It’s not just the story of indigenous people but everybody alive.”

Wells said humans share 99.9 percent of DNA. “There’s a very low level of genetic variation,” he said. “There’s hardly any variation at all.”

In fact, Wells said the past anthropological thought highlighted the differences in races. “We’re all much more closely related than anybody ever suspected,” he said.

More than 320,000 people from 130 countries have purchased the DNA kits to participate in the project, Wells said. Part of the money from the kit sales is plowed back into the project’s Legacy Fund, which benefits indigenous and traditional communities around the world preserve their cultural legacy.

Wells said the project has touched people, prompting an interest many never expected. He believes it’s because people want to know about their ancestry—even that from tens of thousands of years ago.

“Peel away the surface and we’re all members of an extended family,” Wells said.

Chief Justices Appeal for Interbranch Interaction

2009-11-14T07:00:00-05:00

By Mikel Chavers

Get four chief justices together on a panel and you get some big ideas that reach far beyond the judicial branch. In fact, the judges were aiming for more interbranch cooperation Friday afternoon at a panel sponsored by The Council of State Governments Interbranch Working Group.

One issue where desperate dialogue is needed among the branches is budget reductions in the states. Those reductions are hitting the judicial branch just as hard as other branches, according to the justices.

“Your obligation in your state is to administer justice, openly, completely and without delay,” said Oregon Supreme Court Chief Justice Paul De Muniz. But in the realities of the fiscal environment, that essential function of the courts is crippled, he said. “Feast and famine budgeting is very destabilizing to the courts. The courts are not like a faucet that you can turn on and off at will.”

Alabama Supreme Court Chief Justice Sue Bell Cobb agrees. In her state, 97.5 percent of the funding for the courts goes to personnel, so there’s very little to cut, she said.

Back in 2001, Alabama’s judicial branch stomached layoffs and issued an emergency order to close clerk’s offices just so the clerks could simply catch up on paperwork.

“What happened was, people would take off from work to come to the court,” Cobb said. “So it’s not just hurting judges or clerks, it’s hurting the public,” Cobb said.

“The court system is well aware of the fiscal problems that the legislature faces,” said Wisconsin Supreme Court Chief Justice Shirley Abrahamson. But she said the judicial branch works with the legislature to make sure budget cuts aren’t crippling.

“What they’ve done, they talk to us before they look at the judicial budget and start to figure out how much they have to reduce,” Abrahamson said.

With that, the court system in Wisconsin is trying to bring in money. One example is how the state’s judicial branch works with the federal government and the state to intercept funds through tax collections, she said. Instead of giving a tax refund to someone who owes money to the courts, the judicial branch intercepts the money, Abrahamson said.

Another theme that’s straining already strained judicial budgets is the uptick in the number of people representing themselves in court, without a lawyer, according to Kentucky Supreme Court Justice John D. Minton Jr.

“The system is going to be strained at every level with the clog of dockets of unrepresented people,” Minton said.

Now that Stimulus Cash is Flowing, States are Watching

2009-11-13T12:26:55-05:00

By Mikel Chavers

In California, there’s a cadre of prosecutors and investigators just waiting for something to pounce on. They’re waiting for a case of fraud, waste or misuse of Recovery Act dollars. And they’re investigating even the small cases.

Basically, California officials are taking Recovery Act spending very seriously.

That’s according to Laura Chick, California’s inspector general for Recovery Act dollars. Chick acts as the watchdog of the more than $50 billion in federal Recovery Act dollars expected to flow through the state.

The Federal Bureau of Investigations even warned her of the potential fraud when that much money is up for grabs. They told her: Expect 7 percent to 10 percent of out-and-out fraud and misspending.

“Those are not acceptable numbers,” Chick said.

For the whole of the Recovery Act, that means more than $50 billion could be subject to fraud.

And keeping an eye on it is important, said Mike Pickett, president and CEO of Onvia, the company responsible for www.recovery.org, a Web site tracking transportation and infrastructure stimulus spending.

“That’s the whole idea behind transparency,” Pickett said of the Web site. “If you want to prevent (fraud), shining a light is going to have some impact, but if you can actually shine a light on it when it’s going on … (then) I think folks like Laura will get a lot of help and clues from citizens.”

In fact, Chick said she’s been asking California’s various state departments to tighten up. For example, the Community Services Department in the state was looking at organizations they were distributing federal grants to and just how wisely the organizations were spending the money. What they found was some questionable nonprofits, Chick said. In fact, they labeled at least six nonprofits as high risk, she said.

Pickett and Chick are hoping the high transparency standards of the Recovery Act will stick around for the long haul.

Alternatives to Oil Come in Several Forms

2009-11-13T12:25:25-05:00

By Mary Branham

The energy world is changing.

Concerns about energy security and supply security are cutting into petroleum’s hold on the world energy market, said Chris Standlee, executive vice president for Abengoa Bioenergy Corporation and Abengoa Bioenergy of Nebraska.

“We believe alternative energy is a solution,” he said. His company is working with not only corn-based ethanol but also with cellulosic.

But he doesn’t believe oil will go away. “Oil will be a commodity that will be replaceable with other commodities,” Standlee said.

He touted the growing popularity of ethanol and the growing interest in cellulosic.

Standlee presented just one of several options in an energy policy workshop, Alternatives to Oil, Thursday afternoon.

West Virginia Commerce Secretary Kelley Goes said her state is looking at all available options, but is keenly interested in the coal technologies being developed, such as coal gasification and coal to liquid. Interest in investing in those technologies, she said, will be determined by the comparable cost of coal versus crude oil.

“We’ve seen those conditions in the economy, but we haven’t seen them stabilize,” she said.

West Virginia included all resources in its renewable portfolio standards. “We just want energy for our country,” she said.

Ann M. Schlenker, manager of Vehicle Systems at the Center for Transportation Research of Argonne National Laboratory, said interest in plug-in electric hybrid vehicles is growing. Getting more of those vehicles on the roads is a goal of the Obama administration, she said.

The interest, she said, has been fueled by volatility of gas prices and climate change.

Does U.S. Face Global Competitiveness Crisis?

2009-11-13T12:23:12-05:00

By Tim Weldon

The U.S. will soon be passed by numerous other countries in global competitiveness according to some educational and economic indices.

That may not necessarily be a bad thing, says the leader of one educational policy think tank.
“Is our goal to dominate the world?” asked Watson Scott Swail, executive director for Educational Policy Institute. “What we really want to do is get better than we were. I honestly don’t care if we’re first or fifth or 10th. I just want us to keep getting better.”

“We’ve entered what I call the higher education arms race,” Swail said during an education policy workshop Thursday. Specifically, he argued that the U.S. has an excessive number of colleges—4,000 two- and four-year postsecondary institutions. “I don’t think we need more. I think we need better,” he said.

Jamai Blivin, executive director of Innovate-Educate, an industry-led partnership responding to the nation’s decline in its global standing in science, technology, engineering and mathematics, also known as STEM education, expressed more alarm about the nation’s falling rankings in STEM education. In 2006, Blivin said, U.S. 15-year-olds ranked 25th in the world in math, and 14th in the percentage of students to graduate from college. Just 11 years earlier, the U.S. was tied for first in college graduates, she said.

“Every year, 200,000 U.S. engineering jobs need to be filled, and every year only 60,000 U.S. engineers graduate, leaving more than two-thirds of these STEM positions vacant,” Blivin said.

She recommended the following policy actions:

Facilitate and deliver community-driven STEM strategies and make STEM relevant to the community;
Ensure that STEM educators in K-12 and postsecondary education have the necessary content knowledge and are able to teach STEM;
Define a public-private STEM framework for participation by the private sector; and
Require learning portfolios to empower students to become lifelong learners by being able to plan, track and document their STEM careers.

“We believe that we are at a tipping point in education, and industry is convinced that they are part of the solution,” Blivin said.

Health Reform Comes with Challenges, Needs for States

2009-11-13T12:20:50-05:00

By Mary Branham

The epicenter of the health care debate is in Washington, D.C., these days, but the ripple effects of any Congressional action are sure to affect states.

And state officials have several priorities for any kind of reform, said Alan Weil, executive director of the National Academy for State Health Policy, an independent academy of state health policymakers.

He said leaders want to connect people with the services they need, bring better coordination and integration in the health care system, improve care for people with complex conditions, orient the health care system toward results and promote a more efficient health care system.

“States are struggling under the burdens of programs they already run,” he said. “The notion that they are now going to turn all their energy into this expansion … is, I think, unrealistic.”

Weil spoke at the health policy workshop, “Will Health Care Get a Facelift?” Thursday afternoon.

Weil said states have five needs in implementing reform. They’ll need to know what is in the legislation, if and when it passes. They need to support strategic and implementation planning, he said. In addition, states will need topic-specific technical assistance and will need to focus on communication, both internally and with the federal government.

“States will benefit if all these efforts are coordinated with what they’re doing now in terms of their own health agendas and some of the existing efforts,” he said.

And, said Jane Cline, West Virginia’s insurance commissioner, states will face challenges in dealing with the costs.

“States do not have an extra $600 billion lying around,” she said.

For insurance commissioners, the most important aspects of the bill would be the sweeping reforms to improve access and equity.

“Insurance market reforms promise to make health insurance fairer, more transparent and more available,” she said. But those reforms would come with a price, she said.

States Prescribe Varying Degrees of Health Reform

2009-11-13T12:18:52-05:00

By Mikel Chavers

When Alan Weil talks about state health reform he always mentions the trilogy—Maine, Massachusetts and Vermont. As executive director for the National Academy for State Health Policy, he’s seen health reform initiatives that span the spectrum.

And a lot of it’s happening in the states, Weil said.

“It’s clear that the structure of the federal bill draws on state’s experience,” Weil said.

But the approaches are all different, even those in the trilogy, he said in a health policy workshop Thursday afternoon.

The Massachusetts health care reform plan, he said, tackled issues of coverage first, and will tackle cost later. Maine, on the other hand, is working on costs and coverage simultaneously, he said. In Vermont, the state started with chronic care management—there is a community-based organization designed to help people manage their chronic conditions, Weil said.

One example of an innovative approach is Washington Basic Health. The state-subsidized program provides low-cost health insurance coverage through private health plans. The 22-year-old program purchases health insurance for more than 500,000 low-income residents, according to Preston Cody, assistant administrator to the plan.

Washington Basic Health offers an important example, particularly because the national health reform plans includes an option for states to opt-in to a state-subsidized health care option, Cody said.

Washington is proof of how that works.

In the 22 years of operation, the program has put people on waiting lists three times, including now, said Cody.

“But that’s where we are today with the economic situation,” he said. “The recession has created numerous challenges on our state budget.”

And with zero federal matching dollars, that meant the program had to take a more than 40 percent budget reduction this year, according to Cody. That translates to covering fewer low-income folks who need health insurance coverage.

Participants in the state-subsidized plan share the responsibility for paying for the low-cost coverage and pay on average $60 a month in premiums, Cody said.

“Without this program in the state a lot of people would simply choose to go without health insurance,” he said.

‘Great Recession’ Still Wrecking State Budgets

2009-11-04T16:00:00-05:00

By Sujit CanagaRetna, CSG Fiscal Analyst

While states have weathered recessions before, the Great Recession, which began in December 2007, will likely wreck state budgets through the rest of the 2010 fiscal year and into the 2011 fiscal year. That likely will lead to permanent changes in state government finances and services.

The intensity of the fallout continues to deplete state coffers as revenue intakes sputter and expenses escalate. Tax collections for the second quarter of 2009 were down 16.6 percent from the same period in 2008; for the 2009 fiscal year, state tax collections plummeted by an average 9.2 percent, adjusted for inflation.

More alarming is that just three months into the current fiscal year, new budget gaps opened in 18 states, with more states expected to join the list. Cumulative budget shortfalls for the 2010 and 2011 fiscal years are forecast at a staggering $350 billion. Even though there are green shoots of growth emerging on the national economic horizon, state revenues notoriously lag the national recovery, so states are looking at a grim immediate future.

Given that this recession is the worst financial crisis to afflict the nation since the Great Depression, states have not faced revenue shortfalls of this magnitude. So not only has this Great Recession affected states more deeply, it will continue to do so for a longer period of time.

That will likely result in some fundamental changes in state government. The scope and scale of services state and local governments previously provided to citizens will be vastly reduced. States will just not have the revenues to sustain programs.

In preparing their budgets for the 2010 fiscal year, the gaping budget holes resulted in 41 states reducing services, including restrictions on eligibility of low-income children and families for health insurance or reduction in access to health care services in 27 states. In addition, at least 24 states slashed medical, rehabilitative, home care or other services needed by low-income elderly or people with disabilities, or raised the cost of these services. Twenty-five states either cut or proposed cuts in K-12 and early education; 34 states cut funding to public colleges and universities; and 42 states shrank the size or work time of state government employees.

In Arizona, for instance, the Department of Public Safety warned the agency could be reduced to 1997 staffing levels, officers could be forced into dangerous situations without backup and Arizonans could be forced to wait more than an hour for officers to respond to some emergency calls because of budget cuts.

In Kentucky, House Speaker Greg Stumbo said lawmakers may consider dipping into local school districts’ contingency funds to help balance the 2010-12 state budget. In Oklahoma, cuts to the state’s Office of Child Abuse Prevention are expected to eliminate services for about 180 families, while cuts by the Commission for Human Services will mean fewer funds will flow down to the Tulsa Area Agency on Aging, which will reduce its home-delivered meals by 50 percent. In Delaware, budget shortfalls are expected to severely constrain the ability of the state to provide employment assistance to those graduating from the Autism Delaware program.

Overall, the Great Recession and steep drop-off in state revenues will force state policymakers to try to shift voters’ expectations about what services and programs government can provide.

Despite the dour fiscal outlook, several states are pursuing aggressive strategies to rejuvenate their economies. One approach gathering momentum is a serious review of how states expect to finance the plethora of state government services and programs during and after the Great Recession.

California, Colorado, Kentucky, Nevada and West Virginia formed commissions or blue-ribbon panels to address such topics as the expansion of the state sales tax to cover services. A majority of states apply their sales tax to less than one-third of 168 potentially taxable services, even though the U.S. economy has moved away from the manufacturing sector to one dominated by the service sector. States are also looking at applying sales taxes more universally on Internet purchases, a category that has grown exponentially in recent years. Some states are relying more heavily on gaming revenue.

States have also resorted to borrowing extensively in recent years, taking full advantage of cheap and plentiful credit. For instance, a July 2009 Moody’s report documents that state net tax-supported debt in 2008 vaulted to nearly $417 billion, an increase of 4.8 percent from the prior year and a substantial increase from the approximately $75 billion recorded in 1988 and approximately $180 billion recorded in 1998. Of course, during the final quarter of 2008 and first quarter of 2009, state governments—like practically every other public and private entity—had trouble borrowing, but the severe credit freeze has thawed recently.

Unfortunately, there are no easy, permanent fixes in the short-term. States must develop a systematic and long-term investment strategy in education, pre-K through university and post-graduate research, to be truly successful in this brutally competitive, globalized, 21st century economy. This requires the vision and long-term commitment of policymakers at every level—the same thing that made the Research Triangle Park in North Carolina and the Silicon Valley in California successful.