March 2008

March 27, 2008
(Distributed to Kansas newspapers March 24, 2008)


Health care for????

In the Statehouse, there’s always the presumption that most of what the Legislature does is done for political purposes: Either to get elected/reelected or to get the most bang for the State General Fund buck.

The State General Fund, of course, is the state tax receipts account into which voters’ money flows.

When it comes to protecting the SGF, nearly everyone wants to take the role of protector, to be the skinflint who spends not a dime more than necessary to do whatever it’s decided that the state needs to do.

Well, it’s getting down to budget time in the Statehouse and one of the things that most legislators and the governor and much of the public believes should be done is taking care of the health needs of the poor who don’t have insurance and whose jobs don’t provide health insurance.

This year, the House and the Senate have created a major divide over the health-care issue. There doesn’t appear to be enough money to provide health insurance for all the poor, so the chambers are parsing out just who they believe the state can afford to help and who it can’t afford to help.

(It’s probably worth mentioning that in Kansas, everyone gets emergency medical treatment, whether for an accidental injury or an untreated illness that folks didn’t have the money or insurance to have attended to before it reached crisis proportions. Oh, but that emergency care—often rendered for free—just drives up the costs of the health-care industry and those of us with insurance see our rates rise to pay for that uncompensated care for the uninsured. It’s a vicious circle/cycle, isn’t it?)

The House, in its health-care bill, proposes assisting poor people in paying premiums for their health insurance. These are really poor people. A family of four could have income of just about $10,000. That’s poor, and there’s no guarantee that families that poor could make any significant payment toward their own health insurance.

The House adult-care proposal, which is subsidized by the federal government, would likely cost maybe $135 million or so over the next five years. First-year costs are a relatively low $4 million, but it keeps growing. Oh, and the House takes care of the poor children, too.

The Senate is taking another tack. It proposes to leave the adults alone and just care for children. The cost for children’s health care, which is subsidized by the federal government, would be about $21 million spread over the next five years.

Nobody wouldn’t like to do both, but the Senate decided there just isn’t enough money in the state treasury to care for the adults and the children, too, and it chose the children.

That’s a pretty tough decision.

But, it’s probably politically supportable. That’s how Americans, how Kansans, are. You take care of the kids first.

So, the ultimate decision is going to come down to whether the House or the Senate, in this budget-tight election year, is going to stretch scarce tax money to take care of poor adults and children, or just poor children.

That’s where the decision to stretch the state and spend money that might be put to more politically popular uses becomes yet another facet of the issue.

You never go wrong by helping the children grow up healthy and ready for school, and later, for work. But you also never go wrong by keeping everyone in Kansas as healthy as possible—and insured, so their health care costs don’t slide into your health insurance premiums.

Complicated?

Yes, both the insurance issue and the budget issue that will probably guide whatever decision is made are tough choices. We won’t know for weeks how this one comes out.

March 20, 2008
(Distributed to Kansas newspapers March 17, 2008)

STOLI, anyone?

There’s an interesting little scuffle going on in the Kansas Legislature that just might—or might not—surface this week, dealing with life insurance, sort of.

The issue is stranger-originated life insurance. It has picked up the acronym, as nearly everything does these days, of STOLI, not the vodka, but STranger Originated Life Insurance.

The concept is someone you don’t know buying life insurance on, well, you, although more technically, buying your life insurance policy and its death benefit from you.  The “stranger” finds you, through a broker or an agency that deals in fairly sophisticated investments and pays you money for what you’ve already spent on a life insurance policy and maybe a premium above that and then picks up the payments in return for becoming your beneficiary.

This business of selling your life insurance now, while you’re still alive, is one that really started during the AIDs crisis of the 1980s and early 1990s, when victims of the then-nearly-always fatal disease who had life insurance didn’t need the money after they were dead but needed it to pay for treatments that might or might not work.

It was ugly business, of course, but for those with diseases that are costly to treat, for many Americans, turning the asset of their life insurance into hard cash for treatment made sense. Ugly, but it made sense.

And, it’s not just those stricken with generally fatal diseases who took advantage of the value of their life insurance. Say that you just don’t need the cash settlement that you had spent years contributing toward. Maybe a spouse has died or divorced, or the children are doing well or you just don’t have a need for that lump sum that will arrive days or weeks after your funeral.

That asset—that insurance policy—has value, and under current law if you’ve held the policy for at least two years, you can name a new beneficiary for the settlement. That’s value, and your insurance policy is an asset much like a house or a car or art works or nearly anything else.

Well, life insurance companies don’t like that to happen. They invest your premiums to make money—and to pay a settlement when you die—and they don’t like to see that contract for insurance become a commodity. Thousands of people buy life insurance, pay the premiums for several years, and then just stop for one reason or another. If there’s a cash-out, those people who just stop paying premiums may get some money back, but if there’s no provision for that, then the insurance company keeps all the premiums you’ve paid and grinds that into the complicated accounting they do. Some of that premium goes to profits, some goes to holding down premiums for others.

nsurance companies calculate these things, and the dropped policies become an important source of revenue.

That’s where STOLI comes in. If investors buy those policies, they don’t get dropped and don’t provide a windfall for insurers. And, it is a little, well, the non-technical term is “icky” for an investor essentially betting that you will die at some point that makes their investment in your policy—the cash up front they give the policyholder plus picking up the premium payments until you die—a good investment. Somewhere, be assured, there are charts and graphs that track STOLI costs and payouts to investors.

What’s the Legislature looking at? Extending the amount of time during which you can’t buy an insurance policy and name a beneficiary who really doesn’t have anything to do with your life—the investor. The current law is two years. The legislation likely to surface will extend the time to five years, meaning it will cost more cash-up-front for the investment. Nope, nothing to do with the relatively uncomfortable business of someone who doesn’t know you hoping to turn a profit should you die before the investor has paid more money for your death benefit than it is worth to the investor.

It’s just one of those odd little bills that legislators this year might find themselves voting on, and wondering what’s right, or why they should care, or who brought this deal to the Legislature in the first place.

March 13, 2008
(Distributed to Kansas newspapers March 10, 2008)

One up, one down

In a little more than a month, the Kansas Consensus Revenue Estimating Group is likely to put hard figures to what many Kansans are already sensing.

That “sense” is that while many Kansans are working, they are spending less money in the general economy than they did last year.
Like most of state government, it’s a little confusing and takes some experience to decipher, but things just aren’t right with the Kansas economy.

The two key indicators are the amount of money that Kansans are earning and paying taxes on and the amount of money they are spending on things that are subject to the state’s sales tax.

The Kansas Department of Revenue tracks these things closely because the income to the state from Kansas personal income taxes makes up about half of the State General Fund income. Sales tax makes up maybe another 25 percent.

Personal income taxes are soaring. Sales taxes aren’t.

Kansas lives from fiscal year to fiscal year, and for the current year, which started on July 1, 2007, the state has taken in $1.642 billion in individual income tax receipts through the end of February. That’s a whopping $132 million more than for the same time period last year. That’s good news for the state, where the Legislature and governor use the money to maintain services to Kansans.

The more money, the more nice things that the state can do for its citizens, ranging from health care for the poor to assisting public schools and colleges to just about everything else the state does.

That roaring increase in income taxes means Kansans are working and their employers are withholding money from their paychecks so they don’t get socked with a giant bill on tax day, April 15.

But the troubling, or at least unsettling, statistic from the Department of Revenue is that sales tax revenues are down, considerably.
For the first eight months of this fiscal year (that’s July through February, or what the state calls “Fiscal-Year-to-Date”), sales tax revenues are down by $37.7 million from the amount paid last year.

That nearly $38 million translates, at the 5.3 percent state sales tax, into maybe $800 million worth of stuff that isn’t being bought. That is the surprise.

With more apparent income, Kansans are spending less on groceries, clothes, cars and everything else that is subject to the state sales tax.

Just what that means—and we’ll find out more when the Consensus Revenue Estimating Group tries to figure it out in April—will tell us a lot about the Kansas economy, and maybe what we already sense but haven’t put into words.

Now, if there’s apparently more income out there, it is being spent on something that isn’t subject to sales tax. We’re thinking probably paying down credit card balances, making hiked mortgage payments, forking over more for gasoline for our cars (motor fuel is taxed, but it isn’t sales-taxed). It might be being saved, of course, and there is no sales tax on savings, but well, what do you think those chances are?

What’s it mean? Something is happening out there in our homes, but its impact on state government—and that’s what is done here at the Statehouse—isn’t very clear yet.

The surging income tax revenue means people are making money, the sales tax numbers indicate they aren’t spending it on sales-taxable stuff. That seems like it would make income tax even more important to state government revenues, which might argue against cutting income tax rates if this business of state government is viewed as a going concern.

But, we’ll have more puzzle pieces in about a month and we’ll see—maybe—what it means to state government and the people who use it.

March 6, 2008
(Distributed to Kansas newspapers March 3, 2008)


Under the radar

In a legislative session where nearly everything that happens—or doesn’t happen—is about overriding the decision by Gov. Kathleen Sebelius’ administration to nix two 700-megawatt coal-fired power plants in western Kansas, probably not enough is being read into a very unrelated series of campaign finance votes last week.

It wasn’t just the votes but the confusing, politically complex actions that led to those votes that have longtime Statehouse observers intrigued.

The setting was the House, where getting those two power plants approved is Job. No. 1 for House Speaker Melvin Neufeld, R-Ingalls. His efforts to allow the campaign finance votes were to create an atmosphere in which House Republican moderates feel a little less under-siege by Neufeld’s conservative leadership and constant pressure to get the plants built.

Key: Just passing the bill that would overturn the decision on the power plants doesn’t accomplish anything. That takes 63 House votes, but overriding a gubernatorial veto of the bill takes 84—and those 84 votes come at great risk to those who vote to override the governor.

Risk?

Yes. The governor, of course, has the biggest stick in the Statehouse. She can not only make life difficult politically for legislators, she can punish them for “misbehavior” in the future—think highway bill next session and who might or might not wind up with the bypass or off-ramp or four-laner in their districts.

That’s why the opportunity for the House to vote on four campaign finance bills last week becomes a focus. It’s almost a breath of fresh air—and something that most Kansans will like reading about and legislators will like talking about in this election year.

It also sharpens the focus on the quiet competition between Neufeld and House Majority Leader Ray Merrick, R-Stilwell. Merrick didn’t want the ethics bills debated or voted on in a procedure that gives the Senate—yes, there is still a Senate though it’s been generally quiet over there this session—a leg up in writing what will be the final campaign finance legislation this session.

For the maybe 35 moderate Republicans in the House who don’t have leadership posts and are pretty much left to occasions when they can team up with the House’s 47 Democrats to pass bills—but only after procedurally out-foxing GOP leadership—the campaign finance bill votes were a tonic.

It was one of those rare times when literally in the House mommy and daddy were fighting and the kids got to take advantage of  the situation to pass bills that they will want to crow about.

Now nobody, to be clear, is saying or admitting or even clearly acknowledging the evidence that Neufeld’s maneuvering and out-foxing of Merrick on the campaign finance bills was a tit-for-tat deal for votes on the coal plant bill. Nearly everyone involved is cleverer than that.

But the ethics votes clearly leavened the House. That’s only good for fans of the coal plants and probably an indication that if Neufeld is still Speaker after this fall’s elections, he’ll be helpful for those who the governor remembers—and know this, governors never forget—voted against her on the coal plants bill.

So, are those four campaign finance bills important? Yes, they are a turning point.

While those campaign finance bills don’t make earth-shattering changes (they each got more than 100 votes), they’re off to the Senate where you can expect they will gain more substantial provisions. The House can move to concur in the measures and send them to the governor with just a bare majority 63 votes.

Not much happens in the Statehouse without some generally under-the-radar machinations occurring.

This one didn’t, either.

And where it leads, well, that’s going to be interesting…