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Tax cuts set regardless of what happens with private option, lawmakers say

Posted: December 14, 2013 - 4:17pm

LITTLE ROCK — Gov. Mike Beebe says the fate of newly approved tax cuts is linked to survival of the state’s private option for Medicaid expansion, but key lawmakers view the two as separate issues as they prepare for next year’s fiscal session.

When the Legislature in April approved 11 separate tax cuts totalling about $140 million over a three-year period, legislative leaders and the governor said they were being phased in to take advantage of savings anticipated from the plan legislators narrowly approved to use Medicaid dollars to subsidize private insurance for thousands of Arkansas’ working poor.

The plan was the Legislature’s alternative to expanding the state’s Medicaid rolls under the federal Affordable Care Act.

Since then, some lawmakers have suggested repealing or defunding the private option in the budget session that convenes in February. Pushing back, Beebe has warned in numerous venues that any change in the private options would cause major budget problems.

“This isn’t an alarm folks, this is … arithmetic,” the governor said recently. “If you don’t continue it … you are either going to have to do away with the tax cuts … or you’re going to have to take away from somebody else, or you’re going to underfund Medicaid.”

However, legislators said last week they view the tax cuts as permanent, regardless of what happens with the private option in the fiscal session.

“To me, they are two independent issues,” said Sen. Jake Files, R-Fort Smith, chairman of the Senate Revenue and Taxation Committee.

Files, who voted for the private option in this year’s regular session and expects the Legislature to support it again next year, nevertheless said the tax cuts will last if the health care expansion plan doesn’t.

“I don’t see repealing the tax cuts as a response to that as being a viable option, nor a threat to get us to support it,” Files said.

Rep. Charlie Collins, R-Fayetteville, who as sponsor of tax cut legislation also voted for the private option, said he will not support any proposal to repeal the reductions.

“In terms of increasing taxes, which is what reversing tax cuts means to me, I see virtually zero probability that will happen,” said Collins, whose tax cut bill reduced the state income tax in all tax brackets by one-tenth percent.

Sen. Eddie Cheatham, D-Crossett, said he thinks the governor is correct but it would be difficult for the Republican-majority in the Legislature to repeal the tax cuts.

“I know what the governor is saying and I agree,” Cheatham said. “In a sense, they are related because I think some of these tax cuts were passed with the thought we were going to save money with the private option and it would take up some of the slack, those tax cuts.”

Cheatham and other lawmakers said next year’s legislative elections will play a role in whether the private option is reauthorized. All 100 House seats and 18 of the 35 Senate seats are on the ballot next year.

Many of the lawmakers who supported the private option in April could face opposition next year because of their vote from challengers who equate the plan to the federal health care law that critics have dubbed Obamacare. Also, Cheatham noted, anyone who supports rolling back tax cuts most likely would have a difficult time getting re-elected.

Sen. Bart Hester, R-Cave Springs, who opposed the private option from the start, said he expects the program to play a key role in many Republican primaries next year.

“I think some people who voted for it are probably … going to have a tough time getting re-elected if they come back here and vote for (the private option) again,” Hester said.

House Speaker Davy Carter, R-Cabot, said despite the political pressure on some lawmakers, he expects the Legislature to reauthorize the private option, which he contrasted with the “debacle” of the national health care reform roll out.

“Here in Arkansas … we’re doing what’s right and we need to keep doing it. We ought to be proud of what we’re doing,” Carter said.

As of Dec. 2, nearly 60,000 Arkansans have enrolled in the private option, according to the state Department of Human Services.

Carter acknowledged there was a balance during the regular session between tax cuts and Medicaid savings with the private option.

“That was part of the discussion when all of that was debated,” he said. “So, I’m not going to say they aren’t connected, but at the same time, everything up there is connected when it comes to money. I think talking about not funding the private option and tax cuts and all these things is a little premature.”

Sen. Larry Teague, D-Nashville, co-chair of the Joint Budget Committee, said he’s not sure what will happen in the fiscal session.

“When we negotiated the budget … there is no question that savings from the private option was part of the reason that tax cuts were affordable,” Teague said. “Now, whether it’s still a combined issue or a separate issues, the tax cuts are done, the private option is done and whether they are divisible or not, I guess the body will decide.”

Teague said it might be more difficult to get the private option through the Senate since Democrat Paul Bookout, a supporter of the proposal, resigned his seat in August amid an ethics investigation into improper use of campaign funds.

A Jan. 14 special election for Bookout’s seat pits Republican John Cooper against Democrat Steve Rockwel, both of Jonesboro.

“I don’t know who replaces (Bookout) or what their positions are, but I think without question it’s going to be tight either way,” Teague said.

The budget reauthorization requires a three-fourths majority in both chambers. In the regular session, the measure passed with just one vote to spare in the Senate and two votes to spare in the House.

Senate President Pro Tem Michael Lamoureux, R-Russellville, said he expects the private option to be considered on its merits and “we won’t be discussing any tax cuts during the fiscal session.”

Tax cuts “have always been a platform many of us have run on regardless of what other issues are on the table,” said Rep. Kim Hammer, R-Benton.

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