January 21, 2014 Capitol-ism

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South Dakota Chamber Of Commerce - Capitol-ism E-Newsletter

South Dakota Chamber Of Commerce - Capitol-ism E-Newsletter

South Dakota Chamber Of Commerce - Capitol-ism E-Newsletter

January 21, 2014

After the state endured a disastrous fall blizzard and was then frozen solid by a rare polar vortex, people with superstitious natures began waiting for whatever event would round out the old adage about tragedy happening in threes.

The Legislature convened at noon on Tuesday of last week. 

The superstitious will have to keep looking.  The South Dakota Chamber of Commerce and Industry does not hold the opinion that legislative sessions are, in-and-of-themselves, disastrous.  The fact that 105 regular citizens will set aside their everyday lives to take up the yoke of public service is appreciated by the business leaders who comprise the membership and leadership of the Chamber.  It is noteworthy; however, that the Chamber was formed because even the most skilled of Solons driven by the best of intentions is never immune from the inadvertent act that can have disastrous results.  

The South Dakota Chamber of Commerce and Industry is eager to begin working with the legislature in a spirit of optimism and enthusiasm.  While the creation of good law is a laudable goal, the avoidance of bad law is the highest calling over the next several months.

The work ahead -- Trying to predict the issues that will dominate a legislative session is like trying to predict the election of a new pope by the College of Cardinals.  The more certain things seem to be true as the session starts, the more unlikely it is that those very things will happen.  There are several issues that will certainly be part of the session even if they don’t capture the imagination or prove to be at all interesting.

Unemployment tax rates – Unemployment Insurance taxes are easy to overlook and the policies that drive those rates are nearly impossible to understand.  The bottom line of this year’s legislation is that it will tend to lower UI tax rates. 

During the recession, the UI Trust Fund plunged below $11 million dollars, which triggered a surcharge that was set in law at $150/employee.  This surcharge is assessed against all employers, including those businesses that have earned a rate of zero.  As one might predict, the surcharge was not received with calm deference.  Fear and loathing comes to mind.  As a way to soften the hit of the surcharge, the legislature changed the formulas that determine rates which had the impact of increasing the rates and making it harder to earn a rate of zero, but lowered the surcharge to $100/employee.  The goal of the changes was to restore the UI Trust Fund balance, which had been depleted and was using money borrowed from the federal government.  The goal was to restore the balance to $78 million dollars.

It worked.  The recession is receding – or is over, depending on whether you are talking to an economist or someone still looking for a job.  The reforms are no longer needed.

The Department of Labor will ask for the formulas to be relaxed, which should result in lower taxes for many businesses and make it easier for employers to earn a rate of zero.  During the “reform” era, the number of businesses that had earned a rate of zero dropped from about 30% to 12%.

Education Standards/Common Core – Everyone knows that educational accomplishments in the United States have not kept up with other nations AND the schools in their community are really good.  This later sentiment is best expressed by Garrison Keillor’s radio skits based on “Lake Woebegone” with the phrase “All the children are above average.”

While South Dakota students have a record of above average ACT scores, the South Dakota Chamber of Commerce and Industry is alarmed that the percent of high school graduates who require remediation at the post-secondary level continues to be approximately 30 percent.  As the demands of our economy evolve, it is imperative that South Dakota require a continuously higher level of accomplishment in order to prepare students for the challenges of college, careers and life in the 21st century.

South Dakota businesses are not just competing against Minnesota or Iowa (we’d usually throw in a joke about North Dakota but now that they are rich we have a new found respect) or even the coastal regions.  South Dakota businesses compete in a global marketplace.  Rigorous educational standards are essential to keeping South Dakota businesses and citizens competitive, successful and prosperous.

The South Dakota Chamber of Commerce and Industry has reviewed the standards known as the “Common Core” standards and believes they will move education into a process to achieve the knowledge most needed by future business leaders and employees.  Should another set of standards claim to be as rigorous the Common Core standards, the Chamber would join in the review of those alternatives.  At this time, it is urgent to move forward in preparing for the immediate future and it is the Common Core standards that address the skills that will be most needed if South Dakota is to remain competitive, successful and prosperous.

There will most likely be several bills that will attempt to repeal the adoption of Common Core standards or otherwise impede their implementation.  Unless these bills offer a replacement set of standards, the Chamber will oppose such efforts.

Medicaid Expansion – Medicaid provides health care to people who have very little income and live in poverty.  While the Medicaid program is directed by the federal government and partially paid for by the federal government, each state can adopt its own criteria for eligibility – at least within certain parameters set by the federal government.  In South Dakota, Medicaid covers low income children and their mothers but does not cover adults who do not have children, even if they live below the poverty level. 

Under the new “Affordable Care Act”, states are encouraged to expand Medicaid coverage to include everyone who has an income that is less than 138% of poverty.  This means mothers and kids, single adults without children, people entering pre-geezerhood who have adult children that won’t claim them anymore (note – once pre-geezers become actual geezers they are covered by Medicare).  Expanding Medicaid to cover those under 138% of poverty would add 48,000 people to the Medicaid roles.

As an incentive, the federal government is offering to pay for the new people, at first, and to pay most of the costs (90%) afterward.  Here is the amount that Uncle Sam has offered to pay for states that expand Medicaid:

—  Federal share under expansion

–  2014, 2015 and 2016 is 100%; 

–  2017 is 95%

–  2018 is 94%

–  2019 is 93%

–  2020 and after is 90%

One of the fears expressed by opponents of accepting this deal and expanding Medicaid is that the official federal government’s definition of “afterward” is quite often, “As soon as we can.”  This will leave the state holding the bag on the expanded costs only to face the rather distasteful choice of paying those costs or removing people from the expanded benefits.

The Expansion of Medicaid potentially represents an infusion of money into the state’s economy that is significant.  If South Dakota expanded Medicaid this year, the total increased cost between now and the year 2020 would be $102 million dollars (starting at low single digit millions and ramping up to $36 million a year in 2020).  The federal government money that would come to South Dakota would be about $2 billion dollars (yes, with a B).

This money would be funneled through health care providers which are among the largest employers in the state and are a keystone of the modern South Dakota economy.  Health care providers have already taken some reductions in other program reimbursements in anticipation of the Medicaid expansion.  Not finding some way to accept the federal support for expanding Medicaid not only leaves hundreds and hundreds of millions of dollars on the table, it strains the economics of a leading industry.

From the Chamber’s point of view, it is imperative to understand that the 48,000 people who might get health coverage via Medicaid expansion will not simply go away if South Dakota refuses to accept the federal incentives to expand Medicaid.  These people will continue to ignore health problems until they are facing a health crisis and then go to the hospital emergency room.  A good portion of these costs are then written off by health providers.  These health providers cannot absorb endless losses so they, in turn, recover some of those costs by factoring the losses into the negotiations with insurance providers.  The cycle of provider losses increasing costs for the majority of citizens that receive health care coverage through their employer has been going on for decades and will only become more intense in the future. 

The South Dakota Chamber of Commerce and Industry understands the reasons to worry about the “deal” being offered to expand Medicaid and appreciates Governor Daugaard’s cautious approach.  If there is a way to secure waivers from the federal government so this expansion can be as efficient as possible and can be done in a way that fits the moral imperatives and cultural values of South Dakota, it should be sought. 

It should be noted that Governor Daugaard attempted to get a waiver that would allow South Dakota to expand Medicaid eligibility to all citizens below the poverty line, but not to 138% of poverty, and including the adults without children who are currently not eligible.  This request was denied.  What other waivers might be attempted will be made clear as the session moves along.

While the cautious approach is one the Chamber supports, it is also important to note that the Chamber also believes that the economic benefit from Medicaid expansion is also important.  These funds could be compared to federal highway dollars, research dollars that fund employment at the universities, and other programs that have a long history of support in the state.  It is also important to note that the money strengthens a major sector of the economy that has seen reimbursement reductions in anticipation of the expansion.

How does one explain supporting both the Governor’s cautious approach and support expanding Medicaid in the future?  Capitol-ism believes it was a spokesperson for former President Bill Clinton who put it best.  When asked about a similar conundrum, the spokesperson explained “The President has friends that support the issue, and he has friends that oppose the issue.  The President’s position is to stand by his friends.”

While the Chamber cannot say with great specifics the exact conditions that would make expanding Medicaid acceptable, the organization firmly believes it should and will be done in the future.

The South Dakota Chamber has set up bill tracking page where members may review bills of interest to the South Dakota Chamber.  Click here to reach the page.    Click on E-Subscribe (My LRC), then 2014 and Session Bills.  The log in is SDChamber and the password is member.

Register today for Business Day at the Legislature!

Thank you for your support of the South Dakota Chamber of Commerce and Industry. 



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