Vote NO on September 18 Statewide Constitutional Amendment

My name is David Pinkleton, and I am the Event Chair and State Committeeman for Madison County Young Republicans.  I am a native of Huntsville, Alabama.  I graduated from the University of Alabama in Huntsville (UAH) in 2010 with a B.A. in Spanish, and I completed my M.A. in Public Affairs at UAH in 2011.  In the spring of 2012, I interned with State Senator Paul Sanford (R – Huntsville) in the Alabama legislature.  My political interests center on domestic policy at the state level.    

I am adamantly opposed to the September 18 statewide constitutional amendment that will transfer $437 million from the Alabama Trust Fund (ATF) to the Alabama General Fund over the next three fiscal years.  Below are my reasons for a NO vote on the September 18 ballot initiative.  However, I want to go beyond mere opposition to the statewide constitutional amendment and provide practical, long-term solutions to Alabama’s General Fund crisis.  In particular, I want to address the need for Medicaid reform, the 800-pound gorilla in the room.

Why vote NO on September 18 statewide constitutional amendment?

1. There is no payback provision for the $437 million to be transferred from the Alabama Trust Fund to the Alabama General Fund.  SB147 (Regular Session 2012) merely spells out the distribution of ATF funds into the General Fund.  Even though the Governor and other legislators verbally assure us that the money will be repaid, there is no guarantee written in the actual text of the bill that the money will be paid back.  State Senator Bryan Taylor (R – Prattville) has drafted a bill for the next legislative session that would require repayment of the ATF by 2025.  Until the 2013 Regular Session convenes, we do not know if Senator Taylor’s bill will receive an up or down vote in both chambers of the state legislature.  Most notably, his bill in current form does not address where the money would come from to pay back the Alabama Trust Fund.  This is a major red flag.

2. Alabama’s royalties from offshore natural gas, which fund 64.35% of the Alabama Trust Fund, have declined steadily since 2006.  The Alabama Oil and Gas Board expects royalties from fiscal year 2012 to total $72.3 million.  This is in stark contrast to a high of $373.1 million in fiscal year 2006 and $119.9 million in fiscal year 2011.  The State Oil and Gas Board expects royalties from offshore natural gas to range from $69.1 million to $75.4 million a year from fiscal 2013 to fiscal 2016.  As of August 19, 2012, the Alabama Trust Fund had approximately $2.3 billion of invested assets.  This data shows that the major source of revenue for the ATF is declining rapidly.  This begs the question.  Why would we take nearly half a billion dollars from a fund that receives less revenue from natural gas royalties on a yearly basis?  This is another red flag.

3. Medicaid fraud costs Alabama taxpayers hundreds of millions of dollars each year.  In 2010, the U.S. Department of Health and Human Services (HHS) estimated that the national improper payment rate for Medicaid was 9.4%.  The total net payments made for Medicaid in Alabama in 2011 were $5,234,351,464.  Using the 9.4% estimate by HHS, Alabama had approximately $492,029,037.61 in Medicaid fraud in 2011 alone.  As a taxpayer, I am outraged at the amount of fraudulent money paid to Medicaid beneficiaries and providers in Alabama.  This is a blatant abuse of hard-earned tax dollars.  Moreover, the dollar amount of Medicaid fraud in Alabama is significantly greater than the $437 million that the statewide constitutional amendment plans to transfer from the Alabama Trust Fund to the Alabama General Fund.  This leads to the next question.  Why don’t we address the fraud in Medicaid before we take money from the ATF?  This is a HUGE red flag.   

What are practical solutions to the General Fund crisis?

1. Crackdown on Medicaid fraud in Alabama.  In FY 2010, the Alabama Medicaid Agency reviewed 48 medical providers and 424 pharmacies, and they recovered $1.3 million in Medicaid fraud.  This action led to a cost savings of $8.1 million.  Also, the Alabama Medicaid Agency suspended 132 Medicaid beneficiaries for abuse and locked 840 Medicaid recipients into one doctor and pharmacy to prevent potential abuse.  Medicaid fraud cases are referred to the Medicaid Fraud Control Unit within the Office of the Alabama Attorney General (AG).  In fiscal year 2010, the AG’s office handled 32 civil and seven criminal cases regarding Medicaid fraud in Alabama.  These cases resulted in the return of $5,238,079 to the Alabama Medicaid Agency.  The Alabama Medicaid Agency and the Office of the Alabama Attorney General are cracking down on Medicaid fraud, but it is not enough.  With estimates of nearly $500 million in Medicaid fraud in a given year in Alabama, the Medicaid Agency and the AG’s office need to step up their investigation and prosecution of Medicaid fraud.  The hard-earned dollars of Alabama taxpayers should NOT fund Medicaid fraud anywhere in the state.

2. Tie Medicaid funding to budgetary growth in outlying fiscal years.  For fiscal year 2013, the Alabama Medicaid Agency will receive $603,125,607 from the Alabama General Fund.  The grand total for the FY 2013 General Fund budget is $1,684,779,549, so Medicaid will receive approximately 35.8% of revenue budgeted for the General Fund.  Since 2001, there has been a 67.9% increase in Medicaid expenditures in Alabama.  To infuse predictability into Medicaid funding, the Alabama legislature should follow Utah’s lead on Medicaid reform.  In 2011, Utah State Senator Dan Liljenquist (R) introduced S.B. 180 to address the accelerating growth of Medicaid as a percentage of Utah’s budget.  Senator Liljenquist’s Medicaid reform bill established a Medicaid growth target of 8% and created the Medicaid Growth Reduction and Budget Stabilization Account.  In fiscal years where there is a General Fund budget surplus, then the Utah Division of Finance will transfer an amount equal to the Medicaid growth savings from the General Fund to the Medicaid Growth Reduction and Budget Stabilization Account.  In years where Medicaid enrollment growth exceeds expectations, then benefits would be reduced across the board according to a predetermined schedule.  However, the Utah legislature may appropriate money from the Medicaid Growth Reduction and Budget Stabilization Account to the Medicaid program if Medicaid expenditures for the fiscal year exceed 108% or more of Medicaid program expenditures for the previous fiscal year.  The Alabama Medicaid Agency and members of the Alabama legislature need to examine the Medicaid reform bill passed in Utah and consider the feasibility of such a model in Alabama.  The General Fund crisis provides us with a unique opportunity to implement a viable, long-term solution for Medicaid funding in Alabama.

3. Grow the Alabama Trust Fund.  ExxonMobil, Shell, and other oil companies are major contributors to the Alabama Trust Fund.  From fiscal year 1993 through fiscal year 2011, natural gas royalties totaled $3.5 billion to the ATF.  However, the flow of revenue to the Alabama Trust Fund has declined since 2003 as offshore oil production has slowed and natural gas prices have plummeted.  The Alabama Department of Environmental Management (ADEM) is the state agency responsible for issuing permits to new energy facilities located wholly or partially within the Alabama coastal area.  In a given year, ADEM reviews 40 requests for natural gas and oil exploration and production activities in the federal waters off Alabama’s Gulf coast.  The Governor and the members of the Alabama legislature need to work alongside the Alabama Department of Environmental Management to recruit new oil companies to the state.  If we increase the natural gas royalties paid to the Alabama Trust Fund, then Medicaid and other state agencies will receive a more stable revenue source in outlying fiscal years. 

In summary, the General Fund crisis presents Alabama policymakers a unique opportunity to enact sweeping reform in Medicaid, the Alabama Trust Fund, and other state agencies.  Now is not the time to shirk away from our commitment to this state and its residents.  We must move forward and make the tough decisions.  I strongly recommend a NO vote on the September 18 statewide constitutional amendment.  After this ballot initiative goes down in defeat, let’s roll up our sleeves and get to work.  There is much to be done! 

Feel free to comment below.  I am open to suggestions, criticisms, and more.

Sources:

http://blog.al.com/spotnews/2012/08/alabama_trust_fund_repayment_p.html

http://blog.al.com/spotnews/2012/07/alabamas_natural_gas_royalties.html

http://www.gao.gov/highrisk/risks/insurance/medicaid_program.php

http://yellowhammerpolitics.com/blog/api-presents-alabama-by-the-numbers/

http://blog.al.com/spotnews/2011/02/north_alabama_health_care_frau.html

http://www.lfo.state.al.us/pdfs/FY2013%20Budget%20Info/FY2013%20SGF/SGF%20FY%202013%20AS%20ENACTED%206-12.pdf

http://utahpoliticalsummary.com/2011/12/dan-liljenquist-and-state-level-medicaid-reform/

http://adem.alabama.gov/programs/coastal/coastalPermitting.cnt

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