“The Sky is Falling – The Sky is Falling”

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These words from Chicken Little (http://eleaston.com/chicken.html) could very well be the refrain of Alabama Government through the years. In just the administrations of former Governor Bob Riley and current Governor Robert Bentley, Alabamians have been told, “the sky is falling, the sky is falling”. In Governor Riley’s first year, 2003, he proposed a massive $1 billion + tax increase in the form of Amendment 1. Predictions were that if not approved the finances of Alabama’s government would crash and burn. Amendment 1 was defeated by a 2-1 margin and the wheels of government kept on turning for a few years. By 2005 Alabama was once again facing financial collapse until the state was bailed out with significant amounts of federal dollars as a result of the damage incurred when Alabama’s coast was hit by Hurricane Katrina. Once again, Alabama’s leaders were able to plug the hole and move forward without the sky falling (no pun intended). Follow that with the collapse of the financial services world and once again, the federal government came to the rescue. Increased matching dollars toward Medicaid allowed tight General Fund dollars to be diverted from existing programs to prop up other underfunded programs, temporarily. Never mind that once the increased federal match went away the programs that were raided of General Fund dollars did not see the raided funds returned to their respective budgets. Mental Health alone took a $30 million + hit that to this day has not been restored. Mental Health has been told that they were “level funded” which they technically were (if you do not consider the $30 million hit they took earlier). In another instance the Finance Department realized that they had not been calculating the value of the state’s investments properly and lo-and-behold we found $300 million + in “unrealized capital gains”. By definition, a capital gain does not occur until it is realized. Using “unrealized capital gains” is akin to what George H. W. Bush called Ronald Reagan’s economic plan during the 1980 Presidential campaign for the Republican nomination when he referred to “Voodoo Economics”. Follow that up with payments from BP and additional tobacco settlement funds and the one time money keeps on coming – until it doesn’t. The most recent bailout came when voters authorized borrowing $437 million from the Alabama Trust Fund over a three-year period to prop up the sagging General Fund. That worked until it ran out and we have to start the repayment. None of the aforementioned actions reflects the money that has been pulled out of the rainy day accounts or diverted from the Education Trust Fund to the General Fund.

To the credit of Governor Bentley and the Alabama Legislature, with the assistance of many groups in the healthcare world (Medical Association of the State of Alabama, Alabama Hospital Association, Alabama Nursing Home Association, Alabama Chapter- American Academy of Pediatrics, Pharmacists and many other groups), a plan was developed to restructure Alabama’s Medicaid program from a fee-for-service model to a capitated payment system of Regional Care Organizations (RCO). The federal government approved of the new system and agreed to provide over $750 million during the next five years to help implement the plan. One condition existed – Medicaid must be fully funded. In order to achieve that goal this coming year Medicaid required an increase of at least $100 million over the FY 2015-16 budget.

This past week the Legislature overrode Governor Bentley’s veto of the General Fund budget that increased the Medicaid budget by only $15 million. In that action, not only will Medicaid face devastating actions to balance their budget but the state also will lose the $750 grant from the federal government. Among the cuts that are being discussed are eliminating prescription drug benefits for adults, eliminating out-patient dialysis, significant cuts to providers such as hospitals, physicians, pharmacies and the list goes on. Governor Bentley had indicated that if the Legislature overrode his veto he would call the Legislature back into Special Session to remedy the situation. His reasoning was something along the lines that “the sky is falling” and we need to do something about it. This time a chorus came through the rhetoric and said, “Let the sky fall”. They said that we have heard these claims before and they never materialized. Let’s see if the sky really is falling. In essence, the Legislature is calling the bluff, if you can call it a bluff, and is saying show us just how bad things will be. The problem is that once the cuts are put into place and the impact is felt, it will be too late to come back and put the pieces back together. Rural hospitals will have closed, Physicians, predominately Pediatricians, will have closed their offices, or retired early or even moved to another state. It has been said that you cannot unring a bell. Once this bell is rung, school will be out.

“Chicken Little”” is a story for teaching courage. Don’t be a chicken little. Don’t be afraid. The sky is not falling.

The sky is not falling. I has already fallen, crashing down upon the heads of all Alabamians. The time has come for all, and that is not just the elected officials it includes all Alabamians, who are involved in the political process in Alabama, to find the courage to make the hard decisions that will be required to solve Alabama’s fiscal challenges rather than merely putting Band-Aids on a gaping wound. Years ago, there was a commercial for an oil filter for your car. The message was that “you can pay me now or you can pay me later”. The premise was that proactive maintenance was far more cost effective than reactive repairs.

“The sky is falling, the sky is falling, the sky has fallen”

The Alabama House will reconvene at 1:00pm on Tuesday, April 12, 2016
The Alabama Senate will reconvene at 4:00pm on Tuesday, April 12, 2015, 2016

The views and opinions contained in this report do not necessarily reflect the views or opinions of the clients of Public Strategies, LLC