Wednesday, February 26, 2014

Talk About the Fast Track.  I wrote earlier in the week about Education Minnesota's Health Insurance Transparency Act--the bill that would require school districts receive three sealed bids for health insurance each negotiating cycle--and all I can say is that it is off to races with the bill.  The Senate version of the bill, SF 1835, was heard today in the Senate Commerce Committee was recommended to pass as amended after two amendments were attached to the bill, several more unsuccessful amendments were offered, and there was a healthy and spirited round of discussion.  As introduced, the bill would require (as stated earlier) that all school districts as part of their negotiations would be required to obtain three sealed bids from prospective insurance providers and the bids would all be opened at once with the low bid receiving the health insurance contract.  The Public Employees Insurance Plan (PEIP) could enter a bid in any district that they chose to.

When I say all districts, I mean all districts, even those that are self-insured, would have to follow that procedure.  As part of an amendment adopted today, districts where the largest bargaining group and the school board agree, the term of coverage could be expanded from two years to five years, but the sealed bid process would be used in these instances as well after the agreed upon time frame (which cannot exceed five years) elapsed.

Even with the improvements made to the bill, there are still a number of hurdles that must be crossed.  In an ideal world, private insurers and PEIP would compete to be school district insurance providers and the entity that provided the best fit for the district in terms of value and coverage would win the contract.  However, this bill provides an appropriation of $1 million to PEIP, which would clearly give it an advantage.

The other major problem that the bill creates is for self-insured districts.  These districts have worked hard to create systems that are comprehensive and fair by assuming risks.  In the process, they have been able to keep premium rates both relatively low and stable.  Prior Lake-Savage Director of Business Affairs Julie Cink and Director of Human Resources Matt Mons gave very effective testimony describing the tough decisions their district has made and the positive results those efforts have created.  Getting self-insured districts out of this bill will be--and should be--a high priority as the bill moves forward in the process.  The bill's next stop will be the Senate Education Committee.  With the deadlines hitting as early as they are this year and all the committees that will have to look at the bill, it will be moving very fast.

One of the most interesting questions raised during the meeting was brought forward by Senator Dave Brown (R-Becker).  Senator Brown wondered whether or not PEIP will be rendered obsolete by MNSure and whether or not it would be wiser to wait and see how that program matures before making this move.  An answer was not readily available, but I think this is a question that deserves greater deliberation.

The House companion bill, HF 2180 (E. Murphy), will be heard in the House Education Policy Committee tomorrow morning at 10 AM.  Here is a link to the bill and to the amendments that are slated to be offered.

HF 2180:

Amendment A1 (Author's Amendment):
Amendment A2:
Amendment A3:
Amendment A5:
Amendment A7:
Amendment A8:
Amendment A9:

House Property and Local Tax Division.  The House Property and Local Tax Division had a very interesting meeting this afternoon.  At the meeting, the Residential Homestead Property Tax Burden Report for Taxes Payable in 2011 was delivered.  This report is generally known as the Voss Report, named after former Anoka County State Representative Gordon Voss, who developed the concept.  It's a very valuable report that shows the effective property tax burden paid by homeowners throughout the state.  The report does show that property taxes tend to be higher when expressed as a percentage of income in the metropolitan area than in greater Minnesota, but there are two elements that are never fully discussed in the report:  (1) that even after the property taxes are paid, metropolitan households have considerably higher incomes than households in greater Minnesota, and (2) the tax yield per increment of tax effort is much greater in the metropolitan area than it is in greater Minnesota.  I've been trying to get analysts to tackle the second point for years with little luck and if I can put together some time next summer, I will tackle it myself.

One thing that really gets lost in the discussion is that property wealth is a comparative advantage and, generally, if you have it, you are going to use it.  If I get $10 per lap and you get $5 per lap, not only am I going to get more money for the same distance traveled, the incentive for me to keep running is greater than it is for you.  On top of this, you are going to get really tired if you try to keep pace with me.  Hence, the need (and justification) for equalization and other measures that make the property tax more fair.

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