Legislative Insight: The American Health Care Act (AHCA)

Posted: 4/2/17

After failing to muster 215 votes—with no support from Democrats—House Republican leaders pulled the American Health Care Act from a vote last Friday (March 24th). The decision to abstain comes after President Donald Trump and House Speaker Paul Ryan (R-WI) placated both wings of their party. While Trump and Ryan offered incentives to staunchly conservative representatives, they alienated their moderate colleagues.charles_w-_dent2c_official_photo_portrait2c_color

“After careful deliberation, I cannot support the bill and will oppose it,” said Rep. Charlie Dent, (R-PA) in a statement on Thursday.  “I believe this bill, in its current form, will lead to the loss of coverage and make insurance unaffordable for too many Americans, particularly for low-to-moderate income and older individuals.  We have an important opportunity to enact reforms that will result in real health care transformation–bringing down costs and improving health outcomes. This legislation misses the mark.”

Dent’s statement echoes other GOP centrists wary of the AHCA’s impact, as predicted by the Congressional Budget Office. Last week, The CBO and the Joint Committee on Taxation released the much-anticipated score of the American Health Care Act,

The scores assessment included several notable statistics:

  • Fourteen million people would be without health insurance in 2018 under the new law, compared to the Affordable Care Act. In 2020, that number would increase to 21 million before rising to 24 million in 2026;
  • AHCA would reduce the federal budget by $337 billion over 2017-2026;
  • The report estimates that premiums would jump 15 to 20 percent in 2018-2019 for single policyholders because of the individual mandate repeal. After 2020, a decrease in premiums will vary based on age and income;
  • Several Medicaid provisions would decrease spending by $880 billion over the next decade. By 2026, the CBO estimates that Medicaid spending would be about 25 percent under the current ACA.

The CBO’s assessment stems from several AHCA provisions, including:

  • Removal of the individual mandate. Instead of a penalty, the AHCA will implement a 30 percent surcharge on premiums of a year if previous coverage is dropped.
  • The AHCA issues tax credits based on age and income, whereas the ACA also included geography and cost of living in their subsidy assessment. Furthermore, AHCA caps refunds at $4,000 for those 60 and older, while a younger person with the same income would receive $2,000.
  • Under ACA, the Federal government has a matching program. Under the AHCA, the Federal Government would fund Medicaid by a per capita amount beginning in 2020.

Among the most debated items in the CBO’s report, was the overhaul of Medicaid expansion. Under the Affordable Care, Medicaid coverage extended to people at 138 percent of the federal poverty level. Prior to Obamacare, the federal and state government’s paid 50/50 in Medicaid costs. With the expansion (32 states accepted the Medicaid expansion), the federal government covered a significant portion of Medicaid expansion to cover low-income Americans. The American Health Care Act does not extend Medicaid coverage to new individuals between 100 and 138 percent at the federal poverty level, but would allow those already on the expansion to remain under a grandfathered clause. Furthermore, the AHCA creates a per capita formula for federal Medicaid funding. By 2020, the CBO estimates that 14 million fewer people will be on Medicaid. As a result, a larger tax burden for Medicaid would shift to the State’s covering Medicaid expansion. West Virginia, Nevada, Ohio, Arizona, New Mexico and Kentucky—states with high portions of residents at 100 to 138 percent of the poverty level—would experience the greatest impact.obamacare_replacement_brainstorming_session

In lieu of limited Medicaid funding, the AHCA would have provided age-based tax credits instead of ACA subsidies based on income, regional insurance costs and age. While the ACA did not cap subsidies, AHCA maxes tax credits at $4,000 for anyone older than 60 and making less than $75,000. Essentially, older, lower income people living in a high cost region will see a cap on the amount of money to help them purchase insurance under AHCA. Conversely, younger people with higher incomes will see an increased tax credit under AHCA compared to ACA.

Projected Annual Premium Tax Credit available in the Individual Market under the Affordable Care Act and the American Health Care Act, 2020
Income (2020 FPL) Age Affordable Care Act American Health Care Act
Reno, NV US Average Mobile, AL Reno, NV US Average Mobile, AL
$20,000 (160% FPL) 27 $2,899 $3,225 $4,522 $2,000 $2,000 $2,000
40 $3,745 $4,143 $5,725 $3,000 $3,000 $3,000
60 $9,030 $9,874 $13,235 $4,000 $4,000 $4,000
$40,000 (320% FPL) 27 $0 $103 $1,400 $2,000 $2,000 $2,000
40 $623 $1,021 $2,603 $3,000 $3,000 $3,000
60 $5,908 $6,752 $10,113 $4,000 $4,000 $4,000
$75,000 (600% FPL) 27 $0 $0 $0 $2,000 $2,000 $2,000
40 $0 $0 $0 $3,000 $3,000 $3,000
60 $0 $0 $0 $4,000 $4,000 $4,000
$100,000 (800% FPL) 27 $0 $0 $0 $0 $0 $0
40 $0 $0 $0 $500 $500 $500
60 $0 $0 $0 $1,500 $1,500 $1,500
Source: Kaiser Family Foundation analysis. Notes: In the 2017 ACA exchange markets, premiums in Reno, NV and Mobile, AL are approximates

 

AHCA’s Impact on New Jersey

The Garden State was recently ranked eighth in the nation in Medicaid usage, while also having the seventh lowest premium raises as a result of ACA, according to various reports. With AHCA’s proposal to slash funding and convert Medicaid dollars into block grants, New Jersey—which has a fifth of its residents covered by Medicaid—would have dropped a million people from coverage.

If New Jersey were to maintain the current Medicaid eligibility levels, the state would be on the hook for an additional $8.8 billion over the next decade with reduced Federal assistance. If the ACA was repealed, New Jersey would have to contribute about $2.1 billion annually instead of its current $461 million.

According to New Jersey Policy Perspective, half a million New Jersey residents would lose coverage in the next three years under AHCA, with the largest percentage increases occurring in Republican held congressional districts.

While the House did not hold an official vote, three Garden State Congressional Republicans took note of the bills potential impact and voiced their opposition. In the end, only two of New Jersey’s five Republican congressmen supported AHCA, while all the Democrats opposed the bill.

frank_lobiondo2c_official_portrait2c_c112th_congressRegrettably, the current healthcare proposal is not better for South Jersey,” Rep. Frank LoBiondo (NJ-2nd) said in a statement before the vote. LoBiondo’s district would haveexperienced a 77-percent increase in uninsured if AHCA was passed. “Simply put, this bill does not meet the standards of what was promised; it is not as good as or better than we currently have. Accordingly, I will vote “no” on this healthcare plan.”

Rep. Leonard Lance (NJ-7th) also said he would vote against AHCA days prior to a scheduled vote.

“The legislation congress was considering this week missed that mark and did not meet my goals for an Obamacare replacement plan: greater access for the American people, better options for all patients and lower costs across the healthcare market,” Lance said in a statement. “I am hopeful future legislation will achieve these goals and I will work with President Trump, Speaker Ryan and all those who wish to improve the healthcare system in this country.”

Rep. Chris Smith, New Jersey’s 4th district, also voiced opposition. Meanwhile, GOP congressmen Rep. Tom MacArthur (NJ-3rd) and Rep. Rodney Frelinghuysen (NJ-11th) made statements in support of AHCA.

“This bill was not perfect—no bill is—but it was a dramatic improvement from where it started,” said MacArthur after Ryan withdrew the bill from the House. MacArthur’s support of AHCA came in lieu of a 94-percent increase in uninsured within his district. “It didn’t have enough votes to pass but I stand by my efforts to improve it. The only way we’re going to repair our broken healthcare system is if we work together to fix the problem.”

Highlights from the Congressional Debate Surrounding AHCA

us_congress_02After the Congressional Budget office released its findings, both Democrats and Republicans began publicly denouncing the House GOP’s healthcare mandate. House Minority leader Nancy Pelosi (D-CA) appeared alongside Senate Minority leaders Chuck Schumer (D-NY) for a joint statement following the report’s release:

“This is – to take 20 million off of their coverage, and as they do so, they are implementing the biggest transfer of wealth in our history – $600 billion dollars going from working families to the richest corporations in our country,” said Pelosi.  In terms of insurance coverage, it’s immoral.  In terms of giving money to the rich at the expense of working families, it is indecent and it is wrong.”

While the backlash from congressional Democratic leadership seemed predictable, right-wing members of the Republican House also criticized the bill.

“…We didn’t tell the American people we were going to repeal Obamacare but keep some of the taxes in there,” said Rep. Jim Jordan (R-Ohio), chairman of the House Freedom Caucus, during a Fox News Sunday interview with Chris Wallace, a day before the CBO score was released. “We didn’t tell them we were going to repeal Obamacare and get rid of the mandate but yet bring back this 30 percent penalty that’s in the bill.  We didn’t tell them we were going to have this insurance subsidy in the bill either.  So, let’s do what we said.”

Meanwhile, at the moderate end of the GOP spectrum, Rep. Illena Ros-Lehtinen, located in Miami, announced her intention to vote against the AHCA. Citing her elderly and poor constituents, Ros-Lehtinen said in a statement released on March 14: “The bill’s consequences for South Florida are clear: too many of my constituents will lose insurance and there will be less funds to help the poor and elderly with their healthcare.” She added, “we should work together to write a bipartisan bill that works for our community and our nation without hurting the elderly and disadvantaged among us.”

Jordan and Ros-Lehtinen’s comments highlight the challenges AHCA architects Ryan (R-WI) and House Majority Leader Rep. Kevin McCarthy (R-CA) face in getting the bill through congress. The House Speaker also had to work with the Trump administration which promised “insurance for everybody” on the campaign trail, and doubled-down on it following his victory in November. Furthermore, as one of the bills architects, Ryan must pass the bill through the budget reconciliation process. This parliamentary maneuver circumvents a filibuster by Democrats in the Senate with only 50 votes needed. However, reconciliation means the bill must relate to the budget, and can’t target provisions in ACA. The bill also had comply with the “Byrd Rule”in the Senate. Named after the former West Virginian Senator Robert Byrd, it stipulates that a reconciliation measure is prohibited from considering “extraneous matters,” as determined by the Senate parliamentarian.

In an effort to woo both moderate and conservative GOP votes, House leadership amended several aspects of the bill on Monday night. Among the revisions aimed at centrists included $85 billion in funding for tax credits to help Americans between 50 and 64 years old deal with rising premiums. The GOP leadership also deleted a provision that would have allowed consumers to place their tax credit in a health savings accounts, which could then be used for an abortion. Other revisions included work requirement for able-bodied Medicaid recipients, and state options for converting Medicaid programs into block grants.

Rep. Mark Meadows (R-NC), the House Freedom Caucus Chairman, told reporters the revisions weren’t enough to give Republicans the required votes to pass the House. With 27 members, the House Freedom Caucus remains a major barrier to the GOP’s healthcare reform plan. The Freedom Caucus maintains that it will not vote for a plan that mandates services a healthcare provider must carry. The caucus believes this stipulation prevents costs from coming down, but it can’t be changed under budget reconciliation rules.

On Wednesday, Rep. Lou Barletta (R-PA) announced he would vote for the bill following a meeting with Trump and Ryan. His flip comes after receiving a guarantee to have a vote on his bill that bans illegal immigrants from receiving tax credits.

“The president gave his full support to legislation I will introduce to deny health care tax credits to illegal immigrants, and the speaker promised to bring the bill to the House floor for a vote,” Barletta said in a statement. “Because my concerns were met, I will vote for the bill with the understanding that my bill will receive full consideration on the House floor next month.”

While the House bill ultimately failed, other options in the Senate remain. Senator Bill Cassidy (R-LA) has introduced a bill known as the Patient Freedom Act. The bill gives states three options: 1) Keep the ACA intact 2) Create a new state alternative 3) Design an alternative solution without federal assistance. The Senate resolution was introduced in January before it was sent to the committee on Finance. It includes five cosponsors; Lindsey Graham (R-SC), Mike Rounds (R-SD), Shelly Capito (R-WV), Johnny Isakson (R-GA) and Susan Collins (R-ME).

“Our plan represents a growing coalescence of Republican ideas on health care while returning power to states and fulfilling President Trump’s pledge to bring health care coverage for all,” said Cassidy in a statement following the bills introduction.

Following the release of the AHCA CBO score, Cassidy told the Washington Post the score was “eye-popping”

“President Trump said that he wants as many people covered as under Obamacare,” Cassidy said Monday. “He said that health care should be affordable. If there’s 14 million people losing insurance, of course it’s concerning.

While the bill replaces Obamacare, it mirrors the ACA’s taxes, benefits and subsidies, as well as the individual mandate and the stipulations on pre-existing conditions. Cassidy’s bill is the best attempt at reaching out to moderates from both parties, but most Democrats have opposed any repeal of Obamacare.

At the other end of the GOP Spectrum, Senator Rand Paul’s (R-KY) Obamacare Replacement Bill represents the most conservative option put forth by a Senate Republicans. Paul’s plan, which has a single co-sponsorship from Sen. Pat Toomey (R-PA) would strip away the ACA’s regulations and requirements, including the individual mandate and a restriction on inexpensive healthcare plans. The bill also gives states more control of their Medicaid programs but does not provide detail on the entitlements expansion. On February 15, Rep. Marshall Sanford (R-SC) introduced companion legislation, which included six House GOP cosponsors.

The bill mirrors a similar resolution that Paul attempted to pass in 2015.

While GOP lawmakers debate the best path forward, several organizations have voiced their support and opposition:

Key Organizations against AHCA

  • AARP
  • The American Hospital Association
  • The Federation of American Hospitals
  • The American Medical Association
  • The American Nurses Associations
  • Heritage Action
  • Club for Growth
  • Americans for Prosperity

Key Organizations favoring AHCA

  • Americans for Tax Reform
  • Association for Mature American Citizens
  • Council for Citizens Against Government Waste
  • Log Cabin Republicans
  • Independent Women’s Voice
  • Institute for Liberty
  • Market Institute
  • Small Business and Entrepreneurship Counsel

Following the bill’s withdrawal, Ryan spoke to the media about the future of the Affordable Care Act:

“Obamacare is the law, and it’s going to remain the law of the land until it is replaced,” Ryan said. “We did not have quite the votes to replace this law, and so, we’re going to be living with Obamacare for the foreseeable future.”

Danny Restivo Contributed To This Report

Legislative Update: Stem Cell Research

By Danny Restivo 3/30/17

Since the 1950s, doctors and other medical professionals had used stem cells extracted from bone marrow to help treat Leukemia patients. As technology evolved, scientists began to see human embryos as a prime source for developing healthy stem cells. However, with Roe vs. Wade, as well as the first “test tube baby,” the American public began raising questions on ethical grounds. In 1996, Congress passed the Dickey-Wicker Amendment, which prohibits 320px-human_embryonic_stem_cells_only_afederal funding for research using human embryos. Four years later, the NIH released guidelines on the use of embryonic stem cells at the request of President George W. Bush. A year later the president issued restrictions on federal funding for stem cell research on human embryos.  In 2005 and 2007, congress sent two different bi-partisan bills to Bush’s desk, which would overturn the public funding ban on stem cell research. However, each bill was vetoed and there weren’t enough votes to override the president’s decision.

In 2009, President Barrack Obama removed some funding restrictions on embryonic stem cell research with the executive order, “Removing Barriers to Responsible Scientific Research Involving Human Stem Cells.” For the next four years, opponents of embryonic stem cell research took their case to court. In 2013, the Supreme Court upheld a lower court’s ruling in Sherley v. Sebelius, which dismissed a lawsuit against federal funding for embryonic stem cell research.

In December, just a month before leaving office, President Obama signed the 21st Century Cures Act. The bill includes $4.8 billion in funding to the NIH for the advancement of biomedical science, including regenerative treatments like stem cell therapy. The Cures Act does permit the FDA to accelerate the stem cell treatment approval process. However, supporters of Stem Cell treatments believe it doesn’t go far enough in making stem cell clinics fall within guidelines.

While the federal government has revised its policy on embryonic stem cell research, several states have created policies and programs that support stem cell research and other regenerative therapies. Many of these institutions were created in the wake of President Bush’s order to limit federal funding for embryonic stem cell research. With federal funding approved in 2009, as well as more potential money from the Cures Act, state lawmakers may question how much state money allocates to these institutions.

State Initiatives

Map of the United States

California—The California Institute for Regenerative Medicine

In 2004, California voters approved the California Stem Cell Research and Cures, which gave nearly $3 billion dollars over ten years to stem cell research clinics. The bill was a result of the federal government’s attempt to limit funding for stem cell research, while also showcasing California’s aim to become a hub for medical research. Proposition 71 helped create the California Institute for Regenerative Medicine, which was supported by 59 percent of the electorate in 2004. Thirteen years later, CIRM has elicited mixed public opinion. While proponents point to several cases where CIRM research has directly saved lives, opponents cite a lack of progress in comparison to NIH stem cell trials (while President Bush’s restrictions targeted embryonic stem cell research, the NIH continued to fund trials in 2006). In a 10-year span, NIH fully or partly funded 571 trials with $13.4 billion. Conversely, CIRM funded 50 trials with $2.2 billion. Opponents also site a lack of oversight, as well as a focus on infrastructure investment compared to research trials. In 2020, the CIRM will run out of money and it’s unclear whether they will ask voters for public financing, or seek funding through foundations or donations.

Connecticut—Connecticut Stem Cell Research Program

In 2005, state lawmakers provided $100 million in funding for stem-cell research projects over a 10-year period. In October 2014, the Connecticut Department of Health transferred its Stem cell research program to Connecticut Innovations, the state’s venture capital fund that matches public and private partnerships. Under Connecticut Innovations, the Stem Cell Research Program changed its name to the Regenerative Medicine Research Fund. They have collaborated with Yale, UConn and other private entities throughout the region.

Maryland—Maryland Technology Development Corporation

Republican Governor Robert Ehrlich signed the Stem Cell Research Act in 2006, which helped create the Maryland Stem Cell Research Fund. Similar to Connecticut, the fund aims to provide grants and loans to private and public clinics performing stem cell research. While the Maryland Technological Development Corporation (TEDCO) administers the funds, the Maryland Stem Cell Research Commission Fund, an independent scientific peer review committee, directs funding. Since 2006, more than $130 million and 375 research grants have been committed. In May 2016, TEDCO approved the commission’s recommendation for 26 new proposals, totaling more than $8.4 million. In February, MSCRF—along with John Hopkins Medicine and BioCardia, Inc.—announced a patient suffering from a debilitating heart condition had moved into the final trial stage of treatment following stem cell treatment.

Minnesota—Regenerative Medicine Minnesota

In 2014, the Minnesota State Legislature approved a bill that allocates $50 million over a 10-year period to support regenerative medical research. The state also wants leverage the economic potential of regenerative medicine, and created a funding category titled “Bio-business Development.” In 2016, RMM has issued $1.17 million in bio-business grants. The fund also supports research, patient care and education.

New Jersey—Stem Cell Institute of New Jersey

In 2007, voters rejected a proposal to fund a $450 million bond referendum to support stem cell research in the Garden State. Although the constituency had rejected the proposal, the assembly had already authorized the state to borrow up $270 million to cover construction costs for five stem cell labs across the state. When voters went to the poll to reject the initiative, the state had already incurred more than $2 million in planning expenses and broke ground. Nonetheless, Governor John Corzine (D) pledged to continue with the plan, but he put the project on hold six months later. In 2014, the Human Genetics Institute of New Jersey launched their own Stem Cell Program, which was labeled as the institute’s successor.

New York—The New York State Stem Cell Science

The New York Stem Cell Science Program (NYSTEM) launched in 2007 after the lawmakers approved an 11-year, $600 million investment in stem cell research. Since 2007, NYSTEM has issued 24 requests for applications, and made 323 awards totaling $354 million to 35 different institutions. The NYSTEM program aims to further the agenda of the Empire State Stem Cell Board, which serves as an accelerator for scientific knowledge about stem cell biology. In January 2015, Governor Andrew Cuomo (D) announced a $36 million grant for three stem cell research groups. More than $15 million of that grant was earmarked for Weill Cornell Medical College to help develop a cure for Sickle-Cell Anemia by using patients’ own stem cells.

Ohio—The National Center for Regenerative Medicine

Formed in 2003 through funding from an Ohio economic agency, the National Center for Regenerative Medicine includes partnership among Case Western Reserve University, The Cleveland Clinic, University Hospitals Case Medical Center and the Ohio State University. The NCRM focuses on regenerative medicine and stem cell research, cellular manufacturing and clinical trials for cellular therapeutics. In additions, the NCRM has focused on heart disease, cancer, genetic disorders, neurodegernative disease using non-embryonic stem cells. Ultimately, the center aims to use its research to help replace diseased tissues and organs.

Texas—The Institute for Regenerative Medicine at Texas A&M

Established in 2008, the Texas A&M Institute for Regenerative Medicine is a joint venture between Baylor University, Baylor Scott & White Hospital, and the Temple Bioscience District. With funding from the NIH, as well as Texas’s Emerging Tech Fund, the Texas IRM facilitates collaboration between scientists and Central Texas clinicians in an effort to create therapies for degenerative therapies. The IRM also provides human adult stem cells, rat stem cells, and mouse stem cells to academic researchers worldwide.

Washington DC: The Week Ahead (3/27/17)

The Week Ahead

Lawmakers are turning to foreign policy and the budget after House Republican leaders’ and President Donald Trump’s stinging defeat last week over repealing and replacing Obamacare.
As Republicans regroup from being forced to pull the measure from the House floor amid prohibitive party defections, look for House appropriators to grill Health and Human Services Secretary Tom Price over what is next on the health-care front and proposed cuts in Trump’s bare-bones fiscal 2018 budget request.

Trump’s proposals to scrap funding for the Community Services Block Grant and Low Income Home Energy Assistance Program probably will face scrutiny when Price testifies Wednesday before the Labor-HHS-Education Subcommittee.

Also unpalatable to lawmakers is a proposal to cut National Institutes of Health funding to $25.9 billion from $32 billion, a $6 billion reduction that would bring the agency to its lowest level since 2002.

The request comes on the heels of bipartisan passage late last year of the 21st Century Cures Act, P.L. 114-255, which authorizes an additional $4.8 billion to the NIH over the next 10 years.
“We just passed the Cures Act just this last December to increase spending in the NIH because we really think we’re kind of getting close to some breakthrough discoveries on cancer and other diseases,” Speaker Paul Ryan said March 19 on “Fox News Sunday.”
“So that’s something that I think in Congress you’ll probably see some changes,” Ryan said. “NIH is something that’s particularly popular in Congress.”
The secretary also can expect to field questions over HHS’s suspension of social media and other outreach in the closing days of the Obamacare enrollment period. The department’s inspector general is investigating the matter.

Lawmakers step up their investigations into Moscow’s influence in the 2016 election, with more bipartisan cooperation in the Senate than in the House.

The Senate Intelligence Committee plans an open hearing Thursday on Russian disinformation and influence campaigns. Retired General Keith Alexander, a former National Security Agency director, and foreign policy and cybersecurity experts are scheduled to appear.
In the House, partisan skirmishing over the Intelligence Committee’s probe of Russian meddling in last year’s presidential campaign intensified after Chairman Devin Nunes canceled a hearing that had been planned for tomorrow.

Instead, Nunes wants follow-up questioning behind closed doors of FBI Director James Comey and NSA Director Mike Rogers. The panel’s ranking Democrat, California’s Adam Schiff, decried Nunes’s decision and is pressing for an open hearing with testimony from former Obama administration officials, including Sally Yates, the deputy attorney general that Trump fired earlier this year.

The House Armed Services Committee has scheduled a hearing tomorrow looking at Russia’s behavior in Europe. Army General Curtis Scaparrotti, head of European Command and NATO’s supreme allied commander, will testify.

Also tomorrow, the Senate Foreign Relations Committee plans a hearing on U.S. policy in Iran.

The House Foreign Affairs Committee on Wednesday plans to mark up a bill that would enhance sanctions affecting North Korea.

The Senate Judiciary Committee is scheduled to hold a markup today on Neil Gorsuch’s Supreme Court nomination, although the panel’s chairman Chuck Grassley said he anticipated the vote will be delayed a week. Senate Democratic Leader Charles Schumer has opposed the nomination and served notice that Gorsuch will face a filibuster. “He will have to earn 60 votes for confirmation,” Schumer said last week. Republicans have expressed confidence Gorsuch will be confirmed.

The Senate plans a cloture vote today on a treaty allowing Montenegro into the North Atlantic Treaty Organization. Senate Armed Services Committee Chairman John McCain of Arizona has championed the small Balkan nation’s entry into the military alliance, and has been stymied by Kentucky Republican Rand Paul, who has objected to quickly passing the measure by unanimous consent.

In the House, look for another vote to scrap Obama administration regulations, in this case Federal Communications Commission rules on broadband privacy.
House Leaders Pull Health Bill, Likely Ending Obamacare Repeal Effort

House Republicans have largely abandoned their plan to repeal the Affordable Care Act after failing to garner enough support among their own ranks for a bill to overhaul the health law.
After consulting with President Donald Trump, House Speaker Paul Ryan (R-Wis.) March 24 removed the repeal bill he endorsed from consideration. He told reporters the House would not again consider the legislation, titled the American Health Care Act, after weeks of trying to build support for it among Republicans.

Republican lawmakers will largely leave the ACA alone in coming months, Rep. Joe Barton (R-Texas), a member of the House Energy and Commerce Committee, told reporters March 24. He said there was not enough support for it, particularly among hard-line conservatives.

Those who designed the legislation said they were disappointed with the decision not to act on it and blamed conservative lawmakers who refused to back the bill.

“We tried. We tried our hardest,” Rep. Michael Burgess (R-Texas), head of the Energy and Commerce health subcommittee, told reporters. “There were people who were not interested in solving the problem. They win today.”

Support for the legislation among House Republicans eroded over the week, as hard-line conservatives demanded changes and moderates warned the bill could leave millions of Americans uninsured. Some of those who opposed the legislation told reporters they expect this failure will force House leaders to reconsider a more conservative approach to repealing the ACA.

Democrats said they were cautiously optimistic that the ACA, President Barack Obama’s signature legislative achievement, will remain law at least for the time being. House Minority Leader Nancy Pelosi (D-Calif.) said she hopes the failure of the AHCA will make Republicans more willing to fix the health law rather than bring it down.

Next Steps in Health Policy

The House Energy and Commerce Committee, tasked with overseeing many aspects of the ACA, including its Medicaid expansion provisions and insurance regulations, will not write another ACA repeal in the near future, Burgess said.

Rep. Tim Murphy (R-Pa.), a member of the GOP Doctors’ Caucus and the Energy and Commerce Committee, told reporters the panel would not revisit the ACA until after the summer. The committee will continue trying to reform Medicaid and will lean on the Trump administration to grant states more flexibility to experiment with their public health insurance programs for the poor.

Burgess said the committee will continue with its health agenda otherwise, authorizing the user fees that drug and medical device companies pay to the FDA for reviewing their products.

All of the Food and Drug Administration’s user fee programs expire Sept. 30 and Congress is preparing to consider legislation to reauthorize the programs for fiscal years 2018 through 2022.

President Trump challenged Democrats to work with Republicans on a future health bill. However, Democrats said they would not help Republicans dismantle the ACA and its consumer protections.

Liberals in the House are concerned Republicans will now repeal major parts of the ACA, including its prohibition on insurers raising insurance premiums for people with health conditions, Rep. Frank Pallone Jr. (D-N.J.), ranking member of the House Energy and Commerce Committee, said.

Push for Better

Many of the members of the House Freedom Caucus, a coalition of hard-line conservatives who delayed passage of the bill seeking further changes to the ACA, said they expect the defeat of the repeal bill to result in a “true repeal” of the health law.

Members of the group wanted to repeal aspects of Title 1 of the ACA, which includes the individual mandate, rules for the kind of coverage insurers must include in plans and community rating regulations.

Rep. Mo Brooks (R-Ala.) told reporters that repeal efforts will “have to start over looking for a real repeal.”
Republicans need to “get back to the drawing board and bring forward a bolder effort to replace the failing Obamacare with a plan to reduce costs by increasing choice and competition,” Rep. Jim Jordan (R-Ohio) said in a statement.

However, Republican moderates have made clear they will not support such dramatic changes to the health insurance industry. Rep. Charlie Dent (R-Pa.), head of the moderate Tuesday Group, told reporters market reforms must be “do-able and sustainable.” “There are parts [of the ACA] that need to be repealed, parts that need to be replaced. This needs to be reformed, repaired and overhauled, and some parts will be retained—we all know that,” he said.

Medicaid Managed Care in the Balance amid Failed Health Proposal

The debate over Medicaid’s financing may still have long-term effects on the future of managed care and delivery systems, despite the demise March 24 of an Obamacare repeal bill that would have overhauled how the federal health program is funded.

The GOP’s proposal would have ended the federal match for the $550 billion safety-net program and instead implemented per-enrollee spending limits, with the option of lump-sum grants to states that would have been locked in for 10 years. The Congressional Budget Office had estimated the original bill would strip $880 billion from Medicaid over the next decade. Medicaid experts, as well as industry officials and investors, had been closely watching how an overhaul would have slowed efforts already in progress to move health care from a fee-for-service system to one that’s more value-based, integrated and efficient.

With conservative leadership in HHS Secretary Tom Price and CMS Administrator Seema Verma at the helm promising increased freedoms for states to handle their own programs, the conversation will likely push forward despite the bill’s demise.
Delivery Innovation

Medicaid, the federal health insurance program for the poor and disabled, has seen drastic shifts in how it is run since its 1965 inception.

More than 76 percent of Medicaid beneficiaries are covered today under managed care plans, according to the Medicaid and CHIP Payment and Access Commission, allowing private firms to keep better track of their enrollees’ health outcomes and data. They often contract for specific services such as mental health care or case management. Rates are risk-based but must be “actuarially sound” and can include competitive bidding.

The current system can take into account funding changes for things like a Zika outbreak, opioid abuse epidemic or a recession.

John Zang Contributed to This Report

Industry Overview: Stem Cell Research

By Danny Restivo (3/17/17)

In 2016, Cell Stem Cell, a leading medical journal for regenerative medicine, released a study showing 570 stem cell treatment facilities in the United States. In their advertisements, many of these clinics lauded an ability to treat degenerative diseases with stem cells. Research suggests that stem cells might be useful in the treatment of certain diseases like Parkinson’s, ALS, or arthritis, among others. However, many scientists question the legitimacy of these claims, citing a need for more research and definitive trials. While the Food and Drug Administration allows clinics to inject patients with their own stem cells, they prohibit “manipulation” of these cells.

Stem cells became the center of controversy in 2001 after President George W. Bush banned federal funds from stem cell research using human embryos. In recent years, scientists have circumvented this ethical dilemma by culturing and rejuvenating stem cells from healthy adults.  Doctors can now take cells, such as a skin cell, and repurpose it back its early “pluripotent” stage where it can then turn into any cell, such as one that serves heart tissue. Whether these cells prove effective in treating degenerative conditions remains in question, but it hasn’t stymied enthusiasm from patients seeking treatment for chronic ailments.

The FDA allows clinics to inject patients with stem cells under certain criteria. However,many of these clinics flout 2000px-stem_cell_treatments-svgFDA regulations, including a stipulation on “minimal manipulation,” and a mandate that stem cells must come from a patient’s body. These clinics also sidestep guidelines by framing their work as experimental and research-driven. Furthermore, a recent study revealed many unregulated clinics use cells extracted from fat tissue, but the FDA says there’s no evidence they work. For example, some clinics advertise using cells from fat to help treat neurological disorders like Parkinson’s or Multiple Sclerosis. Unfortunately, fat cells do not normally control neurological movement. However, these clinics point to a number of personal stories that ultimately endorse stem cell treatment, including high profile athletes.

After experiencing a ligament tear in his elbow that ended his 2016 season, Los Angeles Angels pitcher Garret Richards opted to receive stem cell treatment instead of the invasive Tommy John surgery. In the case of Richards, doctors extracted bone marrow from his pelvis before injecting the plasma into his injured elbow. In February, Richards was at spring training throwing a fastball at 98 mph. New York Mets Pitcher Bartolo Colon received similar treatment in 2011 to help repair his shoulder, and continues to pitch at 43-years-old. While he’s never publicly admitted it, reports have surfaced that quarterback Peyton Manning sought stem cell treatment in Europe after suffering a neck injury with the Indianapolis Colts in 2011.

While some believe stem cells have rejuvenated athletic careers, others point to regenerative medicine’s lifesaving potential. Sarah Hughes, a 25-year-old from Texas, was born with a rare form of juvenile arthritis. Because of immense pain, she was hospitalized for a significant portion of her youth, weighing only 83 pounds at one point. In 2014, she began seeking stem cell treatment. She had her own stem cells cultured in a Houston lab before traveling to Mexico to undergo treatment. FDA law does not allow a clinic to inject her with manipulated stem cells in the United States. A healthy Hughes attended President Donald Trump’s recent address to Congress as the guest of Rep. Pete Olson (R-TX). Trump referenced the plight of Hughes and Megan Crowley, a 20-year-old Notre Dame Sophomore, during his speech. Like Hughes, Crowley was born with a rare disease and did not expect to live past a few years, but sought regenerative treatment.

In his speech, Trump referenced a need to cut federal regulations on companies seeking to innovate new treatment methods.

“..our slow and burdensome approval process at the Food and Drug Administration keeps too many advances, like the one that saved Megan’s life, from reaching those in need. If we slash the restraints, not just at the FDA but across our Government, then we will be blessed with far more miracles like Megan.”

In September, Hughes spoke in Maryland during an FDA-hosted public hearing on potential stem cell regulations. While certain speakers urged for looser stem cell regulations, others suggested caution and cracking down on those flouting the law. The FDA’s rules are pending, but the agency has only cleared one stem cell therapy product, Hemacord, which helps to restore low blood counts with patients having certain blood disorders. Conversely, the FDA officials have only sent one warning letter to a stem cell clinic in California.

Although progress looms, troubling stories regarding unregulated stem cell clinics have surfaced. In some cases, patients seeking alternative treatment have traveled to Russia, 13982409504_61de86a0ec_bMexico or Europe only to return home and to have their conditions worsened with malignant tumors. Doctors and researchers say stem cells can divide rapidly, creating tumors and other mutations. While most of these cases have occurred overseas, doctors and researchers see it as cautionary tale for a treatment that needs further research and oversight.

In August, the National Institute of Health announced it would lift its ban on funding research that uses human stem cells and animal embryos. The ban’s removal comes after research offered potential for growing human tissue and organs in animals. In one case, a team of researchers found that putting rat stem cells into the embryo of a mouse ultimately lead to a rat pancreas in the mouse. The NIH is now interested in injecting human stem cells into pig embryos in an effort to create human kidneys or livers. However, the NIH would continue a ban on funding any research that mixes animal embryos with human egg or sperm. Many people have questioned the ethics surrounding the injection of human stem cells into animal embryos, but the research could prove invaluable for people in need of a life saving organ transplant.

In light of these research developments, analysts believe the stem cell market will significantly increase in the next five years. Predictions vary, but a March report from a French-based research firm says the stem cell therapy market will grow by 11 percent from 2016 to 2021, totaling $145.8 million. Another marketing research firm predicted the entire global stem cell market hitting $297 billion by 2022. Both reports cited an increase in private and public partnerships, the evolution of stem cell therapies and a belief that looser regulations in the United States will help accelerate the market.

While President Trump has not made definitive public statements on embryonic stem cell research, his Secretary of Health and Human Services, Tom Price, has long opposed federal funding from embryonic stem cell research. A view echoed by Vice President Mike Pence. Now that embryonic stem cell research has taken a back seat to pluripotent stem cell research, it’s unclear what the administration’s stance is on regenerative medicine.

DMGS Health Care Update 3/10/17

ACA Repeal Could Cost at Least $594 Billion: Joint Tax Panel

Repealing the tax provisions funding the Affordable Care Act will cost the government at least $593.7 billion over the next decade, according to the Joint Committee on Taxation.

That figure doesn’t include the revenue loss from several provisions, including funds tied to repealing the individual and employer mandates to buy health coverage. Those revenue scores will come from the Congressional Budget Office, which hasn’t yet released those numbers or the cost of the House Republican plan to replace the health care law. The House Ways and Means and Energy and Commerce committees are scheduled to mark up the replacement legislation March 8.

Democrats are criticizing House leadership for going ahead with legislation without knowing how much it will cost. Minority Leader Nancy Pelosi (D-Calif.) said in March 7 statement, “Members must not be asked to vote on this legislation before the CBO and the Joint Committee on Taxation have answered the following questions about your legislation in 2018 and 2019, over the 10-year budget window, and in the decade after: How will this bill measure up to the Affordable Care Act and current Medicaid law on coverage, quality, and cost? And how will it impact Medicare solvency?”

High-Earner Taxes

Repealing the net investment income tax (NIIT), which will cost $157.6 billion, is one the largest revenue losers in the plan to repeal the health care law. The 3.8 percent tax on investment income for wealthy individuals has raised more money than the JCT originally expected.

Some of the revenue losses from the tax’s repeal are less than previous projections about what the tax would raise. Original JCT scores of the tax, from 2010 (JCX-17-10), grouped the figures with the 0.9 percent additional Medicare tax for high earners.

The 2010 scores projected that those two taxes would raise $38.5 billion in 2019, but the repeal scores show that the loss to the government would be only $17.6 billion that year. Not until 2025 would the loss reach roughly $38.2 billion..

Estimates that come in lower than some previous projections are advantageous to Republicans, as they seek to limit the amount of revenue they need to raise to offset the loss from repealing the taxes funding Obamacare.

The JCT broke out the estimates for the repeal of the tax provisions into several documents: the deduction for highly paid employees (JCX-6-17), the tanning tax (JCX-8-17), the fee on insurance providers and branded pharmaceuticals (JCX-10-17), the net investment income tax (JCX-12-17), and several other provisions including the medical device tax and the “Cadillac tax” on high-cost health plans (JCX-16-17).

W&M Approves GOP Health Care Bill; Changes Expected

Lawmakers in the Senate and House expect more changes to be made to legislation that would replace the Affordable Care Act and repeal many of its taxes.

The American Health Care Act, approved by the House Ways and Means and Energy and Commerce committees March 9 on Republican-only yes votes, nevertheless has drawn significant criticism from a number of Republicans on both sides of Capitol Hill. Some of those lawmakers protest creation of what they view as a new entitlement program through advanceable, refundable tax credits to buy health insurance and failure to fully repeal all of the ACA’s taxes.

Senators will have many opportunities to make changes to the House-proposed plan, Majority Leader Mitch McConnell (R-Ky.) said at a Politico event on March 9

Despite criticism of the package by Republicans, McConnell spoke positively of the process beginning to play out.

“This week the House unveiled its bill to repeal and replace Obamacare and begin consideration through the committee process,” he said later in the day on the Senate floor. “It’s an important step toward keeping our promise to the American people, and it not only repeals and replaces Obamacare, it includes the most significant entitlement reform in a generation and provides needed tax relief to American families as well as health care consumers.”

Across the Capitol, House Ways and Means Committee Chairman Kevin Brady (R-Texas) told reporters that Republicans are “delivering for President Trump on his health care plan.”

Next Steps

Ways and Means approved its language in a 23-16 vote along party lines, rejecting Democratic calls to postpone the markup. Energy and Commerce then cleared its health care bill by a vote of 31-23 after a 27-hour session that saw tempers flare as Democrats on that panel tried to delay the legislation.

The House Budget Committee will blend the two committee bills, and that legislation will go through the Rules Committee process before heading to the House floor for a vote.

If the measure clears the House, it will move to the Senate for approval. Since lawmakers are using the budget reconciliation process to pass the measure without risking a Senate filibuster—reconciliation bills can avoid filibusters—the bill must be careful to fall within what lawmakers call the Byrd Rule. That convention requires that all measures passed through reconciliation must relate to revenue or spending. Two items at risk could be the 30 percent premium hike paid to insurers by individuals who go without health care for at least two months and a rule collapsing the number of age brackets from five to three.

“We’ve been taking advice and guidance from our Senate Republican colleagues on this,” Brady said. “That shaped our decision making on those two issues.”

Five Parts

Ways and Means leaders broke their committee’s markup into five parts, covering several provisions including an increase in the executive compensation tax deduction for insurers, the elimination of a 3.8 percent tax on investments for taxpayers in high-income brackets and the repeal of a 0.9 percent additional Medicare tax for high earners.

The two latter changes combined would cost the government nearly $275 billion over 10 years, based on Joint Committee on Taxation (JCT) estimates. According to Rep. Sander Levin (D-Mich.), the 400 highest-income households in the U.S. would reap 80 percent of that tax break.

Democratic lawmakers at the markup categorized the health care bill as a “windfall tax break for millionaires.”

They viewed the bill’s repeal of an annual fee on businesses that manufacture and import branded prescription drugs as a giveaway to “Big Pharma.” Eliminating the fee runs afoul of President Donald Trump’s promise to crack down on the drug industry, which he has said is “getting away with murder,” Rep. Lloyd Doggett (D-Texas) said.

Price Cut

Rep. David Schweikert (R-Ariz.) said repealing the fee—essentially an excise tax—would result in lower drug prices for consumers. Thomas A. Barthold, the JCT’s chief of staff, said that would be the predicted response from an economics standpoint, but he added that market outcomes aren’t guaranteed. Rep. Mike Thompson (D-Calif.) suggested that a measure be added to the bill to ensure that the estimated $24.8 billion tax break over 10 years actually passes to consumers.

Democrats scolded Republicans for not giving committee members enough time to digest the health care replacement and said that voting on the bill before getting a score from the Congressional Budget Office was irresponsible. The CBO score, expected at the beginning of next week, will calculate the cost of the bill and estimate how many Americans would lose coverage. Approving a bill without having those facts is like “making decisions in the dark,” said Rep. Judy Chu (D-Calif.). “This is not right.”

House Lawmakers Look to Freeze Medicaid Expansion by 2018

A trio of influential House Republicans is pushing to freeze the Affordable Care Act’s Medicaid expansion funding by 2018, two years earlier than Republican leaders previously proposed.

The change could win over a key voting bloc of conservatives in the House but is opposed by moderates, who warned March 9 that senators from the 31 states that expanded their health insurance programs for the poor are likely to oppose it, too.

Rep. Joe Barton (R-Texas) told reporters March 9 he plans to introduce an amendment to the House Republicans’ ACA repeal bill that would close the window for states to earn a greater share of federal dollars for expanding their Medicaid programs at the end of 2017.

Barton and other lawmakers first offered, then withdrew the amendment during a markup of the repeal bill by the House Energy and Commerce Committee March 9 at the behest of the panel’s chairman, Rep. Greg Walden (R-Ore.).

“I promised the chairman I would be supportive of the bill at committee and he didn’t have time to get it scored,” Barton said.

House Speaker Paul Ryan (R-Wis.) said changes will need to be made in the Affordable Care Act repeal emerging from two House committees, but he expected those changes to be small.

At his weekly televised briefing with reporters March 9, Ryan said he expected some changes to be made in response to a budget impact score from the nonpartisan Congressional Budget Office, which isn’t expected until early in the March 13 week.

“When we get our score, I’m sure we’ll probably have to make some tweaks and adjustments. That happens every time we do reconciliation,” Ryan said, referring to the fast-track budget process Republicans are using to make the bill filibuster-proof in the Senate.

Ryan said the bill will also go through two more committees before a vote on the House floor, the House Budget Committee and the House Rules Committee.

“The bill will be out there for three weeks, to be looked at,” he said. The Energy and Commerce Committee as well as the Ways and Means Committee marked up the bill March 8 and March 9.

The change to freeze expansion funding by 2018 could save the government more than $100 billion over six years, Barton said. However, that’s money that would’ve gone into state Medicaid programs to give poor people insurance. Also, tax credits to help people purchase insurance don’t start until 2020 under Republicans’ repeal bill, meaning poor Americans who fall off of Medicaid due to the freeze would get no assistance from the federal government for as long as two years.

Compromising Compromise

Giving states three years to continue growing their Medicaid rolls was a compromise between lawmakers from states that chose to take the added federal dollars and those that rejected the money, Rep. Michael Burgess (R-Texas), chairman of the House Energy and Commerce health subcommittee, told reporters March 9.

“We’re at the cusp of doing major entitlement reform, the likes of which hasn’t happened since Medicaid was first created; you can’t get there without solving the problem between expansion and nonexpansion states,” Burgess said.

Barton, the vice chairman of the Energy and Commerce Committee, and Rep. Marsha Blackburn (R-Tenn.), who served on President Donald Trump’s transition team, told reporters they plan to offer the amendment along with one to establish work requirements for Medicaid beneficiaries at a Rules Committee hearing that must take place before the full House considers the health-care measure. They’re joined by Rep. Richard Hudson (R-N.C.) in originally introducing the amendments.

This change is supported by the Republican Study Committee, the largest voting bloc among House conservatives with more than 150 members who opposed a previous version of the ACA repeal bill. Members of the House Freedom Caucus were similarly supportive of the change.

However, Rep. Charlie Dent (R-Pa.), chairman of the moderate House caucus the Tuesday Group, said March 9 that freezing Medicaid funds earlier will prove unpopular among lawmakers like him, who represent expansion states. He said the change could garner support from hardliners in the House, but would hurt the legislation’s chances in the Senate.

“It’s going to be a big problem,” Dent said.

John Zang Contributed To This Report

Washington DC Policy Update 3/10/17

Republican Health Bill Clears Hurdle as House Panels Approve

The second of two key congressional committees cleared a Republican health care bill, moving the legislation to repeal and change many key parts of Obamacare a step closer to a full vote in the House of Representatives.

The House Energy and Commerce Committee, after a 27-hour session that saw tempers flare as Democrats tried to delay the legislation, approved the bill by a 31-23 vote with only minor changes. The vote came after the Ways and Means Committee wrapped up 18 hours of debate on its piece of the proposal, which it passed without any changes. The two measures will be combined and sent to the Budget Committee before heading to the floor.

The bill, the American Health Care Act, would repeal Obamacare’s requirement that individuals have, and employers offer, health coverage and would eliminate many taxes on the wealthy, insurers and drugmakers used to fund Obamacare. The proposal includes a refundable, age-based tax credit to help people buy insurance and a wind-down of an expansion of Medicaid over a period of years.

Critics of the plan are worried people will forgo insurance without a mandate and that only the sickest will sign up. The Republican bill attempts to address that by allowing insurers to charge people as much as a 30 percent surcharge if they don’t maintain continuous coverage, though that may not be enough to entice younger, healthier people to buy insurance.

The AHCA still has major hurdles to overcome as conservatives, doctor and hospital groups, the main lobbying group for seniors and insurers have all expressed concerns or gone as far as to oppose the measure outright. Conservatives have panned the proposal because, while it repeals many parts of Obamacare, it also provides what they still see as large entitlements. Groups that lobby for doctors, hospitals, and insurance companies say the AHCA would not adequately fund Medicaid, the government program for the poor, and that the tax credits would not be high enough.

Conservative Opposition

Conservatives have opposed the bill’s same provisions — but because they say they go too far. Representative Joe Barton, a Texas Republican, proposed an amendment to try to address those concerns and potentially help bridge a divide within the GOP that has threatened the party’s health-reform efforts.

He withdrew the amendment at the request of Greg Walden, chair of the Energy and Commerce Committee, so lawmakers could continue to work on it for possible reintroduction, Barton said after the final vote.

“I’m not going to embarrass my chairman,” said Barton, a former chair himself.

The amendment would have frozen the Medicaid expansion next year instead of in 2020, after the mid-term elections. Thirty-one states have expanded Medicaid under Obamacare.

“There are probably some Republicans from the Medicaid expansion states that had problems with my amendment, and I respect that, but there are a lot of conservative groups, including the Republican Study Committee and the Freedom Caucus, that were very supportive,” Barton said.

His proposal may be a tough sell in the Senate, where Republicans have only a 52-48 margin and some lawmakers, including Republicans from states that expanded Medicaid, do not want to strictly limit the program.

Defense Bill Stalled as Senate Awaits Supplemental, Obamacare Repeal

A $580 billion Department of Defense spending plan will probably remain on hold while the Senate tackles other priorities like repealing the Affordable Care Act and resolving unfinished appropriations measures, lawmakers said.

Senate Republicans said Majority Leader Mitch McConnell (R-Ky.) hasn’t laid out plans detailing when he will try to take up the House-passed Defense bill, they said, and the outlook for wrapping up work on the fiscal year 2017 spending bills is also being complicated by the late arrival of President Donald Trump’s request for supplemental monies for the Pentagon and a border wall.

The developments suggest it is increasingly likely that the 2017 bills won’t get wrapped up until much closer to the April 28 deadline, when federal funds are due to expire, Republicans said.

House and Senate leaders put off finishing the bills late last year in order to give President Donald Trump more say in federal spending decisions. However, the continuing resolution Congress passed in December to fund the federal government is due to expire in April. Money for the federal agencies will lapse unless new legislation is passed.

Senate Republican Conference Chairman John Thune (R-S.D.) said March 9 that the Republican Party’s priorities are now to reserve floor time for the ACA replacement legislation the House is moving and the nomination of Neil Gorsuch to serve on the Supreme Court. Action on other items before lawmakers depart April 6 for a two-week recess are possible, but a large spending package is an item likely to wait in the wings until after the break, he said.

“[I]f there’s a window somewhere to wedge in [something] dealing with these undone appropriations bills from last year, then I’m sure Mitch will try to find a way to do that, but I think right now those are the two top priorities,” Thune told reporters after a closed-door meeting of Republicans.

Details of Bills

The House passed by a large margin the previous day the massive Defense bill (H.R. 1301) and sent it to the Senate for follow-up action. House Speaker Paul Ryan (R-Wis.) said he does not plan to bring up any of the other 10 unfinished appropriations bills but instead will let McConnell develop and execute a strategy for finishing the measures.

Under discussion, lawmakers said, is a scenario in which many of the non-defense appropriations bills are added to the Defense measure and then put to a vote. Such an omnibus then would be sent back to the House for final action, they said.

However, appropriators said they still are fighting against calls for lawmakers to simply pass Defense and then provide another CR for non-defense programs. The only FY 2017 measure passed by both chambers is the Military Construction and Veterans Affairs bill.

Lawmakers acknowledged there might be a middle ground where some bills are attached to Defense and other programs are funded by a new CR. Such a “cromnibus” was used in prior years to wrap up appropriations work.

However, both Democrats and Republicans on the Senate Appropriations Committee said they continue to negotiate the final details of all 10 outstanding bills. Among those that are said close to completion are the bills for Legislative Branch, Agriculture, and Transportation, Housing, and Urban Development priorities.

Sen. Jerry Moran (R-Kan.), who chaired the Agriculture Subcommittee in the previous Congress, said the agriculture bill is close to completion but issues related to the regulation of cigarettes and cigars remain unsettled. In the House, appropriators are trying to preserve language to keep the Food and Drug Administration from applying retroactively rules affecting e-cigarettes. However, such issues again are likely to be settled by leadership, he said.

“I’d expect again in the ’17 bill it will be determined by higher authority,” Moran said.

Similarly, regulation of the trucking industry is said to be a holdup in resolving the final version of the THUD bill. THUD Subcommittee Chairman Susan Collins (R-Maine) declined to discuss specifics but said progress is being made in talks with the House.

Sen. Roy Blunt (R-Mo.), chair of the Labor, Health and Human Services Subcommittee, said he and ranking member Sen. Patty Murray (D-Wash.) also are close to a deal on what is typically one of the most difficult measures to pass.

“Sen. Murray and I are largely in agreement and we’ll be ready to get an agreement if we are given the opportunity to move forward,” Blunt said. “I think it would be a real mistake not to do that.”

Waiting on Trump

However, Republicans acknowledged that McConnell’s next moves in part reflect the timing of Trump’s FY 2017 supplemental, which is said to be likely to seek another $30 billion for Defense and border security.

Senate Appropriations Committee Chairman Thad Cochran (R-Miss.), who met with White House budget chief Mick Mulvaney on March 9, and other lawmakers said they are uncertain about whether the president’s request will land on Capitol Hill the week of March 13.

Republican leaders could package the supplemental along with Defense and other regular spending bills, they said. However, the exercise could become even more problematic if Trump proposes cuts to the non-defense spending bills in order to pay for the border wall and other items, they said.

Collins, however, said she does not think that item, health-care legislation or any other matter will prevent Congress from dealing with the spending bills.

“I don’t think so,” Collins said. “We have to do it, and the deadline is looming at the end of April and the sooner we get it done the better. We have to start on next year’s budget and there may be many changes proposed by the administration.

“If I were the administration, I would want to get this year’s [bills] behind us,” she said. “We should have done them in December when many of us wanted to do them.”

 

John Zang Contributed To This Report

 

 

 

Full Text of NJ Governor Chris Christie’s Budget Address from 2/28/17

State Fiscal Year 2018 Budget Address

This is the ninth time I’ve come before a joint session to address our state’s budget. Each time I’ve had specific goals in mind; guiding principles to follow. Government should get smaller. Taxes shall not be increased. Our core commitments must be met. Each time, with varying degrees of struggle, harmony and acrimony, we have reached these goals – I have stuck to those principles. Let me assure you that today will be no different.

The journey to greater fiscal health over the last eight years, from the depths of the recession to our economic growth of today, has taken many twists and turns. In 2010, New Jersey was in the middle of a fiscal crisis created by the great recession and a history of reckless taxing and spending by state government.

When I entered office, the State faced an immediate $2.2 billion mid-year fiscal deficit.  Even far worse was the breathtakingly large $10.7 billion projected budget shortfall for FY 2011. We faced a staggering $13 billion two-year budget gap.

Welcome to the old days in Trenton.  I was elected in 2009, and reelected in 2013, to sweep away the practices and the policies that brought us to the fiscal brink in 2010. Regular tax increases that dragged our state to zero net private sector job growth from 2001-2009. Exploding state spending and government employment that grew not only our expenses for the present but an unsustainable set of obligations for the future. A regulatory scheme that choked businesses, acted as a hidden tax on all of us and frustrated our citizens simply trying to get a permit.

The budget was also propped up with endless gimmicks. Billions of temporary federal stimulus funds, and the fantasy of temporary income tax hikes, corporate surtaxes, temporary employee furloughs.  One shots used in a desperate attempt to make New Jerseyeans believe that the state was on solid ground.

Let me assure you it was not. Despite plummeting tax revenues even in the face of dozens of tax rate increases, state spending increased over the previous eight years.  As the national economy faltered, spending in Trenton soared –increasing 58% from 2001 to 2008, over 8% per year, each and every year. And despite all that spending, barely any payment made to a pension system that grew less and less stable by the year.

The temporary plugs did what all things temporary do – they quickly faded away leaving a huge budget hole. What did Trenton do back in the old days? Tell the taxpayers that they would fill it. Yes, I ran for Governor in 2009 promising that those days would not continue and in February of 2010 we began the work to make that promise the reality it is today.

I cut government.  And, it was overdue. Deep, but necessary, cuts were made to every department of state government. Today, that failing and bloated state government that I inherited in those cold and dark days of 2010, is more than 11,000 employees smaller. While shrinking the government workforce, we’ve also shrunk the actual footprint of government infrastructure. The State has vacated 1.5 million square feet of State-owned properties in the past seven years – many being sold and bringing in revenues of more than $10 million. Lease payments have decreased by $15 million annually. We have sold and shuttered those thousands of government cubicles to try to insure that the 2009 promise of a smaller government made and kept to our taxpayers cannot be broken by a new administration swollen by frivolous election year promises. The people in this room are the only folks who may be able to spare the public the exploding tax rates which would inevitably come in the wake of someone actually trying to keep those election year fantasies. We set the tone for smaller government at the state level and it has relentlessly spread to every level of government. I committed to leaving our state better than I had found it in 2010, and through these actions, we have done it.

The 2% property tax cap that we worked together to enact is doing its job.  Since I took office, property taxes have gone up on average only 2.04% per year.  Compare that to the 7% per year that they went up in the decade before I took office.  A better New Jersey than we inherited in 2010 on property taxes.

And local governments are learning the same lessons that we’ve been demonstrating in Trenton.  There are 21,000 fewer employees in county and local government jobs today than there were when I took office. In total, that means 32,000 fewer jobs at all levels of government today than there were in 2010. This did not happen by accident – it is an underreported fact that should give our citizens more faith that we can do more with less

We cut spending, we cut red tape, and we unleashed the potential of our businesses with targeted tax cuts. At the same time, we honored our commitment to provide for our most vulnerable New Jerseyans.  And because of the hard decisions made over the past seven years and the targeted investments we made to grow the economy and not grow government, I am proud of the FY 2018 budget I am presenting to you today.

Our discretionary spending is $2 billion less than it was in 2008.  We are once again providing the most funding to New Jersey schools in State history.  School aid, municipal aid, and direct property tax relief programs account for $17.4 billion in my FY18 budget proposal. That is nearly half of the budget that will go to offset the burden of property taxes on our citizens.

I will make a pension payment of $2.5 billion – $647 million more than the fiscal 2017 amount. And due to a responsible piece of legislation I signed into law, we will now make those payments quarterly. Just the latest reform to our pension system to add to our 2010 and 2011 reforms. We have done more for the solvency and stability of the pension system than any Governor in history despite all the empty rhetoric to the contrary. And there is more to come.

And most importantly, we are once again balancing our budget by being responsible stewards of the State’s finances, rather than through budget gimmicks or by adding even more taxes on the backs of our citizens.  This will be the first Governorship in memory where no taxes were raised to add money to the general fund – no more endless feeding of a beast that would never be satisfied under the old ways.

In 2009, the budget was also balanced through 13.2% of one shot revenues. Today, that is down to 2%. We are making due with less, rather than simply demanding more from our citizens.  Trenton will be a much more welcoming fiscal climate for the next Governor in 2018. We have slayed the ghosts of fiscal irresponsibility that haunted this house in 2010.  We have established a new baseline for government.

But the challenges to maintain a healthier fiscal climate in New Jersey require discipline to keep moving toward smaller government and lower taxes. This is never easy and the temptation to go back to our old ways, which led to no new private sector job growth for a decade, will be around every corner in this election year.

The next Governor cannot take their eye off the ball and slide back into bad spending habits, bad budgeting and the unrealistic expectation that more taxes can be tolerated by our citizens and businesses. The public will not tolerate it and they will kick out those who do it. If you do not believe it, I refer you to our history books and the elections of 1991, 1993 and 2009. Past is prologue.

The results of this fiscal discipline and holding the line on taxes are undeniable.

Since I took office, New Jersey has seen seven consecutive years of private-sector job growth.  We have created 282,000 private-sector jobs.  We have recovered all of the jobs lost in the Great Recession and have grown an additional 33,000 jobs on top of that. And we would have grown even faster if we had followed the prescription that other states followed by lowering taxes even more. We now have steady job growth in a private sector that was moribund for 10 years before we arrived to cut budgets and hold the line on taxes.

We began to improve New Jersey’s uncompetitive business tax climate with meaningful tax cuts and tax reforms that businesses had been begging for and were stalled in Trenton for years before we pushed them through and into law.  Those tax cuts have provided more than $3 billion in tax relief to our business community.

This is on top of the $1 billion in tax relief that we’ve provided for our employers through reforming our bankrupt unemployment insurance trust fund.  For years Trenton had stolen money from this fund to prop up their irresponsible spending. When we arrived in 2010, the fund was billions in debt to the federal government and rife with fraud and abuse.  We put an end to it. We amended the constitution so that politicians will never be able to steal money from this fund again. This fund is meant to be a rainy day fund for our citizens facing the tragedy of a lost job, not a piggy bank for irresponsible Trenton spending.

Now, at a positive balance of $1.9 billion, New Jersey is well ahead of schedule and we will save employers more than a $1 billion in taxes over the next five years.  When I took office, the unemployment rate was 9.8%.  Today it is 4.7%.  That is more than cut in half. That is the lowest it has been since 2008.  New Jersey’s unemployment rate is now below that of the nation as a whole; that was simply unthinkable when we entered office in 2010. New Jersey has come back and our economy is consistently growing once again. The numbers prove it. A better New Jersey in 2017 for employment than we inherited in 2010, with more New Jerseyans working today than at any time in our history.

With the Legislature, we passed the Economic Opportunity Act to make New Jersey a more competitive place again for businesses to invest, build and grow jobs. 269 projects have been approved bringing $7.3 billion in private investment to the State, while creating and retaining more than 61,000 jobs for our citizens. This was another bipartisan effort to reduce taxes – with even more to come.

And we are creating good jobs.  Since I took office, the personal income for New Jersey citizens has risen by 25%, a strong growth rate of 3.5% annually.  This is due to an aggressive approach by my Administration in recruiting the nation’s top industries to our State, by showing the nation and the world that New Jersey’s infrastructure, geography, and higher education institutions are second to none.  We have made New Jersey a place where government was getting smaller, taxes were going down and budget stability returned. What happened as a result? Our businesses in America started calling New Jersey home again.  Amazon. Forbes. JP Morgan Chase. Barclays. Sharpie. Rubbermaid.  All coming to New Jersey to do business.

In 2016, Amazon announced its plans to open 2 more fulfillment centers in New Jersey – an 800,000-square-foot fulfillment center in Carteret and a 600,000-square-foot center in Florence. The e-commerce giant opened a 1-million-square-foot fulfillment center in Robbinsville in 2014. In 2015, Amazon increased its investment with a state-of-the-art fulfillment center in Carteret. Amazon currently has 5,500 full-time workers in New Jersey. The new facilities will add another 2,000 full-time jobs, making Amazon one of the State’s top 20 employers.

Also in 2016, Newell Brands, the maker of Sharpie markers and Rubbermaid containers, announced it will relocate its headquarters from Atlanta to Hoboken to capitalize on East Coast talent for its growing e-commerce operations. Newell Brands decided, as Choose New Jersey says, that our state is highly educated and perfectly located.  In 2015, JPMorgan Chase announced a move of more than 2,100 jobs from Manhattan to Jersey City, bringing the total number of JPMorgan employees in Jersey City to about 7,000.  Forbes Media opened its new offices in 2014. Based in Manhattan for decades, the prominent media company relocated 350 jobs across the Hudson River to a mixed-use development site in Jersey City with the assistance of the Grow NJ Program.

Working to attract one critical business after another, we have rebuilt New Jersey’s job market with tax incentives, tax cuts and smaller, more reliable government.  We also needed to continue to maintain and modernize our transportation infrastructure. While we had spent over $22 billion on infrastructure in my first seven years as Governor, I knew we needed to do more. The only way to do that was to increase the gas tax. But I steadfastly refused to do that without tax cuts that equaled or exceeded any gas tax increase. The pundits and some politicians said that achieving tax fairness and building our infrastructure at the same time was impossible. Once again, by standing our ground and building consensus, we proved them wrong.

I signed a comprehensive tax reform bill, unlike the prior countless bills that only increased taxes that were sent to me by the Legislature, which I have vetoed time and time again.  This bill was different than the dozens that had been sent to me before by this Chamber.  This time the taxpayers had someone on their side.  And in exchange for increasing the gas tax by $1.2 billion, which is borne by both our citizens and the thousands of out-of-state commuters who traverse our state and use our roads on a daily basis, we were able to cut taxes $1.4 billion and reduce the tax burden that had been strangling the long term affordability of New Jersey.

What did we do?  We reduced the sales tax for the first time in decades. We provided an enormous tax cut for retirees so they can stay in their homes and end the unfairness of double taxation of retirement income. We eliminated the death tax so that people do not flee our state to avoid us fleecing them at life’s end.  We provided tax savings for our loyal veterans.    We increased the EITC to 35% of the federal tax credit.  We now provide one of the richest earned income tax credits in the entire nation, to support our working poor. Everyone who works today or has worked in our state saw their taxes cut. I am sure New Jerseyans could barely believe their eyes or ears.

The new Transportation Trust Fund reauthorization that we reached together will ensure a 25% increase in funding for the maintenance and improvement of the State’s transportation network.  The new TTF will provide $32 billion to maintain and upgrade our roadways over the next 8 years.  The largest and longest transportation investment program in State history. I committed to leaving New Jersey better after eight years than how I found it. Through a bill which lowered taxes and increased funding for our roads, bridges and mass transit, we are keeping that promise too. In 2010, we inherited a state where funding for infrastructure had not been increased for 22 years. In 2017, we have a state with funding increased 25% and the longest infrastructure improvement plan in state history. A better New Jersey today than we inherited in 2010.

To jumpstart this investment and create jobs, I am proposing today a $400 million supplemental appropriation in this fiscal year to address bridge deficiencies and the state of good repair for roads in all of New Jersey’s 21 counties. And we will spend these funds and make these investments quickly over the next 100 days. We will expedite technology enhancements and other infrastructure improvements for New Jersey Transit. This $400 million will allow the NJ Department of Transportation to deliver the largest construction program in state history starting right now.  The result will be smoother roads, safer bridges and a more technologically sound mass transit system – all great things for New Jersey commuters.

In 2013 we provided $1.3 billion in capital funding for 176 projects at 46 of our higher education institutions.  Last June, we provided an additional $180 million for 35 more projects targeting programs that boost technology, support the health sciences and renovate laboratories at learning institutions across the state.  Combined, that is a $1.5 billion investment in our children’s future, and in helping our State maintain its status as a highly educated center of industry. We are the first Administration in over 25 years to invest in expanding and modernizing our colleges and universities. Once again, keeping our promise to leave New Jersey better in 2017 than we found it in 2010 when we arrived. More seats at our colleges and universities. More modern classrooms and facilities. Better schools for our citizen. In higher education a much better New Jersey today than we inherited in 2010.

A private sector growing jobs. A public sector shrinking jobs, cutting taxes and investing in a more vibrant economy. A long-term commitment to our transportation infrastructure. A strategic investment in our higher education campuses to bolster a stronger, smarter workforce and to keep New Jersey’s students in New Jersey.  Investment in the state’s bricks and mortar infrastructure has never been higher. But just as importantly, investment in the social infrastructure to protect the State’s most vulnerable has also increased over the past seven years even with the smaller government we have achieved.

My FY18 budget increases funding to NJ FamilyCare, the State’s Medicaid program.  Since New Jersey expanded FamilyCare in 2014, we have seen an additional 487,000 uninsured New Jersey residents gain coverage.  In light of political pressure to do otherwise, we stood up for our neediest citizens. Not only did this expansion provide reliable medical coverage to many formerly uninsured residents, the infusion of federal dollars has generated meaningful savings to the State budget.  This expansion of NJ FamilyCare has led to a dramatic decrease in uninsured residents.  As such, this will allow for a $25 million reduction in State funding for Charity Care in fiscal 2018.

However, we continue to be concerned about a doctor and nurse shortage in our state. So, we are investing a portion of this savings into our Graduate Medical Education program. The program will increase by $30 million in combined State and Federal funds this year. This will ensure that New Jersey residents have continued access to well-trained doctors and encourage those doctors to develop roots and make New Jersey their permanent homes. In this Administration, we have opened medical schools, made Rutgers a giant in healthcare education and training and improved Rutgers funding from number 55 to number 18 in the nation. Once again, leaving New Jersey better than we found it.

As a result of reforms initiated under the Medicaid Comprehensive Waiver, adults with intellectual and developmental disabilities who are living independently or with a family are becoming eligible for substantially increased in–home support services for which the State will receive a federal match. This additional $100 million in matching funding will grow the program to an estimated $200 million with expanded services.  For the developmentally disabled community and their families, this will give them even more help to bring great joy to their lives. This particularly vulnerable community, a community with great potential for growth, will not be forgotten or left behind by this Administration. Once again, leaving New Jersey better than we found it in 2010. In FY 2018, we will invest $20 million to fund lead remediation assistance for low- and moderate-income households in New Jersey, and to meet the funding needs required by new regulations to identify elevated blood-lead levels in children. It was this Administration that reacted quickly and decisively to deal with this issue by adding immediate funding last year. We continue that commitment to our citizens health in this budget.

Fighting the addiction crisis facing New Jersey has been and will continue to be in the next 10 months a top priority in my tenure as Governor.  We have made unprecedented increases in the amount of funding provided for addiction services since I took office, increasing the amount of combined State and federal funding by 52%, from $282.7 million in fiscal year 2010 Appropriations Act to a recommended $430 million in my FY2018 budget.

When I came before you last month, I spent a majority of my time talking about the scourge of drug addiction and how it is impacting the lives of every citizen of our State. My budget proposal for 2018 includes vital funding for the proposals that we talked about then, in addition to maintaining other critical funding to combat this epidemic. I would like to praise the work of this body, in showing that we can work quickly together, when our citizens are most in need.  Last time we were together, I put forward a package of bold proposals to dramatically shift the way addiction and substance use services can be obtained. I challenged you, the Legislature, to deliver to me a bill that made these proposals a reality, and you did just that.  When I signed that legislation less than two weeks ago, we showed the nation once again, that in New Jersey, when we work together we can accomplish anything.  We showed again that New Jersey is a leader in fighting the terrible disease of addiction.

As mentioned, there are also several proposals that I announced in January that are reflected in my proposed FY2018 budget.  It provides an additional $5 million for the statewide expansion of a successful pilot program aimed at improving the capability of primary care physicians to screen, care for, manage and increase access to mental health services for children with behavioral health conditions and substance use issues.  Last month, we also announced an additional $12 million investment for residential services within the Department of Children and Families to allow 18-19 year old young adults to receive substance use services in their facilities. In addition, at my direction, the Department of Health has advertised for the need of up to 900 newly licensed hospital beds for the treatment of residents suffering from co-occurring behavioral health and addiction issues

My FY2018 budget also provides an increase of $1 million in funding for the expansion of the Recovery Dorms program to further support our college students who have been caught in the addiction epidemic.   The State’s commitment to the Recovery Coach Program continues in fiscal 2018. The FY2018 budget provides $2.8 million in funding to continue supporting this program, which reaches and connects drug overdose survivors with treatment, counseling and support services in the immediate aftermath of their overdose.

We are also following through on our commitment to take a smarter and more effective approach focused on treating drug-addicted offenders. Our Drug Court Program is working in all 21 counties and my fiscal 2018 budget provides nearly $64 million to ensure its continued success.

But we need to do even more and we can with willing partners. Today, I am calling on the Legislature to join with me in partnering with the insurance industry to take action to fight for our underserved in this state.  Five years ago, Blue Cross Blue Shield of Massachusetts took the initiative themselves, without government intervention, to limit the distribution of prescription painkillers. They are also finding and coordinating care with detox programs to lessen relapses and funding recovery coach programs. In New Jersey, government has taken the sole responsibility for these actions.

Horizon Blue Cross Blue Shield of New Jersey enjoys non-profit status despite making billions of dollars. They insure over 55% of the health insurance market. They used to be known as the insurer of last resort in our state, but no longer have that burden and responsibility. Since I expanded Medicaid in 2013, the state and its taxpayers are the insurer of last resort, lifting a great burden from Horizon. They have over $2.9 billion in surplus on nearly $12 billion a year in revenue. While some would argue for converting Horizon to a for-profit company, which would bring a windfall of billions of dollars to state taxpayers, I am not advocating that move today. Nor am I suggesting that we use Horizon to fill any budget gaps. Our budget is balanced and needs no such one-shot gimmicks to be balanced.

No, what I propose today is that we work urgently to establish a permanent fund that Horizon would fund every year through their abundant surplus, provided by their 3.8 million New Jersey members, to support our most vulnerable population who access Charity Care and Medicaid. Today, I would propose we use this fund to help this population gain even greater access to in-patient and out-patient drug rehabilitation treatment. This is a public health crisis which is killing our citizens at an alarming rate. These funds could be used to provide the most vulnerable with access to treatment and hope for an even healthier future.

As the sole insurer with this unique non-profit status and historically charitable mission, Horizon shares in the financial obligation of caring for our most vulnerable citizens and can set aside in this fund excess surplus monies and other revenue to support our efforts to beat this disease. Today, it is drug addiction. Tomorrow, this fund could be used to support our hospitals mission or the ever increasing need for healthcare for the poor. I am confident Horizon will embrace this opportunity and partner with us to establish this permanent, sustainable fund. They will not turn their back on the people of New Jersey who pay their salaries and, as the people’s representatives, we will partner with them to make sure it happens by June 30.

We are changing the way that our corrections system deals with substance use disorders.  As I promised last year, Mid-State Correctional Facility will be reopening this spring as an institution dedicated to drug treatment. The new Mid-State Correctional Facility substance use disorder treatment program will be licensed by the Division of Mental Health and Addiction Services.  My FY18 budget provides $2 million in additional funding to provide for the new mission of Mid-State.  The reason that we were able to close Mid-State prison and reopen it as an institution dedicated to drug use, is because of our new approach to drug-addiction.  We have refocused our attention on the individuals who are suffering from drug addiction and helped them reform their lives.  During my time as Governor, we have decreased our prison population by nearly 22%.  Prison population has dropped at every one of New Jersey’s prisons. By bucking a national trend with our dramatic drop in prison population, we are showing that we can also leave this aspect of New Jersey life much better than when we found it in 2010.

And this prison population reduction has not come at the cost of our public safety.  Crime rates have dropped 20% during my time as Governor. I entered office in 2010 as New Jersey’s former U.S. Attorney promising to make New Jersey a safer place for all of our citizens. By appointing outstanding people as Attorney General and supporting the mission of our police, we have accomplished that goal. Thanks to Paula Dow, Jeff Chiesa, John Hoffman and Chris Porrino for your stewardship of our state’s safety and for helping me leave New Jersey safer than we found it in 2010.

I am proud to report that my 2018 budget plans for the closure of another one of the State’s prison facilities.  Due to the continuing decrease in the State’s prison population, we will be closing the satellite wing of the Bayside State prison located at the Ancora Psychiatric Hospital.  The approximately 250 inmates currently housed there will be moved to our other facilities.  There will be no layoffs as a result of this closure and we will work with the existing employees for a smooth transition between other roles in the Department of Corrections. We have made reducing the prison population a hallmark of this Administration. Tough law enforcement does not mean warehousing our citizens to make our streets safer.

Working together we put forward a constitutional amendment that the citizens of this State passed to reform New Jersey’s criminal justice system.  Those reforms will keep dangerous individuals off the streets by allowing judges to hold people charged with the most serious violent crimes without bail.  No longer will gang bangers use cash from drug deals to get out of jail and, before their trial, kill or intimidate witnesses. We trust our judges to keep violent sociopaths behind bars where they truly belong. And we will hold them responsible for meeting the mission the people have given them.

We have also made our bail system fairer by allowing individuals who commit minor, nonviolent offenses to avoid money bail for pretrial release. New Jersey should not have the equivalent of debtors prison in the 21st century.  In January, we provided funding for 20 additional judges to address new pretrial release and detention proceedings, and my FY18 budget continues that funding. The poor should not spend months, or even years, in jail just because they are poor. Together we have ended this injustice.

As you can plainly see, my FY2018 budget continues to prioritize important spending to help the state grow and to help those who most need it despite the escalating costs of fulfilling our pension and health benefit obligations that continue to erode the State’s ability to address all of the important issues we want and need to address as a State.  Almost every new tax dollar that comes in has gone to pay for pensions, health benefits and debt service.  In this budget, over 82%. Without further reforms, the State can simply not afford to meet its obligations.

A key component of controlling government costs is controlling the spending that drives those costs.  And as everyone is well aware the largest drivers of those costs are the defined benefit pensions and platinum plus health benefits that we provide to some, though not all, of our State employees. We have made some progress in controlling those costs.

Our 2010 and 2011 landmark reforms were significant and will save taxpayers nearly $120 billion over thirty years. For those who have called those reforms a failure, remember that number — $120 billion. Those savings would not be there without these reforms and our system would have already buckled under that weight.  And this year, through legislation to reduce prescription benefit costs and extensive negotiations with the State Employee’s plan design committee, we were able to hold year-over-year health benefit costs nearly flat in Fiscal Year 2017 for the first time in the history of this Administration.

While those reforms will continue to bear fruit in the years to come, let me be very clear – they are not enough. Even with the reforms that we have made, our increased pension payment and health benefit costs would represent 82% of the year-over-year growth in the budget. In 2001, health benefit costs represented 4.5% of the State budget.  In 2018, without reforms, they would represent 10% of the State budget.

This is not sustainable, and as such I am once again calling for the enactment of health benefit reforms in my budget proposal.  My budget assumes $125 million in health benefit savings from those reforms.  And because these costs are also borne by the State’s local governments and the employees themselves, this $125 million in State savings will also equate to approximately $127 million in local government savings and approximately $30 million in savings to State and local government employees. Why would we not want to save this money for everyone—state and local government and our public employees? Let’s not go through the brinksmanship of last year—let’s pass these modest but important reforms by June 30.

In addition, in anticipation of the Legislature enacting meaningful out-of-network reform, I am recognizing budget savings for a reasonable transparency solution to out-of-network surprise billing that will allow employees to be in a position to choose for themselves whether they wish to pay higher rates to go out of network.  It’s a small first step in the right direction and it’s hard to argue the benefits of transparency.

So let’s talk about public sector pensions. For seven years I’ve been working to address this issue. We have passed larger reforms than any Administration in history. We have contributed 2 ½ times more money than the last 5 administrations combined.   While the need for real and sustainable long-term reform cannot be understated, addressing the continued compounding of our pension crisis requires a substantial increase in State contributions.   Accordingly, I am proposing increasing the pension payment by $647 million over last year, to a $2.5 billion pension payment in FY18.  To provide some context, the combined contributions of Governors Whitman, DiFrancesco, McGreevey, Codey, and Corzine were $3.4 billion from 1995 through 2010.  We are making a $2.5 billion payment in one year.  With this payment, we will have contributed $8.8 billion to the pension system under my Administration. All without raising taxes to do so. But let’s stop here for just a moment.

So, this Administration has taken extraordinary steps to control the runaway cost of defined benefit pensions via both a smaller, more efficient State government and common-sense pension reforms that have combined to reduce our pension liability by hundreds of billions of dollars. We have also contributed 2.5 times more in public money to the pension than the last five Administrations combined.  In addition, we have also been the most proactive administration at ensuring the benefits that our hard-working State employees have accrued will actually be there for them during retirement.

First, as I just outlined, this administration has been far and away the largest contributor to the pension system. Second, working with the Legislature, last fall we enacted legislation to provide for quarterly payments into the pension system, rather than continuing the past practice of making the entire contribution at the end of June. This will both provide more certainty that the full budgeted payment will be made each fiscal year, but also put funds into the pension system earlier, allowing the Division of Investment to put them to work longer for the pension, helping reduce the unfunded liability.

Finally, we have also decreased the assumed rate of return on pension assets from 8.25% when I took office to 7.95% in 2012, 7.90% in 2013, and down to 7.65% as of yesterday. By reducing the assumed rate of return, we are stopping the gimmickry. When we have too high an assumed rate of return, we are not telling the public the truth. We will continue to reverse the gimmicks of past Administrations. While this concerted effort has contributed to increases in the annual required contribution into the pension system, those payments are crucial in ensuring the long-term viability of the pension system. This has not been easy for us to do—but the right thing rarely is easy. We have obviously not done this to get credit—good thing because we haven’t gotten any—we’ve done it for our state’s pensioners and our state’s fiscal health.

All in all, there is no question that this Administration has been the most focused in our State’s history on shoring up our pension system.  Today, I am going a step further.  Following the lead of a number of private sector pension plans, one potential path to greater solvency is to make large transfers of assets into the pension fund. Such a scenario has the same effect as a cash infusion—the value of assets increases, thereby reducing the unfunded liability in our pension system. In the case of New Jersey, we have one incredibly attractive asset that could be utilized in such a fashion—the State Lottery. This is a state-sponsored monopoly that spins off large amounts of cash. Today, though, we have no ability to recognize the significant value of that asset.

I am proposing to contribute the revenues from the Lottery to eligible pension plans. The contribution would have the immediate effect of reducing the unfunded liability of the pension system by approximately $13 billion, and would increase the funded ratio of the pension system by almost 15 percentage points in one fell swoop, from 49% to 64%. This would also significantly reduce the amount we have to pay into the pension system every year out of the general fund. I look forward to sitting with all stakeholders right away to discuss the specifics of implementing this plan. But let’s be clear, if implemented correctly this action would increase the value and stability of our pension funds immediately and would please bond investors and credit rating agencies, also giving greater confidence to New Jersey’s public employees. I am committed to making every effort to fix our long-term pension problem. This type of bold action can make it achievable. On pensions, put aside the ideology and the rhetoric and the facts show that we can leave the system much better than we found it in 2010.

Finally – let’s talk about School Funding. For the seventh consecutive year, my budget proposes the highest amount of school aid supporting education in New Jersey history.  I am proposing more than $13.8 billion in spending on education.  Of that, approximately $9.2 billion represents direct aid to schools.  Now, this represents 39% of our entire state budget for fiscal year 2018. For the naysayers, no amount will ever be enough. But the facts are that we have contributed more money to K-12 education than any Administration in history.

I spent a lot of last year traveling around the state having candid conversations with taxpayers about something that’s, unfortunately, in dwindling supply in government these days . . . fairness. That’s right, regular people and I spent some time talking about the element of fairness when government goes about taking and spending our hard-earned dollars. We also talked about fairness in school funding, which we all know represents nearly 40% of the entire state budget. Anyone who has heard my message about school funding won’t be surprised to hear me say today, as plainly as I can, that school funding in New Jersey is not fair. It is crippling so many school districts and it is driving people out of the state due to ever increasing school costs. Certain municipalities are ripping off the state; certain school districts are being ripped off.

To me, fairness in school funding means nothing other than equal funding for each and every student. No student should be less valuable in the eyes of the state than any other student.  But just standing here and saying “fair” over and over doesn’t change the reality of the situation. Like “fairness,” “reality” is an under-recognized concept in Trenton these days.

When I was first elected to the governorship, the latest and greatest legislative school funding formula — the SFRA — was in its infancy. Introduced in the legislature on January 3, 2008, ushered through the committee process the same day, passed by both houses within four days of introduction, signed by our preceding governor on January 13, 2008, the SFRA was on the fast track and it was supposed to be all things to all people. Those who questioned it were told, fear not. This formula was affordable and would work. The reality – it is not fair, it is not affordable and it has not worked. We should have known – and some of us did.

It was legislation hatched by big government education “experts,” supported by special interests, and “approved” by the New Jersey Supreme Court . . . how could anything go wrong? Not surprisingly, the formula was detached from reality, both literally and figuratively. From the outset, it was a fantasy. Let me be blunt. The SFRA is a disaster that fittingly caps decades of misguided educational funding experimentation by lawmakers and courts alike. Similar to tax fairness, school funding fairness cannot be imposed by a Governor acting alone. What is required are willing partners, both in the legislature and the courts. So far in my time as governor, I have experienced the best and the worst when it comes to cooperation from my co-equal partners in the other two branches of government.

I thank the majority of the legislature on both sides of the aisle for working with me last year on tax fairness in the context of the transportation trust fund reauthorization. For six years I tried to reverse the tide of endless tax increases without any relief or hint of fairness. Finally, we were able to do some of that together last year, and New Jersey is much better off for it. It remains my goal to turn the tide of school funding fairness as well.

I proposed the fairness formula because I believe in it. I proposed it because I wanted to shine a light on the failure of the current formula. I proposed it to shove the other two branches into a real conversation to fix this problem. Well, in the last few months I have finally heard the leaders of the legislature admit what I’ve been saying for eight years – this system is unfair and broken.

So now I will make one final offer. In fact, I will make a pledge. I pledge to work with the leaders of the legislature to come up with a new funding formula. Everything is on the table. No idea out of bounds for discussion. I am willing to work with you to solve this problem without any pre-conditions on the ideas brought to the table.

However, here is my one requirement to offering compromise. 100 days. We have 100 days to get this done. No phony task forces. No blue ribbon commissions. No delays until next year. We get in a room and you get this done with me, for the families of this state, in the next 100 days. It took you 10 days to pass this failed formula in 2008. Let’s take 100 days to pass one that is fair for all New Jersey students in 2017.  If we can’t do it in 100 days, shame on us. We should do it before you face the voters again. We must do it before we, and our students leave for summer vacation. I am ready if you are ready.

Please understand that this offer is genuine and heartfelt. We have capped our property taxes together. We have capped public employee salary awards together. We have recovered from Hurricane Sandy together. We have reduced spending together. We have secured our Transportation Trust Fund together. We can and we must do this together.

But please be assured that if we do not do this in the next 100 days together, each branch will then be left to its own authority and its own devices to fix this problem on its own. I want to act with you. But, if forced, I will act alone. But it will be fixed before I leave this town.

These are our goals for this budget. Lower taxes. Controlling spending. Meeting and enhancing our commitment to our pension system. Highest school funding in state history. Confronting, head-on, the disease of addiction. This blueprint gives us the chance to do it and, if we are truly bold, a new school funding formula that is fair to all and a new partnership with Horizon to help beat the opioid crisis and serve those truly in need.

I recall vividly standing here on February 11, 2010, over seven years ago, facing a $2.2 billion deficit with only 4 ½ months left in the fiscal year. I cut spending in over 375 state programs. We reduced school aid by $475 million, the amount all state school districts had in their surplus accounts. We canceled the very modest $104 million payment Governor Corzine had budgeted for the pension system. Unemployment was said to be 10%. Revenues were down by over $1.2 billion. The previous Administration had spent $800 million in non-budgeted supplemental spending on the way out the door. And just over the horizon? A second budget speech 33 days later for the fiscal year 2011 with a projected deficit of $10.7 billion. Those were dark, dark days. If you listen to some of the partisan pundits or read the liberal editorial pages, they would have you believe that today is no better or even worse, than that dark day. But what do the facts tell us about today and all the efforts we’ve made 2,572 days later?

A balanced budget and a health surplus. Not reducing school aid by $475 million, but having increased it by over $3.3 billion since that day. Not cancelling an insignificant $100 million payment to our pension, but making a $2.5 billion payment, the largest in state history. Unemployment cut in half. All the jobs from the great recession back plus 33,000 more to spare. Lower income taxes for seniors. No death tax for anyone. Lower sales tax. And property tax increases reduced by 72%. $32 billion budgeted and paid for to build state infrastructure. Business taxes cut by $3 billion. $1.3 billion invested to grow and modernize the classrooms and laboratories for our state colleges and universities. And all of that having been done while recovering from 2nd worst natural disaster in our nation’s history and having to, for a second time, rebuild our tourist industry at the Jersey Shore. And, let’s not forget, for the first time in recent memory no general fund tax increases for seven years. No sales tax increase. In fact, two sales tax cuts for our citizens. No business tax increases. In fact, a $3 billion job-creating business tax cut. And for the working poor, a 35% Earned Income Tax Credit, the largest tax cut for the working poor in New Jersey history and one of the largest in the nation.

February 28, 2017 no better than February 11, 2010? Worse than February 11, 2010? No chance. Facts are stubborn, stubborn things.  We still have work to do. We will always have work to do.  We are New Jerseyans—we are always striving, we are never satisfied. But I am proud of what our collaborations and conflicts have achieved. This is a better state today—a much better state—than it was seven years ago; by almost every measure. And I am a better person and a better Governor for having worked with all of you and for having the great honor to lead the state I have always called home. Let’s not quit now—let’s work together to make things even better a year from now. I am ready. I am willing. Let’s get to work one more time.