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.

Industry Outlook: Organic and Wellness Food Products


Danny Restivo, 2/21/17

The organic food market hit a record $43.3 billion in 2015, increasing more than 11 percent since 2014. In one year, the entire market grew by $4.5 billion, the largest year on record, according to the Organic Trade Association’s 2016 survey.

The last several years have signified an ever-increasing appetite for healthy and ethically produced food among consumers and suppliers. Whether its fruits and vegetables (which account for more than a third of organic subcategories in 2015) dairy products, fish and meats or condiments, large commercial stores have taken note, creating greater access to food that meets the demands of consumers focused on health and wellness.

Consumers have cited a variety of reasons for purchasing food that increase transparency in the production process; some are increasingly health conscious and concerned with chemicals and preservatives, while others have trepidations about animal welfare. As food producers harness the merits of an organic label, ethically-minded and health-conscious consumers have been bombarded with different labels as providers attempt to carve out a niche. “Non-GMO,” “cage free,” “grass fed” and “pasture-raised” have become frequent labels appearing on packages. However, many producers have neglected the essence of these labels and applied them under extremely loose guidelines.

In an effort to cement a benchmark for poultry and livestock, the United States organic4colorsealgifDepartment of Agriculture published its own organic rules on January 19. The rules apply to the USDA’s National Organic Program, which stipulates indoor and outdoor space requirements, clarifies treatment of poultry and livestock, and places limitations on the alterations to cages and pens for animals classified as organic. The regulations also define the soil and vegetation organically-classified chickens and livestock must use.

The USDA’s mandate comes six months after President Barack Obama signed a law that requires food producers to label items produced with genetically modified ingredients. However, the law allows producers to skirt the written label in favor of a barcode that customers can scan with their phone to learn about GMOs in the product. The legislation also allows producers to include a phone number in lieu of a label, giving consumers the option to call for GMO information. The bill, which received bipartisan support from democrats and republicans, pre-empts a similar law in Vermont requiring disclosure of GMO’s on labels. Furthermore, the bill ensures a federal framework, preventing a patchwork of state laws from cropping up.

Organizations like the Organic Consumers Association, and Sen. Bernie Sanders (D-VT) criticized the bill for giving large corporations a loophole. They argued that low-income consumers don’t necessarily have technology to access GMO information. Supporters of stricter GMO labels point to Europe where their use is rare and heavily regulated. These criticisms come after the United States Food and Drug Administration, as well as the National Academies of Sciences, Engineering and Medicine, released comprehensive studies saying GMOs would cause “no differences that would implicate a higher risk to human health.” Furthermore, their studies offered no evidence that GMO’s consumed in North America caused higher rates of diabetes, kidney disease, cancer and other ailments compared to GMO-regulated Europe. After their reports, the FDA announced it would monitor non-GMO labels that promoted products as healthier or safer.

In light of these regulatory measures and research, a desire for accountability and transparency in food production among consumers remains. According to an analysis from Credit Suisse, the top 25 food and beverage companies have lost a combined total of $18 billion in market share since 2009. The loss highlights fear over large producers selling items packed with preservatives and questionable techniques. Instead of grabbing canned fruits or cereal boxes from the grocery stores middle aisles,  millennials have turned to the perimeter aisles where a great deal of organic and locally-sourced produce is found.  Whilesimple-truth-front large box stores like Target, Kroger, Wal-Mart and Wegmans have tapped smaller producers, rather than the traditional large players. Some grocery chains have even started their own “natural” food lines. Kroger’s Simple Truth Food Line grew by $1.2
billion in just two years. According to one research firm, the shift to “wellness” food has resulted in 1 percent drop in packaged food per year since 2014. It may seem like a slim margin, buy producers have taken note.

Major companies like General Mills, Campbell’s, ConAgra and other large-scale food companies have started acquiring smaller health-conscious companies, while reshaping their production models. In 2015, General Mills announced it would stop using GMOs in Cheerios, while also reducing the amount of sugar in its cereal by 25 percent. Kraft also announced it was removing synthetic colors and artificial preservatives from its iconic macaroni and cheese. However, the trend aimed at making food production more transparent has bordered on misleading. For example, Hunt’s, the famous producer of tomato paste, tomato sauce and ketchup, released a statement and created a social media advertisement touting its use of non-GMO tomatoes. Unfortunately, there are no GMO tomatoes on the market. Hunt’s received a great deal of criticism for pandering to misinformed customers, while also antagonizing a belief that large food producers can’t be trusted. The advertisement also furthered the myth that genetically engineered food is unhealthy.

As companies look to capitalize on a market  eager for labels describing “no preservatives,” “non-GMO,” “organic,” or “no antibiotics,” labels from different organization’s guaranteeing healthy ingredients have proliferated. The USDA offers tips to meat producers who use labels that say “humanely raised,” or “treated with care.” Producers must submit applications before using such labels, but critics claims the benchmarks are too low. Therefore, several nonprofits aimed at increasing animal welfare have filled the void. The American Humane Association, Humane Farm Animal Care and A Greener World have set their own standards to make animal welfare at the forefront of a consumer’s mind. Whole Foods has even provided a 5-step certification process before it contracts with a meat supplier. However, these certified labels vary in their guidelines, including differences in access to pasture for cattle, ammonia levels in cages for chickens and space for pigs.

As President Donald Trump enters office with a pledge to rollback two regulations for every one that is implemented, federal food policy could come under scrutiny. Trump had tapped former Georgia Governor Sunny Perdue to serve as his agricultural secretary. Perdue grew up on a farm and holds a doctorate in veterinary science, before serving as the Peach State’s republican governor from 2003 to 2011. As a governor who oversaw the executive branch of state with 42,000 farms and a strong stake in the cattle industry, Perdue now takes charge of an agency with a $155 billion budget that includes the Animal and Plant Health Inspection Service (while the agriculture department oversees the processing of meat, the Food and Drug Administration handles food safety for fruits and vegetables).  Perdue takes office as farm incomes have dropped be nearly a half, from $120 billion in 2013, to a projected $66.9 billion in 2016. His agency could try and roll back regulations in an effort spark growth in a sluggish industry.

 Statements on New Federal GMO Labeling Law

 Zippy Duvall, President of The American Farm Bureau Federation:

“President Obama’s signature today will put a stop to the harmful patchwork of state GMO labeling laws and set in place a uniform, national disclosure system that will provide balanced, accurate information to consumers. For decades, biotechnology has made it possible for farmers to grow safe and healthful crops while reducing their environmental impact. We are pleased that Congress and the administration have moved swiftly to prevent consumer confusion and protect agricultural innovation.”

 Sen. Bernie Sanders (D-VT)

“Under Vermont’s law and my amendment, consumers can glance quickly at a product and be able to determine the GMO contents with no need for a smartphone or internet connection.” He added, “What makes sense is to build on what Vermont has done, not come up with an unenforceable, confusing, weak piece of legislation paid for by the large food corporations in this country.”

President Rihard Wilkins, American Soybean Association President

“The passage of this bill allows for both consumers and producers to move on from this fight, and benefit from a uniformed, standardized labeling law across the country. We believe this thoughtfully-crafted compromise provides consumers with the information they need, without stigmatizing a safe and sustainable food technology. We appreciate the support from House leaders to get us to this point. ASA and its state and regional affiliates now encourage President Obama to sign this bill into law. Its enactment will stop a potential patchwork of state labeling and providing farmers, producers, manufacturers and consumers peace of mind as they continue to enjoy America’s safe and affordable foods.”

 Gary Hirshberg, Chairman of ‘Just Label It’ Initiative

“Consumers have already begun to see GMO labeling disclosures on many familiar food packages as companies prepared to comply with Vermont’s groundbreaking law,” said Hirshberg. “In the wake of the creation of a national, mandatory labeling system, Campbell’s, Mars and Dannon have already publicly committed to keeping this simple disclosure on their packages as USDA sorts out the rules for implementation of this new law. I have sent a letter to other industry leaders asking them to publicly commit to keeping consumers out of the dark when it comes to GMOs in our food.”

Chip Bowling, The National Corn Growers Association

“This achievement was made possible as members of the food and agricultural value chain came together as never before to advance a solution that works for farmers, food companies and, most importantly, consumers.” Bowling adds, “S. 764 ensures consumers have the access to product information without stigmatizing this safe, proven technology that America’s farmers value. Now that both houses of Congress have come together to address this important issue, we ask that the President take the final step by signing this legislation into law.”

 National Association of Wheat Growers

This bill is a crucial step forward in informing customers about a safe and sustainable technology to ensure access to affordable food for consumers. The labeling options allowed in this law will encourage public acceptance of this reliable technology, while preempting the state-by-state patchwork that Vermont’s law alongside other potential future state laws could cause. This technology, which has been proven safe for human consumption, is one of the most reliable ways forward in assuring global food security and access to sustainably-produced food.

Ken Cook, Environmental Working Group President

EWG does not support the Roberts-Stabenow GMO labeling proposal. While we support a national, mandatory GMO labeling system and recognize that more foods would be covered by this proposal than are covered by state labeling laws, we cannot support this proposal because food companies would be permitted to make a GMO disclosure through a means that is unavailable or unfamiliar to many Americans. Food companies have already changed their labels to comply with Vermont’s groundbreaking GMO labeling law. If the Roberts-Stabenow proposal becomes law, EWG will do everything in our power to pressure food companies to continue to make a GMO disclosure on the package.

Statements on USDA’s National Organic Program

 National Pork Producers Council

The U.S. Department of Agriculture’s amendment to the Organic Food Production Act of 1990 would strictly dictate how organic producers must raise livestock and poultry, including during transport and slaughter, and specify, without scientific justification, which common practices are allowed and prohibited in organic livestock and poultry production, thereby eliminating producers’ discretion to make sound decisions about animal care. It also would establish unreasonable indoor and outdoor space requirements for animals. The regulation was cleared by the Office of Management and Budget Wednesday, the last step before becoming final.

Tracy Brunner, National Cattlemen’s Beef Association

“The Obama Administration has bowed to the whims and demands of animal activists rather than talking to the industry as a whole to see what is best for the program and for consumers. This rule sends a clear signal that an activist agenda is more important to the outgoing Administration than any true attempt to clarify a consumer’s perception of what ‘organic’ means.” Brunner added, “NOP is a marketing program, not an animal health, welfare, or safety program and certainly not a place to set animal welfare requirements. Cattlemen and women have worked diligently over the past 30 years to develop and improve animal care and handling standards through the Beef Quality Assurance Program, which is continuously reviewed and updated as new science becomes available.”

 American Society for the Prevention of Cruelty to Animals

Consumers, responsible farmers who provide meaningful welfare and the organic industry should celebrate this landmark victory. Since the USDA began regulating organic agriculture in 2000, consumers have expected—and paid a premium for—an idyllic version of “organic” animal welfare. But in many segments of the organic market, a grimmer reality prevails. Exploding demand for organic products and the absence of clear organic animal welfare standards have allowed the organic market to be flooded with large-scale, industrial producers who profit from the public’s desire for higher-welfare animal products while still employing the terrible practices found on typical factory farms.

The Organic Trade Association

Producing food that meets the USDA Organic label is a choice for farmers and consumers. An ongoing review process by the National Organic Standard Board and USDA keeps that standard strong. Animal welfare, which includes healthy living conditions and the best animal husbandry practices, has always been a high priority of organic producers. In fact, USDA’s National Organic Program’s final rule was the first USDA regulation to mention animal welfare, requiring outdoor access for all organic poultry and livestock and living conditions that accommodate for the health and natural behaviors of animals.

Kansas Senator Pat Roberts, Chairman of the Senate Committee on Agriculture, Nutrition and Forestry

“This rule has serious potential to force organic farmers and ranchers out of business and is widely opposed by those very folks who are affected the most by this rule. Prices for consumers could rise, and animal health could be put at risk, which may decrease food safety. I will work with USDA under the new Administration to see what can be done to ease this overregulation on our hard-working farmers and ranchers.”

 Mike Leventini, Vice President and General Manager at Perdue Foods (statement made during NOP Public Comment Period)

“Perdue supports the NOP’s desire to strengthen what it means to carry the Organic seal.  These proposed standards will significantly differentiate organic growing practices from conventional operations and meet consumer expectations that Organic production meet a uniform and verifiable animal welfare standard.  We are with you; we need the 3 year timeframe to make it happen.”

Federal Health Care Policy Update

Insurers May Get More Time to Opt Into Obamacare in 2018

The deadline for health insurers to apply for the 2018 Obamacare federal exchanges would be extended from May 3 to June 21, the HHS proposed Feb. 17.

Health plans are in the process of deciding whether to participate in the 2018 exchanges, and many health-care stakeholders have said the 2018 exchanges are in jeopardy of further premium increases and withdrawals as Republicans prepare plans to repeal and replace the Affordable Care Act.

Humana Inc. was the latest to withdraw from the 2018 exchanges, and Molina Healthcare Inc. also indicated it might not participate. Most of the health plans participating in the ACA exchanges are losing money due to a sicker-than-expected population of enrollees.

In addition to the draft bulletin that would revise the timing for qualified health plan submissions, the Health and Human Services Department’s Centers for Medicare & Medicaid Services released a document of revised key date filings for qualified health plan certification in the federal exchanges and an addendum of technical guidance. Plans can file their applications as early as May 10 under the proposal, on which the CMS requested comments no later than March 7. The CMS would send final certification notices to insurers by Oct. 12, instead of Sept. 22. The 2018 open enrollment period is to start Nov. 1.

Senate Republicans Ready to Repeal ACA without Democrats: McConnell

The Senate is ready to repeal the Affordable Care Act without any help from Democrats, Senate Majority Leader Mitch McConnell (R-Ky.) said.

McConnell said he hopes to move forward on dismantling the ACA “just as soon as we have the votes,” and said he expects little to no cooperation from Democrats on a replacement plan. Senate Republicans plan to pass a repeal bill using filibuster-proof reconciliation, meaning they can lose two Republican votes and do not need Democratic support to move it.

“It’s clear that in the early months it’s going to be a Republicans-only exercise,” he said during a Feb. 17 news conference.

The admission comes a day after House Republicans met to rally around a plan to dismantle the law. Republican leadership distributed a briefing paper to conference members that says the GOP conference is committed to offering monthly tax credits and loosening restrictions on tax-favored health savings accounts as part of their overhaul.

Congress is out for the next week. House Speaker Paul D. Ryan (R-Wis.) said Republicans would introduce a repeal-and-replace bill upon their return. Over the break, many lawmakers will hold town halls in their districts, which have become for the past several weeks a battleground for voters’ ire over efforts to dismantle the law.

McConnell said he was not concerned about town hall protesters, adding, “I can’t think of anything we’ve talked about more on both sides than Obamacare.”

Conservatives Object to Obamacare Replacement’s Tax Credits

Some conservative House Republicans are objecting to a major part of the Obamacare replacement outline presented to them by party leaders, underscoring the party’s continuing inability to agree on an alternative health plan. The proposal would allow Americans who lack insurance to buy coverage with refundable tax credits they can receive before the end of a tax year. House Ways and Means Chairman Kevin Brady said he and other leaders presented the idea during Thursday’s private conference of the House GOP.

Some conservatives say they oppose the idea because it could amount to a new government subsidy by allowing people to receive a larger credit than they pay in taxes. They prefer a mechanism that would preclude people from getting any more money than they paid in taxes. “I don’t like the refundable tax credit,” says Representative Ted Yoho of Florida. “I don’t want people getting money back.” Representative Trent Franks of Arizona said tax credits “should be predicated on those taxes paid in, not a refundable tax credit, because it can so easily become a major and unstoppable entitlement.”

The dispute over tax credits is one of many issues facing Republican leaders as they seek agreement on how to fulfill their promise to repeal and replace Obamacare. Also discussed Thursday were a proposal to cap the tax break for employer-provided health insurance, and efforts to restructure Medicaid. Republicans are set to face their constituents during a weeklong congressional recess next week.

There is no legislative language yet, so it is too early to count votes for or against a health care plan. However, with 239 Republican members in the House and virtually no hope of Democratic support, the GOP can only afford to lose 21 of their own lawmakers on a bill.

“I think there’s not the votes there to pass refundable tax credits,” said Representative Mark Meadows of North Carolina, chair of the Freedom Caucus of about 40 conservative members. He said it could be a “new entitlement program” and may be subject to fraud. Asked if that calculus would change if President Donald Trump backs refundable tax credits, Meadows said, “No, it does not.”

Representative Dave Brat of Virginia said, “The refundable tax credit piece is problematic because then you’ll have health care run at the federal government level where everything is insolvent.” And he said Democrats will “bid up” the tax credits over time.

Democrats Hit Back at Republican Health-Care Proposals

Congressional Democrats Feb. 16 called for adding a public health insurance option to Obamacare markets and making subsidies more generous.

Speaking to about 600 people at an annual Washington conference held by Families USA, an organization that strongly supports the Affordable Care Act, Democratic members of Congress criticized Republicans for offering “failed ideas,” such as high-risk pools, to replace the ACA. A few hours later, former Obama administration officials also criticized Republicans for not being able to offer a replacement after years of calling for repealing and replacing the 2010 law.

Republicans are moving forward with their plans to repeal and replace the ACA, with the party’s congressional leadership presenting their members talking points of their plans. ACA supporters took aim at the proposals, saying they would not come close to covering the approximately 20 million people who have gained coverage under the ACA.

Trump Pick to Run Medicare and Medicaid Demurs on Key Questions

Seema Verma, President Donald Trump’s pick to run U.S. health programs for the elderly, poor and disabled, gave little detail on her views on key pieces of those programs.

At a hearing before the Senate Finance Committee on her confirmation to run the Centers for Medicare and Medicaid Services, she said questions ranging from future funding to drug benefits to seniors are up to Congress, and that she’ll implement the laws they pass. She did give insight into her philosophy, which is that more flexibility should be given to states and individuals to make choices about health care, and the federal government’s role should be more limited.

“I will work toward ushering in a new era of state flexibility and leadership,” Verma said in her prepared introductory remarks. “We need to ensure that people have choices about their care.”

On Medicare, the government program for the elderly and disabled, Verma said she was opposed to the idea of turning it into vouchers, which could lead to more limited funding. However, she said she is open to ideas to shore up its financial stability.

Medicare Part D

Republicans, who control Congress, are working at a strategy to repeal Obamacare, the signature health-care law of Trump’s predecessor. Undoing the Affordable Care Act could increase the amount seniors have to pay for drugs in the Part D piece of Medicare, which subsidizes the costs of prescription drugs for its beneficiaries. Again, Verma would not give her opinion on the issue.

“It’s important to help seniors get the most affordable drug prices,” she said.

When asked whether Medicare should have more authority to negotiate prices — something that drugmakers strongly oppose and about which Trump and his administration have send mixed signals — she praised the role of private firms known as pharmacy benefits managers. PBMs, which negotiate with drugmakers to get discounts for clients including government programs and insurers, have been in the cross hairs lately in the debate over who’s responsible for high drug prices in the country,

“I’m thankful that we have the PBMs and the Part D program that are performing that negotiation on behalf of seniors,” Verma said.


On Medicaid, the program for the poor, Verma repeatedly endorsed the idea of giving more control to states. She backed the Medicaid expansion that she worked on in Indiana as a consultant, including to then-governor Mike Pence, who is now vice president. She was asked about policy under consideration by Congress that could limit Medicaid funding, including block grants and per-capita caps.

“What I support is the program working better, and whether that’s a block grant or a per-capita cap, there are many ways we can get there,” she said.

After the hearing, Senator Ron Wyden, the Oregon Democrat who is the ranking member on the Senate’s Finance Committee, called those policies “a Trojan horse for cutting spending.” He said Verma avoided questions on Medicare, and that he is awaiting her written responses before deciding how he will vote.

During the hearing, Verma was pressed on whether the Medicaid proposals would lead to individuals losing coverage. She said, “I strongly do not want to see anyone not get health services.”

Vulnerable Populations

That built on a theme she returned to throughout her hearing, that she has fought for coverage for vulnerable populations throughout her career.

“I started my career working on national policy on behalf of people with HIV and AIDS, as well as low income mothers,” she said in her prepared opening remarks. “I fought for coverage, for greater health care access and for improving the quality of care — and have continued to fight for these issues.”

In the individual market, Verma said health plans should be able to offer skimpier packages of benefits than what the Affordable Care Act currently allows. At one point, she declined to answer a question on whether insurance should cover autism treatment for children, because she had been advised by the Office of Government Ethics not to address the topic because her husband is a psychiatrist.

At another point, she said that she would give adults more choices in their insurance plans. That came in response to questions from Senator Debbie Stabenow, a Michigan Democrat, about whether her plan would amount to charging women more for benefits such as maternity care.

“Women have to make the decisions that work best for them and their family,” Verma said. “Some women might want maternity coverage. Some women might not want it, might not choose it, might not feel like they need that.”

HHS Moves to Stabilize Obamacare Markets

Health insurers got help from the Trump administration Feb. 15 to make their Obamacare exchange plans more profitable, but the proposed regulation did not include changes in the premium differential that can be charged for older enrollees.

The Department of Health and Human Services market stabilization proposed rule (RIN:0938-AT14) would make changes in 2018 to the Affordable Care Act special enrollment periods, the annual open enrollment period, guaranteed availability, network adequacy rules, essential community providers and actuarial value requirements. It also announces upcoming changes to the qualified health plan certification timeline.

The proposed rule follows the announcement Feb. 14 by Humana Inc. that it is leaving the marketplaces in 2018 because the company’s plans are losing money. Humana followed UnitedHealth Group Inc. and Aetna in pulling back from the marketplaces. Most plans have lost money in the exchanges due to a sicker than expected population of enrollees, and both supporters and critics of the 2010 health-care law are grappling with ways to make the individual and small group health insurance markets sustainable.

The proposal is HHS Secretary Tom Price’s first attempt to stabilize the troubled ACA markets since he took office. The proposal is scheduled to be published in the Federal Register Feb. 17, with comments due March 7.

IRS Easing ACA Individual Mandate after Trump Order

The IRS will not require people to mark whether they have health insurance when filing their tax returns, a shift from current requirements under the Affordable Care Act’s individual insurance mandate.

The agency walked back a previous decision to require an indication of coverage on tax returns after President Donald Trump signed an executive order Jan. 20 requiring federal agencies to reduce the burden of the ACA. The law, which Republicans are jockeying to dismantle, requires individuals to maintain health coverage or pay a penalty.

After accepting returns that didn’t indicate coverage in 2014 and 2015, the Internal Revenue Service had set up a system for this year that would reject tax returns during processing if an individual didn’t provide health coverage information. The agency decided to continue accepting electronic and paper returns for processing, even if they lack the coverage information, following the executive order, according to an agency statement.

While the step may be seen to be a weakening of the ACA’s mandate, the IRS makes clear that the law is still in force and “taxpayers remain required to follow the law and pay what they may owe.” IRS Commissioner John Koskinen has previously said despite the flurry of activity on the Hill regarding the ACA, taxpayers should follow current law until there is a new one.

John Zang contributed to this report

Washington DC/Administration Update

Trump Cabinet, Court Pick to Dominate Spring Work Period: McConnell

Action on President Donald Trump’s plans for an Affordable Care Act repeal and tax code overhaul are likely months off, and instead, the Senate will use the upcoming spring work period to confirm Trump’s remaining appointments and upend Obama-era rulemakings, Senate Majority Leader Mitch McConnell (R-Ky.) said.

The Republican leader said Feb. 17 as the Senate prepared to depart for the Presidents Day recess that lawmakers’ priorities when they return Feb. 27 will be confirming remaining Cabinet nominees and taking up more House-passed Congressional Review Act bills to repeal regulations. The days leading up to the two-week spring recess starting April 7 will be for debate and approval of Judge Neil Gorsuch to serve on the Supreme Court, McConnell said.

The only major legislative initiative likely to come to the Senate floor during early spring is a supplemental spending bill to provide the Pentagon more money, a priority for Trump and the Republican-controlled Congress, McConnell said. The Defense Department supplemental is also expected to be the vehicle for funding Trump’s border security initiatives.

But McConnell suggested that item—along with work on the 11 unfinished fiscal year 2017 appropriations bills—could slip into April, closer to the April 28 deadline when current government spending lapses.

Trump saw 13 top-level nominees approved in the past month, including his national security team, but still is without leadership at many agencies that oversee domestic programs. Still to be confirmed are his picks for the Commerce, Energy, Interior, Housing and Urban Development, Labor, and Agriculture departments.

  • Elaine Chao as Secretary of Transportation
  • Betsy DeVos: as Secretary of Education
  • John Kelly as Secretary of Homeland Security
  • James Mattis as Secretary of Defense
  • Linda McMahon as Small Business Administration administrator
  • Steven Mnuchin as Secretary of Treasury
  • Mick Mulvaney as Director of Office of Management and Budget
  • Tom Price as Secretary of Health and Human Services
  • Scott Pruitt as Head of Environmental Protection Agency
  • Jeff Sessions as Attorney General
  • David Shulkin as Secretary of Veteran’s Affairs
  • Rex Tillerson as Secretary of State
  • Ben Carson awaits confirmation for Secretary of Housing and Urban Development
  • Linda McMahon awaits confirmation for Head of Small Business Administration
  • Rick Perry awaits Confirmation for Secretary of Energy
  • Wilbur Ross awaits confirmation for Secretary of Commerce
  • Ryan Zinke awaits confirmation for Secretary of Interior

No hearings scheduled yet on Alexander Acosta, nominated Feb. 16 to be secretary of labor (Andrew Puzder withdrew from consideration as secretary of labor Feb. 15)

No hearings scheduled on Sonny Perdue for Secretary of Agriculture .  Senator McConnell declined to give a timetable for the ACA repeal and tax code overhaul. Both, he said, remain the subjects of intense conversations among House and Senate Republicans.

“[W]hat we have is a pretty overwhelming desire to do that, and if we do that, and we change this awful health-care law, and if we do the first comprehensive tax reform since 1986, those will have been really big lifts,” McConnell said. “We’re committed to doing that.”

Trump Picks Outspoken Army ‘Rebel’ as National Security Adviser

Donald Trump’s pick of H.R. McMaster for national security adviser puts a key job in the hands of a decorated officer with a record for speaking his mind, reassuring administration critics who have been increasingly vocal about their differences with the U.S. president.

Trump on Monday selected the Army lieutenant general to replace Michael Flynn, who resigned last week following revelations he misled the vice president about contacts with a Russian envoy. Keith Kellogg, who stepped in as acting national security adviser and was considered for the post, will remain as chief of staff for the national and homeland security councils.

While Trump has tapped a number of military officers for key administration posts, the new national security adviser has a reputation for speaking truth to authority, a trait that hasn’t always been welcome in a White House where loyalty to the president is prized most of all. Scores of Republican foreign policy officials have been passed over for top jobs after signing letters or speaking out against Trump during the campaign.

Trump’s decision prompted Senator John McCain of Arizona, who heads the Armed Services Committee and has been perhaps the president’s loudest Republican detractor on Capitol Hill, to call the 54-year-old McMaster “an outstanding choice,” adding that he gives “President Trump great credit for this decision.”

Pence Pledges U.S. Commitment to EU on Last European Tour Stop

Vice President Mike Pence said the U.S. commitment to the European Union remains strong and the new administration would seek ways to bolster the relationship, just a month after Donald Trump questioned the bloc’s viability and said NATO was “obsolete.”

“It is my privilege on behalf of President Trump to express the strong commitment of the United States to continued cooperation and partnership,’’ Pence said Monday in Brussels. “Whatever our differences, our two continents share the same heritage, the same values and above all the same purpose — to promote peace and prosperity through freedom, democracy and the rule of law.”

On the final day of his first trip overseas since taking office, Pence sought to allay concern that the trans-Atlantic partnership was beginning to fray by giving reassurances to European Council President Donald Tusk, European Commission President Jean-Claude Juncker and the EU’s foreign affairs chief Federica Mogherini. Pence’s trip capped Secretary of State Rex Tillerson and Secretary of Defense James Mattis’s own international debuts in Europe as the administration tries to set its foreign policy agenda.

Tusk, standing next to Pence after their meeting at the European Council, told reporters that the two leaders did not try to paper over their differences. “The idea of NATO is not obsolete, just like the values that lay at its foundation are not obsolete,” Tusk said. Pence was expected to meet with Jens Stoltenberg, secretary general of the North Atlantic Treaty Organization, later on Monday.

Puzder Withdraws as Labor Secretary Nominee

Andrew Puzder withdrew as President Donald Trump’s labor secretary nominee Feb. 15, amid rising controversy over his personal life and private sector background.

“I am withdrawing my nomination for Secretary of Labor. I’m honored to have been considered and am grateful to all who have supported me,” Puzder said on Twitter.

Puzder is the chief executive officer of CKE Restaurants Inc., parent company of the Hardee’s and Carl’s Jr. brands. His withdrawal came hours before a Senate Health, Education, Labor, and Pensions Committee confirmation hearing, which had been scheduled for Feb. 16. That hearing was delayed four times over the past five weeks, allowing new revelations about Puzder to surface.

Puzder ran into trouble on Capitol Hill over his admission that he employed an undocumented housekeeper. A decades-old divorce that included a domestic-abuse allegation also cast a shadow over his nomination. Some conservatives, likewise, had questioned his pro-immigration stance.

At least six Republicans have said they were not ready to back Puzder and were waiting for his confirmation hearing. Three GOP defectors would have been needed to sink him in the 52-48 Republican majority Senate.

John Zang contributed to this report


Congressional and Administration Health Care Update- Week of 2/13/17

Senate Confirms Price as Health Secretary as ACA Fight Nears

The U.S. Senate confirmed Tom Price, a congressman and physician, to head the Department of Health and Human Services, a post where he’ll have a leading role in Republican efforts to dismantle Obamacare and implement its replacement, and oversee a budget of more than $1 trillion.

The vote was 52-47, making Price the most contentious nominee for the position since at least President Jimmy Carter’s administration. Democrats opposed him because of his free-market, limited-government views on how the American health-care system should operate, and his past efforts to privatize Medicare by turning it into a voucher system. They also strongly criticized him for leaving questions unanswered about stock purchases in medical companies he made while handling health-care legislation.

“President Trump is setting up his cabinet to run our country in a way that benefits those at the top and their allies, but really hurts the workers and families we all serve.” Senator Patty Murray, a Washington Democrat, said on the Senate floor during Thursday’s debate on Price. “It’s hard to imagine who in America would be better off under Congressman Price’s leadership at HHS.”

Senator Orrin Hatch, a Republican from Utah, backed the nominee, who was an orthopedic surgeon before being elected to Congress.

“Dr. Price has extensive insight into our nation’s health-care system, having practiced medicine for two decades in a variety of settings,” Hatch said. He “will put this vast experience to good use and be decisive not only in working with Congress to find solutions but implementing them.”

Guidance Helps Explain One-In, Two-Out Regulatory Order

The Office of Information and Regulatory Affairs quickly issued interim guidance for agencies grappling with President Donald Trump’s new executive order requiring two regulations to be eliminated for every one issued.

All regulatory activity was frozen on Jan. 20 by a memorandum issued by White House Chief of Staff Reince Priebus. Once the freeze is lifted, the new order’s requirements will apply to all significant regulatory actions by agencies between noon on Jan. 20 and Sept. 30, the end of the fiscal year.

In general, executive departments and agencies may comply with the order’s requirements by issuing two “deregulatory” actions for each new significant regulatory action that imposes costs, said the guidance document signed by Dominic Mancini, acting administrator of OIRA.

OIRA requested public comment on the guidance, which should be sent to by Feb. 10. It is likely the guidance, which was presented in a question-and-answer format, will be updated following the comment period.

It is also possible that the guidance could change once the new director of the Office of Management and Budget is confirmed. Trump’s nominee to lead the OMB, Rep. Mick Mulvaney (R-S.C.), is awaiting Senate confirmation.

Medicare Equipment Bidding Stalled by Administration

The Trump administration is temporarily halting an upcoming round of the Medicare durable medical equipment competitive bidding program.

The next steps of the Round 2019 bidding program, which was announced Jan. 31, will be temporarily suspended “to allow the new administration further opportunity to review the program,” the Centers for Medicare & Medicaid Services said Feb. 7 in a brief announcement.

The Medicare agency has said the program saved billions of dollars from the former fee schedule payment since it began in 2011. The program hasn’t been popular with the DME supplier industry due to reimbursement cuts which they say have driven suppliers out of business.

Lottery Winners May Have to Scratch Off Medicaid

Lawmakers cracked down on lottery winners using Medicaid health-care benefits, sending two proposals Feb. 7 to the House Energy and Commerce Committee and moving forward with early Republican efforts to curb what they see as misspending in the $550 billion program.

The proposed legislation would limit Medicaid eligibility for recipients of lump-sum payments by factoring the dollars into their income over a matter of months, as well as close a Republican-deemed “loophole” by including a spouse’s annuity income into Medicaid long-term care eligibility determinations for an institutionalized partner.

The bills, H.R. 829 and H.R. 181, were widely supported by GOP members of the health subcommittee, who called them “first, small steps” in improving Medicaid and noted possible savings for the most vulnerable beneficiaries. But Democrats bristled in a highly partisan vote, calling the proposals trivial at best—masking the ultimate goal of stripping dollars from the safety-net health insurance program—and harmful at worst, chipping “away at the program around its edges” and jeopardizing “hard-working” spouses of patients in need of long-term care.

Sent to the full committee with 20-to-12 and 19-to-13 margins, they represent the first targets for reforming and reining in Medicaid spending, which the Congressional Budget Office estimates could reach $1 trillion annually by 2026. With some members surprised about the lack of consensus, the votes underscore how controversial tweaks to a health insurance program that covers more than 70 million seniors, disabled and children will be.

“We never claimed this was going to fix everything, but this is a starting point,” Rep. Markwayne Mullin (R-Okla.), who authored H.R. 181, the annuities bill, said.

“Let’s just move forward, try to come up with small problems that can be solved,” he said.

Rep. Fred Upton (R-Mich.) was the sponsor of H.R. 829, the lottery bill.

Trump Administration Says Obamacare Failed as Sign-Ups Decline

Fewer people in the U.S. signed up for Obamacare coverage for this year, according to a preliminary report, as enrollments slowed after the Trump administration vowed it would do away with the health law.

In the 39 states where Affordable Care Act sign-ups are done on the website, 9.2 million people enrolled in individual insurance plans — about 400,000 fewer than last year. States like New York and California that run their own sign-up systems are reporting their data separately. The deadline to enroll was Jan. 31.

Even before the data came out, Democrats were claiming that the Trump administration had undermined the law, partly by halting some outreach efforts. While it now runs the health program, the Trump administration called the report another sign of the law’s shortcomings, pointing to a 25 percent increase in premiums and a decline in insurer participation.

“Obamacare has failed the American people,” Matt Lloyd, a spokesman for the Department of Health and Human Services, said in a statement. “We look forward to providing relief to those who are being harmed by the status quo.”

Until Trump took over in January, sign-ups had been trending higher. Then, on the day he was inaugurated, he signed an executive order declaring he’ll seek a prompt repeal of Obamacare and directing federal agencies to work to minimize the law’s burdens. There was also a partial halt to efforts to push people to sign up for coverage, though some of those efforts later resumed.

States with the biggest declines in sign-ups included ones where health insurers pulled out of the markets, leaving consumers with fewer choices. In Mississippi, Alaska, Georgia, Missouri and other states, insurers left the program or scaled back, while premiums climbed.

Obamacare also expanded eligibility for Medicaid and let children stay on their parents’ health plans to age 26. Including those changes, the U.S. estimates that about 20 million people have gained insurance under the law, helping lower the uninsured rate to 8.9 percent.

Medicare Must Do More Outreach on Home Health Coverage

A new website, corrective statement and national call to providers are part of a court-ordered educational outreach program the CMS must conduct to ensure Medicare providers apply the correct home health coverage standard (Jimmo v. Burwell, 2017 BL 31713, D. Vt., No. 5:11-cv-17, 2/1/17).

The U.S. District Court for the District of Vermont Feb. 1 ordered the Centers for Medicare & Medicaid Services to conduct additional educational outreach by notifying Medicare providers and contractors that the program will pay for home health services designed to maintain or slow the decline of a beneficiary’s health. The order comes in litigation brought to force CMS to rectify a prior coverage policy that excluded coverage for treatment that merely maintained a beneficiaries condition.

The court accepted the majority of the CMS’s proposed corrective plan, including language provided by the Center for Medicare Advocacy (CMA), which represented the plaintiff class of Medicare beneficiaries, for a public corrective statement. The court also insisted that the agency hold a national call to disseminate the statement and provide clarification about the correct home health coverage standard.

One key provision that the CMA pushed for was to characterize the new “maintenance standard” for Medicare coverage as a change rather than a clarification of the prior standard, which the CMS originally suggested. Judith Stein, executive director of the Center for Medicare Advocacy, said in a Feb. 2 statement that using the word “change” in the forthcoming outreach initiative, along with “the imprimatur of CMS,” means that “Medicare adjudicators and providers should have no doubt about what the correct coverage policy is.”

The order comes after Judge Christina Reiss found in an Aug. 17, 2016, ruling that program outreach mandated by a settlement between the CMS and Medicare advocacy groups fell short of the parties’ settlement agreement, and ordered the parties to come up with a new plan to correct continued incorrect application of home health coverage standards (25 HLR 1262, 8/25/16). Medicare advocacy groups previously alleged that the CMS was improperly covering only home health services designed, or later found, to improve a beneficiary’s health (the “improvement standard”), and the parties agreed in 2013 (the Jimmo settlement) to conduct an educational campaign that alerted providers, contractors and adjudicators that the improvement standard was too narrow and erroneous.

Medicare Advantage Payments for 2018 to See ‘Modest’ Rise

Medicare managed care plans should expect a “modest” 0.25 percent average increase for 2018, but revenues should go up 2.75 percent when coding trends are considered, the CMS said Feb. 1.

The “moderate growth” is consistent with last year’s payment update and reflects a similar pattern to Medicare fee-for-service payments, the Centers for Medicare & Medicaid Services said in a release announcing the 2018 Medicare Advantage and Part D Advance Notice and Draft Call Letter. Comments must be submitted by March 3, and the 2018 final announcement will be published April 3.

The CMS is proposing updates to the methodologies used to pay Medicare Advantage and Part D prescription drug plan sponsors. However, a Jan. 19 Government Accountability Office report found the new system isn’t ready for prime time, calling into question “the soundness of billions of dollars in Medicare expenditures.”

John Zang contributed to this report