Senate budget has much less help for health departments

By Melissa Patrick
Kentucky Health News

Having drafted several budgets, Rep. Steven Rudy of Paducah cautioned his fellow House members Feb. 13 that their passage of two big, bipartisan bills to help health departments with their looming pension crisis didn't mean the departments' troubles were over, because those bills and the money to support them had to also be approved by the Senate.

Logo of the state Department for Public Health and local health departments

He warned, "Our friends down the hallway will have a bite of this apple," and now they have taken a big bite.

Randy Gooch, director of the Jessamine County Public Health Department, told Kentucky Health News that even with a reduction of the pension contribution to 84.43 percent of payroll on July 1, from the planned 93%, the Senate budget is about $9.4 million short of funding House Bill 129, the public-health transformation bill.

HB 129, which Gov. Andy Beshear recently signed into law, will overhaul the state public-health system, including how health departments are funded and prioritize their resources.

"It was certainly disheartening and deflating to hear the Senate budget proposal provides no new funding for local health departments to support the foundational funding requested through HB 129,"  Gooch said in an e-mail. "It was especially surprising the Senate didn’t provide any portion of the funding recommended by either the governor or the House . . . during a time local health departments are responding to the covid-19 pandemic."

The Senate budget would give health departments about $24 million less per year than the House budget and about $17.5 million less than the governor's proposed budget for public health.

Gooch said both the House budget, HB 352, and the governor's version would fully fund the public-health transformation bill, based upon the required funding methodology.

The Senate budget takes no account for HB 171, which would move health departments, regional universities and quasi-governmental agencies away from a "percentage of pay" pension formula to a model that requires them to pay only what they owe the system over a certain period, called "level-dollar funding."

HB 171 was the second bill referenced by Rudy on  Feb. 13. It is touted as part of a three-phase approach to create a sustainable solution to local health departments' pension-driven financial woes.

The Senate budget provides about $25 million in each fiscal year to help health departments with their pension, at a rate of  84.4% of payroll. The governor's budget is also based on an 84.4% rate, but provided an extra $50 million each year for pension relief, lowering the effective rate to 67.4%.

The House budget more or less adopted that approach, with line-item appropriations for each health department to help them pay pension obligations, based on what each department owes the pension system and assuming a local public-health tax of 8 cents per $100 worth of property.

The legislature has frozen health departments' pension contributions at 49.47% of payroll for the past two years, but a 2016 pension-reform law would make that 93% on July 1, the first day of the new budget. Many departments say that would force them to close.

Gooch and Jason Bailey, head of the Kentucky Center for Economic Policy, a left-leaning think tank, said none of the budgets fully fund the departments' pension needs.

"Whether it's 84% or 93%, all of these numbers are not achievable by these health departments without the money," Bailey said, "and nobody is providing the money to really make this work, and that's what worries me."

Rep. Kim Moser, R-Taylor Mill, sponsor of the public-health transformation bill, has said it is estimated that health departments' pension-liability contribution deficit could be as high as $38.5 million, and that "18 of our local health departments, which represent 41 counties, will face fiscal insolvency during the fiscal year 2020 without significant financial and operational changes."

Allison Adams, president of the Kentucky Health Department Association, said, "We are thankful for the efforts in the 2019 special session and the recent passage of public-health transformation, but this is a true, rare crisis. Our legislators have consistently said, 'I support my health department.' Now would be the time."

Rep. Jim DuPlessis, R-Elizabethtown, who is the sponsor of HB 171, told Kentucky Health News that the House and Senate are working on a compromise for his bill and the budget. He said he was hopeful they would be able to keep the majority of HB 171 intact, though he said the negotiations will likely be done through Senate Bill 249.

The House has filed a committee substitute to SB 249 to reflect most of the language of HB 171, with a change to include a new 30-year-amortization period for the state pension debt, rather than the 27 years in HB 171.

Gooch said, "I certainly hope the final budget validates the value and priority of public health for our commonwealth, knowing our prevention efforts reduce the premature loss of life each and every day, but becomes much more evident in a more visible response to pandemic infectious diseases in all of our communities."

Because of the new coronavirus, legislators have adjourned until March 26, and plan to do likewise until April 1, when they plan to pass a final budget and send it to the governor in time to override any gubernatorial vetoes by April 15, the last day they can meet.