One of the problems with the federal Affordable Care Act (called “Obamacare” by the President himself) is the way it’s paid for: with $700 billion of taxpayer money taken from Medicare. Many Louisiana officials, myself included, have criticized this. That’s why it’s so disappointing and more than a little ironic that the state has done the same thing to its own State Group Benefits (SGB) health insurance plan for 230,000 active and retired state employees, their spouses and children.
According to a July 18 report by the nonpartisan Louisiana Legislative Fiscal Office (LFO), two years ago, OGB had built up a reserve fund, or savings account, of $540 million to pay its members’ health insurance claims. This money came from premiums paid by employees and employer contributions paid by the state. Then OGB, which is run by the state Division of Administration, began spending $16.1 million more per month to pay claims than it was collecting in premium revenue. If this continues, by the end of Fiscal Year 2015, the reserve fund will contain only $5.6 million, according to the LFO.
What happened? Why is OGB suddenly living off its reserve fund? According to the LFO, the state has “indirectly utilize[d] OGB’s fund balance to support the FY13 and FY14 operating budgets.” (LFO Report, p.3). The state did this by reducing premiums, which helped employees financially but which helped the state even more by reducing the amount of the state’s legally-required employer contribution to OGB, which in turn freed up money to spend elsewhere in the budget.
In other words, the state in effect took the money from the OGB reserve account to pay for the state’s operating budgets in 2013 and 2014, just like Congress took the money from Medicare to pay for Obamacare.
The OGB reserve account is not the only trust fund the state has drained recently. The Louisiana Medicaid Trust Fund for the Elderly was established with federal dollars in 2000 to provide a permanent source of money for health care for our elderly. We were supposed to invest the money, spend the interest and leave the principal in tact. In 2012 the trust fund contained $519.2 million. At the end of this fiscal year, it will contain zero. The state has spent the interest and the principal.
Similarly, in 2011, the state capped the amount of the Millennium Trust Fund (better known as the Tobacco Settlement Trust Fund), whose earnings are used to pay for health care, education and the TOPS college scholarship fund, and redirected the tobacco settlement monies flowing into the trust fund to the operating budget to pay for TOPS, which frees up money to spend elsewhere. This maneuver thus effectively uses the trust fund money to pay for balancing the budget.
Louisiana state government finances must be stabilized. The way to do it is not especially complicated: 1) stop draining the state’s savings accounts and trust funds; 2) stop spending more money than we take in; and 3) when we do spend money, spend it on things citizens need, not things politicians want.
John Kennedy is State Treasurer of Louisiana