Capitol Week in Review

Wednesday, February 4, 2015

The Senate has approved the governor's bill to initiate broad reforms of the Medicaid system. It was the second major victory for the governor in the Senate, which earlier passed his bill to cut income taxes on middle class wage earners.

Both the Medicaid overhaul plan and the income tax legislation are now in the House of Representatives.

Senate Bill 96 creates a 16-member legislative task force charged with recommending changes to the entire Medicaid system. One of its goals will be to promote more personal responsibility on the part of people who receive Medicaid services. For example, they may be required to look for work and take job training in order to maintain their eligibility.

The Senate passed SB 96 by a vote of 27-to-7 and sent it to the House. Opposition came from senators who want to eliminate the current system as soon as possible. One senator voted against the bill because it threatened to eliminate the current system too quickly.

The new task force will have to work with a sense of urgency because SB 96 has a provision that specifically terminates the eligibility of the Medicaid expansion population on Dec. 31, 2016. Those are the people who have health coverage under the private option, which has proven to be highly controversial.

Any bill that is passed by a supermajority, while also drawing opposition from both ends of the spectrum, is an example of what political science professors call a good compromise.

The Senate also passed SB 101, an appropriation to maintain funding of the current Medicaid system for the fiscal year that ends June 30, 2016.

The House overwhelmingly approved SB 6, the governor's proposal to lower state income taxes for people with incomes between $21,000 and $75,000 a year. It will lower the tax rate from 6 percent to 5 percent for taxpayers earning between $21,000 and $35,099 a year. The rate will go down from 7 percent to 6 percent for taxpayers earning between $35,100 and $75,000 a year.

The cuts will take effect for earnings in 2016 and will save middle class taxpayers more than $100 million a year. The revenue loss for state government will not be as great because of a change in how the state will tax capital gains. A 2013 law was going to exempt 50 percent of capital gains from the income tax if they were claimed after Jan. 1, 2015. However, SB 6 makes that exemption available only until Jan. 31, 2015. After Feb. 1 of this year 40 percent of capital gains will be exempt from state income taxes.

Although some representatives opposed the change in tax treatment of capital gains, a compromise was reached and SB 6 was approved by a vote of 95-to-2. The bill was sent back to the Senate, which must vote on whether to agree with the compromise amendments that were added by the House.

A host of important and potentially controversial bills remain to be considered. They include legislation to restructure lottery scholarships and change the way the lottery is overseen. Also, the legislature will take up bills to address overcrowding in the prison system and strengthen the probation and parole system.