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Budget Woes in the States Should be a Warning to Washington

 

The end of fiscal year 2017 is quickly approaching for the federal government. At the end of September, Congress is required to pass all 12 appropriations bills — something that they have historically failed to do, as our debt nears $20 trillion.

 

Yet throughout the states, there are similar struggles happening, and the long-term risks for Washington’s irresponsibility come into sharp focus. After a two-year stalemate, Illinois’ Democratic-controlled legislature, along with 15 House and Senate Republicans, came together to override Governor Rauner’s vetoes and pass a budget. In order to curb the massive budget shortfall, the state income tax was hiked dramatically, while a $130 billion shortfall in pension liabilities remains unaddressed along with the $15 billion in unpaid bills the state has accumulated.

 

Illinois will be forced to issue bonds and borrow from various state accounts to help pay the overdue bills. The state was on the brink of seeing their credit rating fall to “junk” status, which would’ve made them the first U.S. state in history to do so.

 

Nearly 900 miles east in New Jersey, the state is also having their share of budget problems. Gov. Chris Christie signed a budget just before the 4th of July holiday after a 3-day budget impasse, which resulted in a partial government shutdown.
 
New Jersey and Illinois are not the only states that are having issues passing budgets. With just hours to go before the new fiscal year began July 1, there were 11 states that had not yet agreed on a budget.

 

Irresponsible budgeting at the state level has become almost a given, and occasionally the warnings of inevitable fiscal crisis can be easy to ignore. But the all-too-real experiences of several states should serve not only as a warning for them to get their own finances in order but a reminder of what can happen if Washington does not.

Trump’s White House Payroll Saves Taxpayers Millions

Last week, the Trump Administration released its annual report on White House Office Personnel, which includes data on the salaries of all 300+ White House employees. The projected four-year savings on the payroll is close to $20 million — which is perhaps a sign that President Trump is serious about finding cuts throughout the federal government.

 

As Adam Andrzejewski highlighted in a recent op-ed, Trump’s White House has over 100 fewer employees than Obama’s White House in his first year in office. Additionally, First Lady Melania Trump has only five staffers dedicated to her, while First Lady Michelle Obama had employed 24 staffers.

 

Part of the savings also stem from President Trump — along with Ivanka Trump (First Daughter and Advisor to the President) and Jared Kushner (Assistant to the President and Senior Advisor) — forgoing a salary. Because the President is required to receive a salary, President Trump decided to donate his pay to the Department of Interior for both the construction and repair of military cemeteries.

 

The White House Office Personnel is only a tiny morsel of the overall budget, but the fact that President Trump is willing to make cuts is encouraging leadership on his part. Fiscal conservatives can hope that this will lead other departments to find ways to save taxpayer money in their own offices and promote fiscal restraint across all sectors of the federal government.

Senate Introduces the Better Care Reconciliation Act of 2017

On Thursday, the Senate released a draft of its plan to repeal and replace the Affordable Care Act. The bill, H.R. 1628—or Better Care Reconciliation Act of 2017 (BCRA)—is similar to the legislation the House passed in May, which eliminates both the ACA’s employer and individual insurance mandates and most of the taxes it levied. Notably, it removes the controversial “continuous coverage” provision that the AHCA used to replace the mandate — although this is likely to change before final passage.

 

The BCRA phases out Medicaid, although on a longer timeline than the AHCA. It looks to deal with the growing costs of Medicaid by block-granting money to states with a growth rate that is linked to inflation. This hopes to give states more flexibility in adopting programs that work best for their state and increasing efficiency throughout the Medicaid program.
 

Importantly, the legislation does not include the waiver language from the so-called MacArthur amendment that was instrumental in getting fiscally conservative support to pass AHCA — instead, it looks to reform “1332 waivers” that were already included with Obamacare but rarely used because of the cost and burdens of doing so. Under the plan, there would be money appropriated to ease the financial cost when states seek a waiver, and the burden of proof will shift away from those seeking waivers.

 

The Congressional Budget Office released their score of the legislation, which they predict leaves about the same amount of people uninsured as the House bill. However, they do provide the caveat that the drop in coverage would be, “primarily because the penalty for not having insurance would be eliminated.” The CBO also estimates that premiums will increase in 2018 by 20 percent and by 10 percent in 2019. The good news comes in 2020, when premiums would be about 30 percent lower than under ObamaCare and 20 percent lower by 2026.

 

CBO estimates that on net, the bill would cut the deficit by $321 billion over the ten-year window — about $200 billion more than the House bill would — a good bit of these savings are a result of an estimated 15 million fewer people on Medicaid coverage by the year 2026.

 
Republicans have been working on replacing the Affordable Care Act for over half a decade, and they may be closer now than ever before. However, the pros and cons of this bill — and what the final version will look like — are still very much in dispute, even among the Republican conference. Whether Leader McConnell has the support necessary to move forward on this legislation remains to be seen, but the next weeks will be crucial for the future of American healthcare.

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