a service of the Nevada Policy Research Institute

Business G-2

Guinn, Buckley push for more
property-tax-funded programs

By Steven Miller
March 16, 2005

As Nevada’s property-tax crush bears down on homeowners, Gov. Kenny Guinn and Assembly Democrats have quietly agreed to expand State of Nevada spending obligations funded by the property tax, BusinessNevada has learned.

Three or four new social-service programs would be launched under a plan developed by an interim subcommittee headed by Assembly Majority Leader Barbara Buckley. At least two of the programs have already been publicly endorsed by Gov. Kenny Guinn in his proposed Medicaid budget.

Driving the entire campaign is the prospect of getting millions of new matching federal dollars for state government to spend. Under the Buckley plan, property tax revenues that currently support county indigent medical care under two state accounts -- Indigent Accident Fund (IAF) and Supplemental Fund (SF) -- would be directed elsewhere.

Instead, the monies in question would be earmarked for purposes that, under Medicaid rules, could bring federal matching dollars. Programs at the top of the list in a December presentation by Buckley would:

  • Expand Medicaid coverage to pregnant women,

  • Subsidize health insurance coverage for low-wage employees of certain small employers, and

  • Provide insurance coverage for people with high medical expenses who do not qualify for Medicaid because their income and resources exceed established limits.

Clark County's University Medical Center and Washoe County's Washoe Medical Center, which receive the greatest share of the IAF and SF monies, have expressed concern over their prospective financial losses, should property tax moneys be directed away from indigent care.

Although the New York-based consultants hired by the interim subcommittee, EP & P Consulting, have estimated that much of the prospective UMC and WMC losses could be made up through the new Medicaid-subsidized programs, UMC's Peter Tibone told the subcommittee's technical working group last May that UMC would still experience a $20 million annual deficit. Tibone is the medical center's director of reimbursement.

His boss, UMC CEO Lacy L. Thomas, told the group that if UMC was not relieved of its legal obligation to provide services to the medically indigent, there will need to be "more pressure on the taxpayers of Clark County." At the same time, Washoe County Legal Services advocacy director Jon Sasser expressed concern that eliminating the IAF and the SF would create a gap in legal responsibility. No one, he told the group, would have legal responsibility for non-emergency but medically necessary care, or for bills for medically necessary care exceeding $25,000.

The IAF, or indigent accident fund, is supported by 1.5 cents of the property tax, while the SF, or supplemental fund, is supported by 1 cent of the property tax -- both assessed by the counties.

The IAF -- dedicated by law to the medical care of indigents hurt in motor vehicle accidents -- was established by the state in 1941, before Nevada law made car insurance mandatory and before the Medicaid program made matching funds available under certain conditions.  

One source told BusinessNevada that claims against the IAF account only total about $3 million a year, yet the account has recently been bringing in much more—about $12 million annually. Furthermore, it was stated, the recent mushrooming of Nevada land valuations could push new revenues even higher.

During the last biennial budget, state lawmakers—in view of other tax increases being imposed on Nevadans—directed Nevada counties to not assess that portion of the property tax during the first year of the biennium. Now, BusinessNevada is informed, the Guinn administration and Assembly Majority Leader Barbara Buckley have agreed that in both years of the new fiscal 2006-07 budget the tax will be assessed at the full rate.

Nevada Association of Counties analyst Andrew List testified to a senate subcommittee Friday that Gov. Guinn and Majority Leader Buckley intend to re-earmark the property tax funds for social purposes that, under Medicaid rules, can receive federal matching funds. He was challenged by Sen. Bob Beers, who pointed out that returning to the full statutory assessment rate while changing the purpose of the property tax fees would mean “You’re effectively increasing property tax to start new programs.”

Other states' experiences

While states often attempt to increase the amount of federal matching funds they can receive by reclassifying state and local spending under headings that qualify under Medicaid rules, the process can easily lead to additional burdens on state taxpayers, according to the National Center for Policy Analysis.

A 2003 NCPA white paper, Reforming Medicaid, points out that in the late 1980s Texas made two such attempts. The first did not increase the tax obligations of Texans but the results of the second attempt “were immediate and dramatic. It had taken about 20 years, from 1968 to 1988, for total Medicaid spending in Texas to reach $2 billion a year. Medicaid spending reached $7 billion—a three-and-one-half-times increase—in just five more years,” reported the study's authors.

In order to qualify for even more matching funds, Texas had expanded Medicaid eligibility—primarily to pregnant women, infants, and children—eventually increasing the demand for state matching dollars.

One of the Buckley-Guinn social programs would similarly expand the number of pregnant women who can receive Medicaid services. Under an already optional program that Nevada taxpayers now fund, women are eligible at an income level that is 135 percent of the federal poverty level. Under the proposed expansion of this program, pregnant women would be eligible at an income level up to 185 percent.

Other risks facing the Buckley-Guinn proposals include Medicaid itself. According to a white paper released by the National Governor’s Association this February, Medicaid spending has been accelerating “at double-digit rates in recent years,” and has increasingly “become too expensive for states to afford.” In just the past five years, enrollment in Medicaid programs has jumped 40 percent, while Medicaid spending itself increased by over 50 percent.

“Over the past two decades,” says the NGA study, “the average share of state budgets set aside for Medicaid spending increased from eight percent in 1985 to 22 percent in 2003. In 2003, for the first time, total Medicaid spending surpassed spending for elementary and secondary education as the largest single item in overall state budgets.”

At the federal level, too, Medicaid costs are out of control. For that reason, the Bush administration's current budget proposes to reduce federal spending on Medicaid for states by $40 billion, limit some payments, reduce the federal match on some services and take aim at states that the federal government says wrongly use Medicaid funds for other government purposes.

On Valentines Day, February 14, Majority Leader Barbara Buckley and representatives of 29 Nevada tax-consuming organizations denounced the proposed cuts in the Bush administration’s budget as "heartless" and "unconscionable."

“These are not luxury programs. These are not fluff programs,” said Buckley.

But the incident underlines the growing possibility that federal cuts to Medicaid could mean more of the financial burdens of new programs could soon rest on the backs of Silver State taxpayers.