Yet Another State Slush Fund Uncovered

[A] little-used $125 million fund established by former governor Michael S. Dukakis as the first step to guaranteeing health insurance for all state residents has accumulated a large surplus.

The fund, called the Medical Security Trust Fund, was established in 1988. Large employers are required to contribute $16.80 per worker annually, for a total of $48 million last year....

The Boston Globe
Mar. 7, 2000 (below)

Remember the "Massachusetts Miracle"? Remember when the Dukakis administration didn't pay its Medicaid bills and had to raise the income tax rate "temporarily" to finally do so? Remember the Dukakis presidential campaign and his promise at our expense of "Universal Health Care"? Remember it was adopted to further his presidential ambition, then later repealed?

Well, the state's still charging for it -- and yet another surplus has piled up ... another $125 million! From another "program" instituted during the "Miracle" years when bills went unpaid until the "temporary" tax increase was imposed.

Remember the Associated Press report on December 28th, "Bay State awash in $$ for a rainy day"?

With tax dollars gushing in to state coffers because of the booming economy, the state has now piled up mountains of money in trust funds that are meant to help the state if times turn bad.

The state now has:

$1.8 billion raised through the unemployment insurance tax to pay for unemployment benefits for laid-off workers;

$1.4 billion raised through general taxes in the state's "rainy day" fund; and

$131 million in reserve funds in case the welfare caseload grows.

And the state will soon be filling up another trust fund, with 70 percent of the money flowing in annually from the state's $8 billion share of the national tobacco settlement.

Remember the State House News Service report on March 2nd?

[A] 56 percent decline in the caseload due largely to the state's own 1995 reform law has left the Department of Transitional Assistance with a pile of extra money. DTA spokesman Dick Powers said the agency has between $62 million and $68 million in surplus federal funds, including the bonus money.

And remember the Boston Sunday Globe's report on February 7th?

According to the state Department of Revenue, which tracks local budgets, free cash accounts and so-called rainy day funds held by the state's 351 cities and towns soared from $166 million in 1992 to $773 million last year.

And total local reserves are probably closer to $1 billion because some cities and towns conceal surpluses in accounts that, on paper, are earmarked for other purposes....

Then recall last week's Department of Revenue report:

"Year-to-date revenue collections totaled $9.59 billion, up $563.0 million or 6.2 percent above last year."

Can the Gimme Lobby coherently explain to us with a straight face -- if possible -- just why it is that they believe "The Sky is Falling!" and "The State can't possibly afford a tax 'cut'"?

CLT has begun digging for as many of the hidden state slush funds as we can find, poring over the state Comptroller's "1999 Comprehensive Annual Financial Report" for leads. The number of "Trust Funds" is staggering ... and many seem to have had a FY'99 year-end surplus. Maybe you can find something we'll miss before we've completed our list!

We've also added a link there to the state Division of Local Services, where you can find everything you ever wanted to know about how Proposition 2 is working across the state, community by community and category by category. It was our 1980 Prop 2 ballot question that first established the DLS.

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Chip Ford

The Boston Globe
Tuesday, March 7, 2000

Cellucci eyes $90m in loans to health units
By Liz Kowalczyk
Globe Staff

Governor Paul Cellucci, offering his first health-care initiative since the fiscal crisis at Harvard Pilgrim Health Care was discovered, wants to take millions of dollars set aside for the uninsured and lend it to struggling nonprofit hospitals, nursing homes, and clinics.

According to a memo circulated among Cellucci's staff, a little-used $125 million fund established by former governor Michael S. Dukakis as the first step to guaranteeing health insurance for all state residents has accumulated a large surplus.

With the Harvard Pilgrim situation fresh in the public's mind, Cellucci's staff filed legislation last night asking the Legislature to set aside $90 million of the total for low-interest emergency loans to health-care providers.

"This money was essentially set aside for health care, yet the purpose of it was never realized," said John Birtwell, the governor's spokesman. "This is a way to have an immediate impact on providers who are struggling and need help."

Because the proposal doesn't dip into the general fund, the governor's office hopes the plan will be more palatable than asking the Legislature for a taxpayer bailout of Harvard Pilgrim, which was forced into state receivership on Jan. 4.

The fund, called the Medical Security Trust Fund, was established in 1988. Large employers are required to contribute $16.80 per worker annually, for a total of $48 million last year.

But given the recent economic boom and continued low unemployment, only $14 million was spent last year on health insurance for workers who have been laid off or who have fallen through the cracks because they work part time or on a contract basis.

The rest sits in a bank account earning interest.

The Dukakis legislation was intended to be the first step toward universal health insurance for all Massachusetts residents, but the remainder of his plan was later repealed.

Because the fund was established solely to provide health insurance for the unemployed who meet certain income requirements, any change requires legislation.

Cellucci is proposing a one-time transfer of $90 million to create the Health Care Access Preservation Fund. Further revenue would be generated from the interest paid by providers and by leveraging the money to sell bonds.

The administration said plenty of money would be left over to provide health insurance to the 10,000 adults and children who qualify for the program in any given week -- even if the state falls into another recession.

The Division of Health Care Financing and Policy would establish criteria for receiving the emergency loans, which would go to providers that offer services not readily available elsewhere, that serve a large number of Medicare and Medicaid patients, that are experiencing financial hardship, and that display strong leadership and an ability to repay the loans.

Andrew Dreyfus, executive vice president of the Massachusetts Hospital Association, was pleased but cautious about the governor's proposal.

"We will need to examine it closely to make sure there are sufficient funds remaining for the uninsured," he said. "But we are pleased that the governor recognizes the urgent financial problems of many hospitals."

Dreyfus said that he would not want to see the new fund take the place of "fundamental reform of the system," which legislators and the governor's office say will be addressed by a special task force that will be formed in coming weeks.

As a concession to employers, who administration sources said have mixed views about the loan fund, Cellucci also is asking the Legislature to reduce the amount that employers contribute to the fund by 25 percent. A Rate Review Board would be allowed to increase or decrease the amount of the contributions in the event of a change in the state's economy.

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