With the recent disclosure that our state faces a budget shortfall of $577 million, congressional legislation to extend fiscal help to states has become a more urgent priority for Oregonians.
Some help could be on the way. A bill introduced in the U.S. Senate this week includes extensions of some forms of Recovery Act assistance to states, including Medicaid funds. But the legislation may face amendments that could weaken or eliminate the Medicaid dollars.
A final vote on the bill could occur by next Wednesday, June 16.
What aid is included in the bill, and what's left out?
H.R. 4213 is known as the "tax extenders" package because some of its provisions would continue various business and personal income tax credits. The Senate version of the bill would also extend some fiscal relief to cash-strapped states. (Read a summary of the bill here.)
An important element of that state fiscal relief is a six-month extension of additional matching Medicaid funds, to help states maintain health services for their poorest residents and other basic services. These extra funds, technically called enhanced Federal Medical Assistance Percentage (FMAP) funds, not only protect vulnerable households but also preserve public and private sector jobs.
Under the Senate bill, the federal government would send as much as $249 million in FMAP funds to Oregon. Some of these funds would go to counties and school districts. About $200 million of the enhanced FMAP would shore up the imperiled budget of Oregon Department of Human Services, an agency that provides critical services for some of the state's most vulnerable families.
The bill would also temporarily extend a number of other Recovery Act provisions that help struggling households and help stabilize the economy. These include extensions of unemployment insurance benefits and enhanced funding for Temporary Assistance for Needy Families (TANF), which assists very low-income families with children.
Unfortunately, the Senate bill does not continue COBRA premium assistance. That program has helped unemployed workers maintain health coverage during this difficult recession.
The FMAP provision remains at risk
We are hearing that the provision to extend FMAP could face amendments that would eliminate or scale back the funds during debate on the Senate floor.
Another threat to the FMAP provision comes from efforts to weaken provisions to rein in a tax loophole benefiting investment fund managers. The cost of the proposed "tax extenders" legislation is partially offset by measures to scale back a tax loophole that allows investment fund managers to treat compensation for services -- called "carried interest" -- as capital gains subject to a 15 percent tax rate, rather than as regular income subject to the higher income tax rate of 35 percent for those in the top tax bracket (as investment fund managers tend to be). A description of the "carried interest" loophole can be found here.
Under pressure from some Senators, including some liberal Democrats, Senate leaders included in H.R. 4213 weakened carried interest language as compared to a similar provision in a House bill, thereby closing a smaller portion of the loophole. As noted here, the claims that closing the carried interest loophole would restrict venture capital and have other negative effects are unfounded.
Amendments to further water down the carried interest provision may be debated this week and next on the Senate floor. Should any of these amendments succeed, pressure to reduce the FMAP provisions could increase within the current deficit-sensitive political environment.
What's in Oregon's interest?
A report just released by the Center on Budget and Policy Priorities examines how the failure of Congress to extend fiscal aid to states would result in additional service cuts and job losses in at lest 34 states. Oregon is among those states.
It is in Oregon's interest for the Senate to approve the tax extenders bill, including the provisions as introduced to temporarily extend Recovery Act FMAP, TANF emergency funds and unemployment insurance benefits.
It is also in Oregon's interest for the Senate to oppose attempts to weaken the FMAP, TANF and other Recovery Act provisions and to oppose attempts to further weaken the carried interest measure that helps pay for the bill and improves fairness within the tax code.
Janet Bauer, Policy Analyst, jbauer@ocpp.org
P.S.: If your organization is not able to sign but you personally support the messages in the letter, please contact Janet Bauer at jbauer@ocpp.org for advocacy opportunities for individuals.
The Oregon Federal Budget Project aims to protect Oregonians who rely on federal programs that support children, working families, elders and people with disabilities. The project also defends federal funding that helps Oregon students afford a college, protects Oregon's environment and supports the safety of Oregonians. We also seek to advance fair and adequate taxation.
We provide timely updates on proposals on tax and budget legislation under consideration in Washington and information on how to take action.
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