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Health Care, Tax Cuts Issues Colliding (AP Analysis)

3 min read

LITTLE ROCK — How do you convince Republicans who took over the Arkansas Legislature by vowing to fight “Obamacare” to support government-subsidized health insurance? The same way you convince a Democratic governor who has said his budget can’t include more tax cuts to agree to a large package of reductions.

As Arkansas lawmakers approach what could be the final weeks of this year’s session, it’s becoming clearer that proposals to expand health insurance to low-income workers and to cut $100 million in taxes are colliding.

The ideas have become so inextricably linked that the Republican chairman of the House panel repeatedly refers to a Rubik’s Cube when describing them and other budget issues the Legislature must wrap up before a self-imposed April 19 deadline. The Legislature is moving closer toward action on those matters and a proposal to provide $125 million in financing for a steel mill project in northeast Arkansas.

“If we get all of these pieces together, the revenue picture looks a lot better,” Rep. Charlie Collins, R-Fayetteville, told reporters after the panel advanced his bill to cut income taxes — a proposal that will cost the state about $57 million a year.

Lawmakers are mulling a proposal that would allow Arkansas to use federal Medicaid funds to purchase private insurance for low-income citizens — those who make up to 138 percent of the poverty line, which amounts to $15,415 per year. The insurance would be purchased through the exchange created under the federal health care law.

It’s an idea that came after Republicans resisted expanding Medicaid and called on Democratic Gov. Mike Beebe to seek more flexibility from the Obama administration. Now that Arkansas has been given that flexibility, many GOP lawmakers are moving closer toward accepting an insurance plan that would rely on a key part of the federal health care law that they vigorously opposed over the past two election cycles.

It comes as Beebe is showing an openness to tax cuts that he once said the state couldn’t afford. In the weeks heading into this year’s session, Beebe pointed to his decision to hinge his grocery tax cut proposal on a potential drop in state obligations later as a sign of just how tight the budget is.

But the two-term governor now says there’s a path to allowing some of the tax cuts that Republicans are pushing: pass the private option. The savings from the expanded insurance — which officials say would cut down on the cost of uncompensated care throughout the state — could pay for a substantial amount of tax reductions, Beebe said.

“They’re not two different things in my mind,” Beebe told reporters last week. “You can pass tax cuts without Medicaid expansion, but it guts a lot of folks.”

That argument was boosted by new numbers from the state Department of Human Services, which said that Arkansas would save $670 million over the next decade if lawmakers approve the private option plan.

The endorsement of the Arkansas State Chamber of Commerce may also help sway reluctant lawmakers, though several GOP leaders downplayed the impact the state’s largest business lobbying group would have on the debate. In backing the private option, the head of the chamber acknowledged that businesses could also benefit from tax cuts that may be attached as part of the deal.

“Everything kind of relates to everything else,” said Randy Zook, the chamber’s president and chief executive officer.

Both the health care and tax cut discussions pose plenty of unanswered questions. Republicans are still wary of signing on to a plan when they haven’t seen a written agreement from the federal government on what Arkansas will be allowed to do. They also want to see their reforms aimed at curbing Medicaid’s costs to be a part of the discussion.

For his part, Beebe has said a major problem with the tax cuts is whether they’d take effect before the state sees the savings from the insurance expansion. The tax cut package also faces criticism from some Democrats and activists who say the benefits of the reductions skew more toward the state’s wealthy.

It’s a discussion that’s looking far less like a Rubik’s Cube and more like Jenga, the stacking game with wooden cubes. Take out the wrong piece and the whole thing could collapse.

(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, rewritten, broadcast or distributed.)
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