Capitol to Capitol
An Information Service of NCSL's Standing Committees

Volume 19   Issue 34 -December 14, 2012


DEAL OR NO DEAL

Seventeen days are left until a host of federal tax cuts sunset and 19 days until sequestration is imposed. President Obama and Speaker John Boehner continue to offer proposals and counterproposals in an effort to stave off the looming fiscal cliff. In late November, the president released a proposal totaling nearly $2 trillion. Of this amount, nearly half of the savings were from increased revenues to high-income earners, with the remaining savings coming from broadening the tax base and changes to mandatory programs. Speaker Boehner responded with a plan consisting of cuts to discretionary programs, entitlements and revenue increases from reforming federal tax expenditures. This proposal would achieve over $2.5 trillion in savings. All proposals assume the approximate $1 trillion in savings over 10 years via domestic and defense discretionary spending caps in the 2011 Budget Control Act. Any compromise that may eventually be agreed to would simply be a structured framework, with the details being ironed out in the 113th Congress. However, time is running thin. “If the fiscal cliff occurs…I don’t think the Federal Reserve has the tools to offset that event,” stated Federal Reserve Chairman Ben Bernanke. “I don’t buy the idea that a short-term descent off the fiscal cliff would be not costly.” For additional information, please view NCSL’s federal deficit reduction overview page, located at: http://www.ncsl.org/issues-research/budget/federal-deficit-reduction-overview.aspx.

How will states be impacted if a deal is yet to be made by Dec. 31 (marginal tax rates, alternative minimum tax, unemployment benefits, etc.) and Jan. 2 (sequestration), States would be most significantly affected by the reductions to state-federal programs from the sequester. A recent report by the Office of Management and Budget projected areas such as education, energy, human services and law enforcement will be cut by 8.2 percent, with defense discretionary reductions at 9.4 percent. Meanwhile, on the revenue side, the impact of the fiscal cliff on state revenue bases would vary depending upon a state’s linkage with the federal tax code. NCSL staff contacts: Michael Bird, Jeff Hurley


HEALTH EXCHANGES, MARKET REFORMS AND MEDICAID

States received word on Dec. 10 that the administration has dropped its support for a blended Medicaid FMAP (matching rate). The letter also clarified that there will be no enhanced federal Medicaid matching funds available for a partial or phased-in Medicaid expansion. These affirmations and many others are a part of a 17-page memorandum plus cover letter from U.S. Department of Health and Human Services Secretary Kathleen Sebelius. The memorandum addresses issues raised by state legislators, governors and others regarding health insurance exchange options, market issues, multi -state plans, bridge plans, consumer outreach, eligibility and enrollment and Medicaid. Full text of the Sebelius letter and memorandum is available at: http://www.ncsl.org/documents/health/DrGovFAQs12-6-2012%20pdf.pdf. NCSL staff contacts: Joy Johnson Wilson, Rachel Morgan


STATE AUTHORITY UNDER JUDICIAL MICROSCOPE

Protecting State regulatory and legislative authority is the focus of two U.S. Supreme Court amicus briefs NCSL has recently joined through the State and Local Legal Center (SLLC). In City of Arlington & Cable, Telecommunications, and Technology Committee v. FCC, the Court will decide whether courts should defer to federal agencies when they determine the scope of their regulatory jurisdiction. In Delia v. E.M.A., the Court will resolve whether federal Medicaid law preempts a North Carolina statute which allows the state to recover one-third of a Medicaid recipient’s total tort settlement. Medicaid allows states to collect expenses from a Medicaid recipient who recovers from a tortfeasor. North Carolina law permits the state to recover the lesser of actual medical expenses or one-third of a Medicaid recipient's total tort settlement. The amicus briefs and circuit court rulings are available at:
http://www2.bloomberglaw.com/public/document/City_of_Arlington_Texas_v_FCC_668_F3d_229_55_CR_294_5th_Cir_2012_, http://statelocallc.squarespace.com/storage/pdf/Final%20brief%20Arlington%20v.%20FCC.pdf; http://www2.bloomberglaw.com/public/document/EMA_v_Cansler_674_F3d_290_4th_Cir_2012_Court_Opinion, http://www.statelocallc.org/storage/pdf/Final%20brief%20Delia%20v.%20EMA.pdf. NCSL staff contact: Susan Parnas Frederick (law and justice); SLLC contact: Lisa Soronen