City Hall

City Hall

Local schools, governments, health providers bracing for “fiscal cliff”

December 3, 2012


Question: What does an elderly person on Medicare seeking treatment at Lawrence Memorial Hospital have in common with a third-grader at New York School, a young mother receiving prenatal care at Heartland Community Health Center and a neighborhood group trying to fix a broken sidewalk?

Answer: All of them directly benefit from streams of federal money that come to Lawrence through a wide range of federal programs. And all of them have a direct stake in the budget battles now being waged in Washington over what’s being called the “fiscal cliff.”

“Fiscal cliff” is the media term often used to describe a combination of large spending cuts and tax increases that willautomatically take effect after the first of the year — unless there’s a deal to reduce the federal budget deficit by $1.2 trillion over 10 years. Officially, it’s called “sequestration,” and it includes an estimated $55 billion a year in cuts to domestic programs that fund education, health care and other social services.

But while local officials are studying spreadsheets and trying to estimate the impact those cuts could have on local services, most say there’s not much they can do immediately to prepare for them.

“Honestly, you ask the question, are we thinking a lot about it? We’re really not,” Lawrence public schools Superintendent Rick Doll said.

Overall, the Lawrence school district gets only a small percentage of its total budget from federal funds. But those funds are targeted for specific programs for the most vulnerable students.

One of the largest of those is called Title I funding, which is used for supplemental services in schools where more than half the students come from low-income households. In Lawrence, six elementary schools qualify as Title I schools: New York, Kennedy, Woodlawn, Schwegler, Hillcrest and Pinckney. The district itself also receives Title I funding for programs that benefit homeless or neglected students, and to promote parent involvement.

All told, Doll said, Lawrence receives about $1.75 million a year in Title I funding. And if the fiscal cliff cuts were to go into effect, he anticipates losing as much as 10 percent of that, or about $175,000 a year.

“Any time you get a decrease in funding at any level, in any particular fund, you have to think about doing one of two things,” Doll said. “One would be to cut programs, which in this particular case would be really detrimental to kids. These Title I dollars go to our most at-risk kids. That would be difficult for us. So we’d have to look into other funds to see if we could make up that difference in cuts. In reality, it’d probably be a combination of both. We’d probably look at maybe some cuts and then also trying to look for some dollars in other nonfederal funds to help supplement that, where those Title I dollars are going.”

Schools also receive significant federal funding for special education and the school lunch program. According to the Kansas Department of Education, about 12 percent of all special education funding and about 55 percent of school meal programs are funded by the federal government.

It isn’t yet clear how much of that could be reduced if the sequestration cuts take effect. But state officials say they are anticipating cuts in the range of 8 percent.

Health care

At Lawrence Memorial Hospital, CEO Gene Meyer is bracing for even more serious cuts in the form of Medicare and Medicaid reimbursements that could total about $8.3 million over 10 years.

Medicare is the federal health insurance program for seniors. Medicaid is a joint federal-state insurance program for low-income children and families.

“We rely on public funding on both the Medicare and Medicaid side,” Meyer said. “But Medicare is the big issue because of the number of seniors that we care for. It’s about 43 percent of our patient volume.” That doesn’t necessarily translate to 43 percent of the hospital’s revenue, he said, because Medicare pays relatively low benefits compared to commercial insurance plans.

But the cuts to Medicare that are directly related to the fiscal cliff are only part of the puzzle for community hospitals, Meyer said. Wrapped up in the broader discussion of the federal budget are two other issues: implementation of the federal Affordable Care Act, commonly known as “Obamacare,” and a perennial Medicare issue dealing with Medicare payments to physicians.

Under the Affordable Care Act, Medicare payments to hospitals are scheduled to be cut next year. Meyer said that cut will cost LMH an estimated $2.6 million a year over the next 10 years.

Originally, those cuts were supposed to be offset by extending health insurance to most Americans, thereby reducing or eliminating the “uncompensated care” hospitals now provide to the uninsured. But that was supposed to be accomplished through a mandatory expansion of Medicaid, the one part of the health reform law that the U.S. Supreme Court declared unconstitutional.

As a result, states now have the option of expanding their Medicaid programs to include more people. Kansas Gov. Sam Brownback, a Republican, so far has not said whether he will support expanding Medicaid here.

Meanwhile, Meyer said, LMH and the physician clinics associated with the hospital are keeping a close eye on federal Medicare payments to physicians. Under a complex formula created by Congress, whenever the total cost of physician services goes past a certain cap, cuts in physician reimbursement rates are supposed to kick in.

For the past 10 years, under pressure from medical lobby groups, Congress has delayed those cuts by passing what is commonly known as a “Doc Fix.”

If Congress fails to pass another Doc Fix in 2013, Meyer said, physician reimbursement rates would be cut 27 percent. And that’s on top of the cuts related to the fiscal cliff and the cuts stemming from the Affordable Care Act.

“The community should be concerned because if these cuts continue, all providers — LMH included — will have to look at services and activities that we’re engaged in to really question the continuation of some of these services,” Meyer said. “I don’t have a list right now that would say we have to look at x, y and z. But clearly, if you’re going to operate a community hospital that relies on significant public funding, both in the Medicare sector and the Medicaid sector, if that’s cut as dramatically as what we think it will be, we’re probably going to have to take a look at making some adjustments to our operating budget.”

Meyer said that could include discontinuing certain medical services and programs that either lose money or barely break even, but he couldn’t identify what specific programs or services those would be. He also said the hospital may have to consider eliminating jobs.

“Staffing is a major expense for all hospitals,” he said.

At Heartland Community Health Center in Lawrence, there’s concern that the fiscal cliff could cause hard-won federal funding to evaporate almost as soon as it arrives.

In June, at the end of a four-year process, Heartland finally received designation as a Federally Qualified Health Center, or FQHC. That enables the local safety net clinic to receive federal funds — currently about $650,000 a year — in exchange for providing primary health care services to the uninsured.

In addition, the clinic also receives enhanced payments whenever it treats patients with Medicare or Medicaid coverage. That means it gets reimbursed for the actual cost of providing those services instead of the standard reimbursement rates, which are often substantially below costs. Uninsured patients account for as much as 70 percent of all the patients the clinic serves, according to Heartland spokeswoman Ali Edwards.

Although she didn’t have exact numbers, Edwards said the clinic staff is anticipating cuts in the neighborhood of 2 percent for federal health care programs if the fiscal cliff goes into effect. That would translate to about $13,000 from its basic operating grant, plus additional cuts through Medicare.

Medicaid reimbursement rates are established by the state. And while the federal government pays about 60 percent of the cost of Medicaid in Kansas, a reduction in federal funding wouldn’t necessarily mean a cut in Medicaid reimbursement rates.

The decision about how to absorb a cut in federal Medicaid funding would have to be made by the Kansas Department of Health and Environment’s Division of Health Care Finance, the agency that manages the state’s Medicaid program.

“If it does happen, we will obviously advocate for keeping funding for community health centers such as ourselves at our current level,” Edwards said.

City and county services

Douglas County and the city of Lawrence are much less dependent on federal funding than schools and health care providers, but the automatic spending cuts scheduled to take effect next year could have an impact on them as well.

Lawrence City Manager David Corliss said the two biggest concerns for the city are possible cutbacks in Community Development Block Grants, or CDBGs, which fund neighborhood improvement projects and a variety of social services for low-income individuals; and federal HOME Investment Partnership grants, which fund affordable housing projects in communities throughout the country.

Both programs are managed by the U.S. Department of Housing and Urban Development. In Lawrence, they added up to $1.2 million in 2012.

“If sequestration happens, and there’s across-the-board cuts in discretionary spending, it probably will impact CDBG funding,” Corliss said. “They’ve talked about, at least from our sources, 8 percent reduction in CDBG funding, and we would need to look at how that would impact future CDBG programs.”

That probably wouldn’t have an immediate impact in Lawrence, Corliss said, because the city is now working on projects funded in the federal 2012 fiscal year, which ended Sept. 30. Congress has not yet passed a 2013 budget but instead is operating on a series of “continuing resolutions.” That’s the money being negotiated now in the talks over the impending fiscal cliff.

According to budget figures from the city, this year’s CDBG funds are being used to pay operating expenses for five neighborhood associations: Brook Creek, East Lawrence, North Lawrence, Oread and Pinckney. North Lawrence is also receiving $1,000 for a bus stop pad at North Third and Lyons streets, while the Oread neighborhood is receiving $13,492 for a crosswalk improvement at 14th and Tennessee streets.

The city is also using block grant funds to support operations of the Douglas County AIDS Project, Lawrence Community Shelter, Housing and Credit Counseling Inc., the Boys and Girls Clubs of Lawrence, the Social Service League of Lawrence and Independence Inc.

Meanwhile, the city is using about $400,000 in federal HOME grants to fund tenant-based rental assistance, the city’s first-time homebuyer program, Habitat for Humanity and other affordable housing programs.

Douglas County Administrator Craig Weinaug said there are few programs funded through county government that would be affected by sequestration.

Most of the federal money the county receives is for road and bridge projects that flow through the Kansas Department of Transportation, and those funds are not considered to be part of the negotiations over reducing the deficit because they come from dedicated revenue through motor fuel taxes.

Even if Congress and the Obama administration agree on a deficit reduction package to avoid the fiscal cliff, local officials acknowledged that any such package will itself have to include large and potentially painful budget cuts. As a result, they said, local governments may have to get used to the idea of reduced federal funding under any circumstances.

“Probably the biggest thing that’s likely to happen with the fiscal cliff is there’s just going to be a steady reduction in all sorts of federal funding,” Corliss said. “We do get the occasional Homeland Security grant for equipment purchases, or grants that come through the state from the Environmental Protection Agency for recycling work. There is any number of federal grants and opportunities that could be affected.”


Gandalf 5 years, 4 months ago

I just had a strange idea for a compromise. Let's test the teapub theories. Let's cut 10% from federal aid to all states whose legislators have voted consistently to block any solution. That would give them a chance to prove they are right. Surely the teapubs should jump at the chance.

bd 5 years, 4 months ago

how about a 10% cut in foriegn aid!!!!!!!!!!!!!!

jhawkinsf 5 years, 4 months ago

I'd be in favor of a 10% cut in all programs. Everything from foreign aid to the military to social services. Couple that with a 10 percentage point rise in taxes on everyone. And I mean everyone from the rich to the poor, churches to non-profits. Once we start paying for everything, instead of putting it on our grandkids' credit cards, then we can decide what's really important and what we can live without.

Scott Tichenor 5 years, 4 months ago

Grover Norquist controls this issue. Republicans fear him far more than the citizens that elected him. Their mission: hang on to their jobs. Nothing else matters. It's that simple.

tomatogrower 5 years, 4 months ago

The only pledge that lawmakers must be beholden to is the pledge to serve our country. If Norquist's pledge is more important to them, they need to be fired or tried for treason.

homechanger 5 years, 4 months ago

Our local government is preparing fora fiscal cliff by building and 18 million dollar library and 25 million dollar field house.

fan4kufootball 5 years, 4 months ago

Lets not forget about the massive losses on operating the T every year.

anotherview 5 years, 4 months ago

The T is a government service just like the roads and streets the city builds for cars. Are you suggesting that all the city roads and streets be toll roads so they could operate at a profit?

labmonkey 5 years, 4 months ago

Lets see... Obama wants to raise taxes on the rich and wants a $255 billion stimulus. He just doesn't get it. No tax increases for anyone until there is at least $500 billion annually in spending cuts!!! They take more, they just want to spend more. Let the cliff happen... at least there will be some spending cuts that way.

NoSpin 5 years, 4 months ago

Well said, labmonkey. If the SP's want to raise taxes on the"wealthy" or the successful they need to start talking about serious spending cuts. The best way to increase tax revenues is to create jobs but there have been no new plans by the WH to lower unemployment. Having a new stimulus plan is outrageous- will eat up all the tax increases. Guess the credit card credit limit will be raised. Bad way to run the government and a bad example for households.

hipper_than_hip 5 years, 4 months ago

Sequestration is about cutting Federal budgets and shrinking the size of the Federal govt; why is that such a bad thing?

chootspa 5 years, 4 months ago

Because it will bring about yet another recession to enact austerity at this point, just as it's done in Europe. Unless you live in magical pony and unicorn land, aka Libertarian-ville, in which case the rainbows will all shine more brightly, and we'll all get closer to paradise. I don't live in that land. I live in the land where I trust the economists that have made the more accurate predictions over the years.

We can start enacting austerity when the economy has recovered and the unemployment levels have gone down. In fact, it would be important to do so at that point. But at this point, we should be spending more and not less. We're not a household. The way we budget our personal finances is totally different from the way a country should do so.

lunacydetector 5 years, 4 months ago

how can there be a fiscal cliff in a black hole?

that $2 million so everyone got a new trash can seems quite stupid

chootspa 5 years, 4 months ago

You do know that Congress could vote on extending the tax cuts for the middle class right now, don't you? The bill's already been voted for in the senate. Obama has said he'd sign it. If anyone is holding hostages in this one, it isn't Obama.

jhawkinsf 5 years, 4 months ago

The Senate has voted for one bill that the House won't even hold a vote on and the House has passed a bill that the Senate won't even vote on. Of course, one chamber has a Democratic majority while the other has a Republican majority.

Obama is completely innocent of holding anyone hostage. But he's guilty of not providing the necessary leadership to resolve the impasse. (If you believe as I do that leadership is part of the job description).

chootspa 5 years, 4 months ago

Actually, I'd say he's done a far better job of providing leadership this time around by refusing to bargain with himself. He's stated what he wants. The GOP needs specifics in their counter offer instead of vagaries and whinging, which is all they've provided so far.

jhawkinsf 5 years, 4 months ago

Look in a mirror. Now answer me this, honestly. Do you really believe what you just said or are you more inclined to give Obama a pass on his lack of leadership because you were predisposed to give him a pass, one way or the other?

I'm guessing there are elements of truth in both your statement and in my suggestion. Of course, only you know the real answer.

chootspa 5 years, 4 months ago

I think he's been a people pleaser who gave up far too much in the last four years, and I'm pleased as punch to see him finally showing some backbone. In a vacuum, he still doesn't have the positions I'd advocate. Unfortunately for us, he's up against the tea party crazies who would literally rather ruin the country than disobey President Norquist. But at least he's said no to the entitlement cuts this time around. So far.

Now, you were saying? Oh right. You're busy pretending like the GOP had any resemblance of a grown up argument in this case. I keep checking the news, and all I hear is that they're wanting to cut medicare and then mumblemumble unspecified loophole closures.

jhawkinsf 5 years, 4 months ago

Bullwhip, bully pulpit. Whatever. Obama could come to Kansas and call out that buffoon of a governor that resides in Topeka. Or he could tell Grover Norquist to take a frying leap. Take off the kid gloves and kick some butt. Get pissed. What's the worst that can happen, he'll kill his chances of getting elected to a third term?

But let's face it, if he can't lead the likes of Sarah Palin, Grover, Bachmann and the rest, maybe, just maybe, he's not much of a leader.

chootspa 5 years, 4 months ago

Last I checked, Bachmann was the only person on that list actually capable of voting for legislation. So tell me, who was the last president to get unanimous votes on all of his bills?

jhawkinsf 5 years, 4 months ago

True about Bachmann. So I guess that Norquist fellow is some no one to be ignored. But really, with so little done and so much more to get done, is it really Obama's plan to wait until his third term?

chootspa 5 years, 4 months ago

Well, I'm sure he'll whip out his mind control ray and get right on that. You're making some very strange arguments, and I can't help but think that if you looked in a mirror you'd see a bit of a contortion act. You simultaneously argue that Obama should throw a tantrum and then complain that he's not being a "leader" because he's not being persuasive. Exactly how persuasive are tantrums these days? I stopped using them as a negotiating tool when I was three.

jhawkinsf 5 years, 4 months ago

Well, if he can't pull out his mind control ray, he can still pull out his golf clubs and stroll down the golf course waiting for a call from Congress, all the while mumbling to himself, 'I'm still relevant, I'm still relevant, I'm still relevant'.

chootspa 5 years, 4 months ago

Hello, non sequitur. Glad to meet you. Goldfish, haiku, sammy, Iowa. Also horseshoe.

jafs 5 years, 4 months ago

That's just nutty.

You can't "lead" people who are committed to opposing you.

"Calling out" Brownback, or Norquist, etc. would have little to no effect at all. Kicking butt or getting pissed has nothing to do with leadership. Etc.

By the way, a right leaning president couldn't "lead" radically left leaning politicians any better.

The problem isn't "leadership", it's that we have two fundamentally opposed philosophies, and politicians have gotten more ideological and more obstinate about them. What's needed is for both sides to back off on the ideology and posturing, and work together to find solutions.

chootspa 5 years, 4 months ago

Yes. This. Obama's first term was largely about giving the GOP exactly what they wanted - tax cuts, more places to carry guns, the Heritage Foundation health care system, etc, etc. Being reasonable. They still claimed he was the most socialist socialist that ever did Kenya Kenya socialist. In that atmosphere, there's no "leading" possible. The best you can do is stop shooting the hostages.

jhawkinsf 5 years, 4 months ago

Obama's first term was largely about positioning himself for his second run. Not that that is different than what others have done. But it is what he was doing.

chootspa 5 years, 4 months ago

You mean he actually wanted to serve a second term? You don't say!

jhawkinsf 5 years, 4 months ago

That too, in addition to what I actually said.

Armen Kurdian 5 years, 4 months ago

The President has shown his true colors in that he is hell bent on fulfilling a political talking point purely from an egomaniacal point of view vice actually trying to grow the economy. Capping deductions at $50K would bring in a lot more revenues than raising rates. Reforming the tax code to eliminate deductions & loopholes, and reducing rates coupled with meaningful entitlement reform & spending cuts would send a strong message to US business that we are getting our fiscal house in order. Until the President & Sec Geitner start to discuss the issue in good faith, there won't be any compromise or deal. The President is still posturing and preening his feathers instead of really leading.

chootspa 5 years, 4 months ago

I'd be fine with capping deductions at 50k, but I don't see anyone voting on that proposal right now. Do you?

Patricia Davis 5 years, 4 months ago

You are kidding, aren't you?The party of NO! that did nothing to help this country or this president suddenly wants good faith talks. Hypocrisy is thy name!

chootspa 5 years, 4 months ago

I'm with you on this one. On top of that, the deduction disproportionately benefits the rich, and it no longer encourages healthy behavior once we started giving people loans they couldn't repay.

tomatogrower 5 years, 4 months ago

They wanted Obama to extend the Bush tax cuts 2 years ago, so they could produce jobs, but they didn't produce the jobs. Let the tax cuts expire.

Richard Heckler 5 years, 4 months ago

How did blue and white collar workers lose these millions upon millions of jobs?

It’s not the Unions! Try Supply Side Economics where some made billions shipping USA jobs abroad.

--- 1. Mergers = industry and jobs lost to other countries

--- 2. Hostile Takeovers = industry and jobs lost to other countries

--- 3. Leveraged Buyouts = industry and jobs lost to other countries

--- 4. Free Trade Agreements = industry and jobs lost to other countries

--- 5. Reagan/Bush Savings and Loan home loan scandal which killed the economy and cost the USA millions of jobs. = industry and jobs lost to other countries

--- 6. Bush/Cheney Home Loan scandal killed the economy and cost the USA millions of jobs = industry and jobs lost to other countries

All of above ultimately translate into millions upon millions upon millions of blue and white collar USA job losses in some cases to dictatorships. Big time layoffs are the end result. These jobs go abroad with tax codes that prevent taxation on profits made abroad from USA big name corporations.

There was a time when becoming employed by corporate America came with long term employment, fine wages and dependable retirement benefits. Those days are gone. Why did congress participate in killing the USA economy and millions upon millions of blue and white collar jobs?

Richard Heckler 5 years, 4 months ago

Sam Brownback is using his expertise creating money laundering techniques that funnel as many of OUR tax dollars into corporate bank accounts. That does not save money but it does keep his campaign cookie jars happy.

After all they are the sources for his campaign dollars

Privatization is a money laundering device that funnels OUR tax dollars to the white collar crooks.

Cait McKnelly 5 years, 4 months ago

The LJW doesn't pay a lot of attention to Congress. They're a lot more locked into the state house. But i was just made aware that John Boehner booted Tim Huelskamp from the House Budget Committee (a rather prestigious position). Why? Because he's actually TOO far to the right. He's given Boehner a truckload of headaches because Huelskamp's loyalties are more to the Heritage Foundation and The Club for Growth than they are to the GOP.
The GOP is already in deep doo doo since the last election. Many in the party know they have to do something to rebrand themselves and in the last two weeks it seems a day hasn't gone by that at least one Republican legislator hasn't told Grover Norquist to take a hike. They're circling the wagons and they've become aware the party HAS to start moving closer to the center or risk total destruction.
Huelskamp may be a casualty in the Republican wars but it's also an indicator that Kansas has taken one more giant step toward total irrelevancy. Total control of the state government means little when it's such a Pyrrhic victory.

Briseis 5 years, 4 months ago

Abraham Lincoln once said that he believed in the people and that if you told them the truth and gave them the cold hard facts they would meet any crisis. That may have been true in 1860, but not today. The cold hard facts are available for all to see:

-A $16.3 trillion National Debt -47 million people on food stamps -Over $222 trillion of unfunded Federal entitlement liabilities -Over $5 trillion of unfunded State entitlement liabilities -True unemployment above 20%. -True inflation above 5%. -A stock market at the same level as 1999, with a 10 year expected annual return of less than 4% – Stocks for the really, really long run. 10 year bond returns of 0% will be a miracle. -A savings rate of 3.7% and with Bernanke’s ZIRP, no incentive to save. Real hourly earnings continue to fall.

-Baby Boomers within 10 years of retirement have saved an average of only $78,000, and more than a third of them have less than $25,000. More than half of U.S. workers have no retirement plan at all. -A crumbling, decaying infrastructure, with 150,000 structurally deficient bridges, bursting water mains, and an overstressed electrical grid. -Horrific government public education producing millions of low functioning morons. -Rotting social fabric, with 40% of children born out of wedlock (72% of black children) and a 50% divorce rate. -An energy policy based upon unicorns farting rainbows and press releases about green energy and the miracle of shale fracking, as average gas prices in 2012 and 2011 were the highest in U.S. history.

Richard Heckler 5 years, 4 months ago

Jobs Jobs Jobs will eliminate the fiscal cliff forever. Congress has a way of doing away with jobs.

President Obama and the USA Congress,

What are you going to do? This country cannot wait another fours years for the republican party to cooperate. The democratic party cannot wait another fours years for republicans to stop being obstacles to new USA industry that cannot be outsourced.

The USA CANNOT afford millions upon millions of new jobs that can be outsourced.

Congress has failed the majority of the USA population that being the 99%. The 99% was the motor behind everything that had anything to do with the economy. Why did congress allow that to be nearly destroyed?

Why did congress provide a tax code that protects profits on USA goods made abroad in essence encouraging outsourcing of USA jobs by the millions. Congress needs to explain their logic that USA blue and white collars do not need jobs. and the USA economy

Congress needs to explain their logic that the USA economy does not need millions upon millions of blue and white collars working in the USA. Where did these conclusions come from? Corporate America was never going broke instead making tons of profits.

This large group posing as the GOP will NOT build bridges.

This large group posing as the GOP is working for the minority aka the 1%.

The GOP as it was 33-50 years ago is dead. There is no GOP as such.

Richard Heckler 5 years, 4 months ago

The Republican Party of NO is an obstruction to new wealth and new industry and jobs jobs jobs.

Republicans cost the Nation too much money! Republicans cost the USA too much money!

THE ENTITLEMENT program for the wealthy at the expense of the middle class = duped one more time.

In the end big debt and super duper bailouts HAVE BEEN the results which does not seem to bother Republicans, as long as they are in power.

In fact, by the time the second Bush left office, the national debt had grown to $12.1 trillion:

This ENTITLEMENT - Over half of that amount had been created by Bush’s tax cuts for the very wealthy.

This ENTITLEMENT - Another 30% of the national debt had been created by the tax cuts for the wealthy under Presidents Reagan and George H.W. Bush.

This ENTITLEMENT - Fully 81% of the national debt was created by just these three Republican Presidents.

This ENTITLEMENT - Starting in 2003, George W. Bush destroyed the world economy by encouraging U.S. banks to make loans to those who could not afford them, through schemes such as the "American Dream Downpayment Initiative".

Also through the destruction of oversight, such as lawsuits to prevent state securities laws from being enforced on Bush's watch.

Once Bush's policies led to their inevitable result of economic collapse, the United States found itself in a situation where it had to take on debt in order to restore the economy. Or at least try.

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