Not the outcome they wanted

State proposal on MCO sales tax revenue gives counties, transit agencies fraction of lost funds

The saga over Medicaid managed-care organization sales tax revenue appears to be nearing its end, Lake County Commissioner Daniel P. Troy said, but it’s not the ending that counties and transit agencies wanted.

The state’s 88 counties and eight transit agencies stand to lose $207 million annually with the loss of the MCO tax revenues. Those entities could now receive up to $80 million through two one-time payments.

A change in federal regulation means the state can no longer impose a sales tax on Medicaid MCOs. Counties and transit agencies piggybacked on top of the state’s sales tax base for a total of $207 million annually. Lake County stands to lose between $1.6 million and $1.7 million annually. The MCO sales tax revenues makes up roughly 4 percent of the county’s budget, Troy said.

The state has offset its losses on the change with a franchise fee on health insuring corporations that is projected to raise $615 million annually.

Counties and transit agencies have fought for protection from their losses. Gov. John Kasich vetoed a provision in the budget that would have fully reimbursed through a larger franchise fee — if the state received federal approval.

That approval, however, appears unlikely.

The House overrode Kasich’s veto, but the Senate has taken a different approach, seeing if a deal could be reached instead.

Under the deal, the counties and transit agencies would split a single $50 million payment with the potential of another $30 million to split in July 2018 if the state finishes the fiscal year with a surplus.

“It’s a compromise from our perspective,” Troy said. “As I said on the phone, I kind of feel like Germany in the Treaty of Versailles at the end of World War I, ‘These are the conditions by which you’re going to comply.’ ”

The deal will still need to be approved by both Senate and the House.

“We’re a little concerned the House voted overwhelmingly to override this veto, are they going to say, ‘Nope, we’re not going to agree to this, we want the Senate to override this veto.’ ”

Laketran’s annual loss will be $417,800.

“At this point with prudent spending, Laketran does not anticipate any immediate cuts in service, but we may have to look at service changes in the future,” Laketran General Manager Ben Capelle said.

Troy said they’re not happy about the proposal, but if they say no to the deal and go to the Center for Medicaid Services in Washington, D.C., and are told they can’t reset the fee, they might not get the $50 million when they return to the state legislature.

State Sen. Matt Dolan, R-Chagrin Falls, has been leading the effort to get the deal for counties and transit agencies.

“Sen. Dolan said there was a tough time getting the governor and his administration to agree to this deal … because the governor from the beginning has not felt any compensation was necessary here,” Troy said. “It is what it is.”