For state, a $110 million question

Daniel Barrick recaps the JUA Lawsuit in the Concord Monitor, and examines what would happen if the state loses the $110 million it seized to balance the state budget.

"Am I concerned? You bet," House Speaker Terie Norelli said last week. "But am I afraid we're about to get knocked off a cliff? Not at all. There is not an immediate crisis."

Still, others say the tensions that accompanied last week's layoff announcement barely hint at the difficult decisions that will be necessary if the state loses its claim to the malpractice money. Some, including Republicans in the Legislature, are calling for Lynch to offer specific plans now in preparation for that outcome.

"Frankly, a hole of the magnitude we're talking about is going to require a top-to-bottom re-evaluation of the budget. You can't just tweak here and there," said Charlie Arlinghaus, president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord. "The difficulties get worse the longer you delay."

Justices seem skeptical of state's position in $110M JUA Case

Michael Kitch continues to provide outstanding coverage of the JUA Lawsuit for the Laconia Daily Sun. Since there is no link to each article on the paper's website, we're happy to provide an archive of his coverage here.
Laconia Daily Sun- JUA 10-16-09

State tries to justify $110m seizure

Kevin Landrigan summarizes yesterday's oral arguments in the JUA Lawsuit.

David Leslie, a Boston lawyer representing Attorney General Michael Delaney, said the policyholders had no vested right to the surplus and the Legislature could take at least some of it to support spending on access to health care.

“Do the policyholders have a vested right? They don’t,’’ Leslie argued.

But Kevin Fitzgerald, lead lawyer for the parties that sued the state, said politicians in Concord took the money without any legal foundation.

‘’You can’t take that which doesn’t belong to you, neither can you supplant the plain contractual rights of others,’’ Fitzgerald answered.

"You can't take things that don't belong to you."

Shira Schoenberg reports on yesterday's oral arguments at the Supreme Court in the JUA Lawsuit.

Attorney Kevin Fitzgerald, who represents the policyholders of a state-created medical malpractice fund, summed up the complex litigation over $110 million in nine words: "You can't take things that don't belong to you."

Lawyers for the state and for policyholders of the Joint Underwriting Association's medical malpractice fund argued before the state Supreme Court yesterday over who controls the $110 million sought by Gov. John Lynch and the Legislature to balance the state budget.

GOP warned against insurance fund raid

State Senator Sharon Carson writes an op-ed in the Concord Monitor responding to Senators D'Allesandro and Reynolds justification of taking $110 million in JUA funds to balance the budget.

As part of their response to the difficult economy, the Democrats seized $110 million from the JUA fund to balance excess spending for 2009, 2010 and 2011. The doctors insured by the JUA then filed suit, claiming that the state was unlawfully taking money from a fund that it had no legal rights to. In July, the Belknap County Superior Court blocked the state from seizing the money, indicating that the confiscation of private funds in this manner was unconstitutional. The state appealed to the New Hampshire Supreme Court, and oral arguments will be heard today.

Senate Republicans warned that the passage of a budget dependent upon $110 million that belongs to the members of the JUA would be devastating to the economic well-being of this state. Lynch endorsed the budget, signing it into law knowing that this precarious proposal would be subject to lawsuits endangering the budget as a whole.

True leaders would have held the line and spent only what was necessary. True leaders understand that they are stewards of the people's money and that the people expect them to lead by example. If Democratic leaders had held the line on spending, there would have been no need for the JUA money and hence no costly lawsuit.

NH Supreme Court hears JUA case

The Concord Monitor runs Norma Love's AP preview of today oral arguments in the JUA case at the New Hampshire Supreme Court.

The policyholders, who include doctors and medical providers, also argue that if the state takes the $110 million and the fund fails to retain enough reserves to pay claims, their costs would be driven up to cover the claims.

Kevin Fitzgerald, the policyholders' lawyer, argues that the constitution requires the state to pay compensation if it takes property, but that can't happen if the property is money.

"If the state takes $1, it has to pay $1 for it. At the end of the day, it can't take it," Fitzgerald said last week.

The state is arguing that it set up the fund, the Medical Malpractice Joint Underwriting Association, in 1975 to fill a gap in the availability of malpractice insurance and did not give policyholders a vested interest in any surplus.

Top lawmakers join in backing taking

Kevin Landrigan reports in the Nashua Telegraph on the Amicus Brief filed last week by Democratic legislative leaders in the JUA Lawsuit.

Among the legal arguments was the assertion that taking the money from the Joint Underwriting Association was not simply to balance the two-year state budget but to preserve state programs that make health care more accessible.

Lawyers for Lakes Region Hospital, Derry Medical Center and Dr. Georgia Tuttle had characterized using the surplus as a “money grab.” “There is nothing superficial about what is at stake, and that it can be asserted the public policy interests involved are more than merely financial ones,” Frydman wrote.

Senate Republican Leader Peter Bragdon, of Milford, saw no point in GOP opponents of this JUA move preparing their legal arguments.

“There are plenty of capable parties making our assertion we first made early on that taking this money was in violation of the state Constitution,” Bragdon said.

Lawmakers argue for JUA Raid

In the Concord Monitor, State Senators Deb Reynolds and Lou D'Allesandro make the case for the state's seizure of the surplus premiums in the Joint Underwriting Association. They are not convincing.

So let's look back at the role of the Legislature and its goals in creating the JUA- to preserve access to health care by providing doctors with a more affordable malpractice insurance option. This goal was accomplished, and premiums were set at a level to avoid undercutting the private market entirely.

Do we now use the excess that's accumulated in the JUA to pay a windfall dividend to lucky policyholders who already received malpractice insurance at fair market rates? Or do we reallocate the money for the very same public good - access to health care - that we originally sought to address by creating the JUA?

The only reason such a large surplus exists is because the state's insurance commissioner has refused to refund the excess premiums to JUA members, as established under the law, arguing that returning the excess premiums would disrupt the private malpractice insurance market. The state's case, which has already been eviscerated by Judge Kathleen McGuire, is that they needed the money to provide health care services. But there is nothing in the budget, other than some wishful rhetoric, to apply the JUA money towards health care programs. The Legislature took the money because it wanted it to balance the budget. Lawmakers have tried to justify the seizure of private property under the classic "We Know Better" defense.

Speaker, Senate President file briefs seeking to take JUA Funds

House Speaker Terie Norelli and Senate President Sylvia Larsen today filed an amicus brief with the New Hampshire Supreme Court siding with the state's appeal that it should be allowed to confiscate surplus premiums paid into the Joint Underwriting Association.

Their argument can be justly boiled down to this: "We're the government, and we can spend the money better than you." Of course, you can read the entire brief for yourself.

Speaker- Senate President- Amicus Brief- 10-2-09

What is Plan B in the scramble for $110 million?

Foster's editorial page asks what will happen if and when the state loses its appeal in the JUA Lawsuit.

Oct. 15 has been set as the date for oral arguments in the state's appeal to the New Hampshire Supreme Court.

If the appeal fails, Gov. John Lynch and the Legislature will have to begin turning over sofa cushions in an attempt to find $110 million in loose change.

The state's claim to a surplus in the malpractice fund sounds like an act of fiscal desperation. If the high court affirms the Superior Court ruling, hide the cookie jar and expect there will be raids on the diminished incomes of struggling men and women throughout the state.

Supremes schedule next step in JUA Lawsuit

The Union Leader runs an AP story on the Supreme Court's scheduling of oral arguments in the JUA Lawsuit.

The New Hampshire Supreme Court has scheduled oral arguments on Oct. 15 in a dispute between the state and medical providers over $110 million in a malpractice fund.

The state had asked the court to expedite the appeal. The court shaved two weeks off the time the state has to file its briefs but gave the medical providers the full 30 days it requested. (more)

N.H. is becoming a failed state

Foster's points to the state's actions that brought about the JUA Lawsuit and the Governor's inaction in the wake of last week's decision as a sign that our government has ceased acting responsibly.

It is as if the shine on the golden dome of the Statehouse is taking on the appearance of tarnished brass...

The people of New Hampshire are increasingly bled of their wealth. The state and the nation have been deeply scored by economic pain not experienced since the 1930s. And government — instead of looking for ways to lessen the burden imposed on people — looks for ways to squeeze even more from those they are sworn to represent.

The state has forced cities and towns to increase property taxes by reducing historical aid.

Doctors and state ready for Round 2

Lauren Dorgan reports in the Concord Monitor on the state's appeal of its loss in the JUA Lawsuit, and quotes from Associate Attorney General Anne Edwards' brief to the Supreme Court:

"During the economic recession, the Legislature needs as much time as possible during this biennium to consider alternative budget reductions and funding options if the excess JUA funds, as budgeted . . . are unavailable," the filing said. It went on to say that while the appeal is pending, the ruling "creates uncertainty for the State's completion of its Comprehensive Annual Financial Report for the fiscal year ending June 30, 2009, and for bond rating agencies that regularly evaluate the state's finances." (more)

If uncertainty exists, it's because Governor Lynch decided to balance his budget with someone else's money.

Also in the Monitor, Margot Sanger-Katz looks at who participates in the JUA.

State's Motion to Appeal in JUA Case

Resp's Motion to Expedite Appeal

Charlie Arlinghaus- $110 million budget hole is no cause for panic

By CHARLES M. ARLINGHAUS

The state of New Hampshire is not about to go out of business. We have a serious budget crisis, but nothing we can't handle. A few prompt actions, a little vigilance to make sure nothing else goes wrong, and we'll be fine at least until the next budget crisis.

No doubt you've read about the ongoing budget crisis (see Arlinghaus, Collected Works of). There's no question we have a problem and that some action must be taken. However, in perspective, the problem is surmountable, and being forced to fix it has some long-term benefits.
As predicted, the state was prevented from seizing medical malpractice money that doesn't belong to it. The result is that $110 million of revenue used to balance the budget that just ended and the one going forward is no longer available. The state is appealing, but no one in Concord realistically thinks the state has any hope in this case.

That's the bad news. The good news is that as bad as revenues were, they were better than we hoped. According to the state's final unaudited numbers just released, the tax sources used to fund the state's operating budget, while well below the amount budgeted, were actually $15 million higher than we counted on a few weeks ago.

So assuming that we didn't spend more than we thought a month ago, the problem is about $95 million. That sounds incredibly high, but it may not be as high as you think. Consider that 25 years ago, the state faced a huge crisis at the end of Gov. Hugh Gallen's last budget. In the end, the deficit couldn't be closed. Even after taking some actions, the state closed the books with a deficit of $60 million on an annual operating budget of $300 million. That would be the rough equivalent of a $500 million deficit today.

We have to balance a problem of about $95 million over the course of two years in which the operating budget paid for with state taxes (general and education funds) is projected to spend about $4.96 billion. In other words, we must cut 1.9 percent from current spending to avoid raising taxes.

The Legislature will almost certainly reconvene for a special session of some kind, but the governor needn't wait for that. Under the state's budget law, the governor may order spending reductions if he determines that "projected state revenues will be insufficient to maintain a balanced budget." That time is now.

The responsibility for balancing the budget falls to him anyway. A 2 percent cut to state spending doesn't sound like much, but it won't be reached by legislators using the hunt-and-peck method to find something they may have missed before. Instead, it will require what we might call directed management.

The governor will have to sit down with each department head and ask him or her to find a few percentage points worth of reductions. He does this at the beginning of the process each budget cycle. This year, we were told he asked each for a 97 percent budget, although the final budget came in at 106 percent. He doesn't even need to roll back to 97 percent, only to about 104 percent. In other words, he and his department heads need to select only a fraction of the cuts they've already considered.

By the way, this management technique is already part of the current budget. The budget as passed included unspecified management reductions by nine different agencies or departments. The commissioner or the branch of government in question were directed to figure out reductions that equal a specific amount. In addition, the largest reduction in the budget was a command to roll back state employee wages by $25 million, the details of which were left up to the governor.

One additional piece of good news is that our neighbors are doing their best to help us meet our revenue goals. My colleague Grant Bosse refers to Maine and Massachusetts as the "New Hampshire Economic Recovery Coalition." Both states passed tax increases that will drive their citizens to New Hampshire to help our economy and tax collections.

There's no question that the state faces a serious budget problem. But fixing it is well within reach. Cutting 2 percent of spending over the course of two years won't require draconian changes to government or massive tax increases, and the governor has the authority to start right away.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

Raiding nonprofits: State needs to clarify

The Union Leader looks into Governor John Lynch's disturbing reaction to the JUA Lawsuit, where he indicated tax-exempt status put an organization at the mercy of the state:

Citing the group's nonprofit status was intended to buttress the state's claims, but it is concerning. If the state Supreme Court overturns last week's Superior Court ruling and allows the state to take the JUA's money, it could encourage the state to look at other nonprofits. Granted, that would be a stretch. Unlike most nonprofit groups, the JUA was created by the Legislature and its board is appointed by a state department head. But legal precedent is legal precedent. If the court validates the argument that the organization's nonprofit status was one justifiable reason for the state to take its cash, that would give legislators cover for expanding such raids in the future. (more)

JUA Lawsuit on the Exchange

New Hampshire Public Radio devotes an hour this morning to the JUA Lawsuit and its consequences for the state budget. Our counterpart Steve Norton, from the New Hampshire Center for Public Policy Studies, and Laconia Daily Sun reporter Michael Kitch will be the guests for the first segment, starting at 9.

Face it, Governor, you need a 'Plan B'

The Union Leader, Nashua Telegraph, Fosters, and Concord Monitor don't sing in harmony all that often. Yet all three editorial pages are joining the chorus calling for Governor John Lynch to acknowledge the reality that his plan to take $110 from the Joint Underwriting Association is growing less and less likely. Here's the Monitor's take.

Not discussing a Plan B is unfair to the people who may become Plan B. House Finance Chairwoman Marjorie Smith has cited plans to tax estates worth more than $2 million and a capital gains tax as revenue possibilities that could be adopted if needed. Those levies would raise an estimated $85 million. Both are good and viable alternatives. But people who may wind up paying such levies deserve time to make financial preparations. So do the state's businesses and other potential sources of revenue. (more)

Where is Plan B? Lynch remains silent

The Union Leader asks why Governor John Lynch has no Plan B as his plan to fund the state budget with surpluses from the Joint Underwriting Association goes down, even as legisaltive leader talk about reviving the capital gains tax and inheritance tax:

No one would be talking about these new taxes had Gov. John Lynch announced a Plan B in case his scheme to snatch that malpractice fund money failed. But to date we have heard no such offering from the governor's office. If he has a plan, he's keeping it a secret.

Given that seizing the $110 million was always legally questionable, it is more than reasonable to expect that the governor would have thought of how to replace that money. At the very least, there should have been a plan for replacing the $65 million (out of that $110 million) that was allocated for last year's budget. (more)

Court was right to keep state's hands off JUA funds

Foster's argues that Judge Kathleen McGuire was right to keep state budget writers from taking $110 million from the Joint Underwriting Association:

While the JUA seems to have more than enough money today, that holds little promise of surplus in the future. Under New Hampshire state law, limits on jury awards — individually and collectively — are weak. A spate of unanticipated jury awards could strip JUA coffers.

Who then would be left to replenish the kitty? Would Gov. Lynch and the Legislature be willing to cough up the difference? Doubtful — very doubtful.

As a result, someone needs to defend the integrity of the JUA. (more)