Landmark bill to overhaul public-health system on governor’s desk; companion bills, including budget, await action in Senate

Kentucky health department officials gathered in Frankfort Thursday, March 5 for passage of House Bill 129 out of the Senate. The bill has since gotten final passage in the House and been sent to the governor. (Photo by Melissa Patrick)
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By Melissa Patrick
Kentucky Health News

A bill touted as part of a three-phase approach to create a sustainable solution to local health departments’ pension-driven financial crisis has been delivered to Gov. Andy Beshear’s desk. The other two parts are in the budget and a bill to change how departments pay their pension costs.

Allison Adams, president of the Kentucky Health Department Association,  acknowledged that the bill, called the Public Health Transformation Plan, wouldn’t solve all of the departments’ financial and pension woes, but said it was an important step to take toward improving Kentuckians’ health and creating a more equitable funding model.

“The nation is looking at us,” Adams said, adding that only a few states have implemented a similar plan, “but not nearly as aggressive and forward thinking as Kentucky has.”

Adams said the bill has three main components. First, it prioritizes existing public-health resources to programs and services that research shows will improve the health status of Kentucky, which ranks 43rd for health, according to America’s Health Rankings.

“We are looking at putting money where we know it can make a difference and keep people healthy versus waiting till they are sick and then paying for treatment,” said Georgia Heise, public-health director of the Three Rivers District Health Department in Carroll, Gallatin, Owen and Pendleton counties. She is a long-time advocate of this new business model.

“There’s only nine states that I’m aware of that have looked at doing this kind of thing,” Heise said, “and our bill is by far the most aggressive and puts the money in the hands of the local health departments.”

Adams said the bill codifies a funding formula based on population and each county’s ability to generate revenue through a local health tax. “It makes the funding equitable now across the state,” she said, “so that we are rising up the less fortunate counties that don’t have the ability to get the resources they need through the public-health tax.”

In other words, departments that have more resources would get less state funding. The state has long had a minimum public-health tax of 1.8 cents per $100 worth of property, with a cap of 10 cents per $100.

The bill also requires departments to conduct community needs assessments to help set their priorities, which would be funded by federal grants or local tax dollars.

Many health department programs are driven by funding attached to a disease, not to health. Advocates say the new model will allow counties to spend their money on what their community assessment shows is most needed.

“It provides the flexibility of our community dollars, your local dollars to drive the services to what is identified in the community needs assessment,” Adams said. “I’m happy for the fact that we are now being directed to put money where we know it is going to make the biggest difference in the future . . . We’re being astute to the taxpayers’ dollars; we’re putting it where it needs to go in order to move the health needle.”

A spreadsheet prepared by Adams’ group estimates that 14 of the 61 county and district health departments would get less state funding, and the rest would get more, using a formula based on a county’s population, its ability to support its health department with its current tax, how many employees the county would need to provide only services required by law, and an estimated increase in environmental fees.

The losses range from $4,812 in Whitley County to a high of about $746,404 for the Lexington-Fayette County Public Health Department.

Randy Gooch, director at the Jessamine County Public Health Department, noted that the spreadsheet has not been adjusted for a limit of 25% on increases in environmental fees, which was added to the bill, but said “As long as they provide the necessary funding through the General Fund to make up the difference of environmental fees, there will be little change in this.”

Also, a Senate floor amendment deleted language that would have allowed the state health commissioner to set a higher maximum rate for the tax. If Beshear signs into law as expected, an emergency clause will make it effective immediately.

House Bill 129‘s sponsor, Rep. Kim Moser, R-Taylor Mill, has said that the departments could be as much as $38.5 million short in making their pension-liability contributions, and that 18 of them, representing 41 counties, “will face fiscal insolvency during the fiscal year 2020 without significant financial and operational changes.”

The other two parts of the “three-phase approach” include the budget bill and a bill to change how they pay for their pensions.

House Bill 171, sponsored by Rep. Jim DuPlessis, R-Elizabethtown, would change the way health departments, regional universities and quasi-governmental agencies pay their pension costs. It would move them away from the current “percentage of pay” formula and to a model that requires them to pay only what they owe the system, divided evenly over the next 27 years. It passed the House Feb. 13 and is awaiting action by the Senate State and Local Government Committee.

DuPlessis told Kentucky Health News in February that the House wants to help health departments that aren’t able to meet their pension obligations, but in order for them to get that help, their counties must have a health tax of at least 8 cents per $100 assessed property value.

The House version of the budget, House Bill 352, includes a line-item General Fund allocation on pages 66-69 for each local and district health department to help pay their pension obligations.

A spreadsheet of health departments and taxes that support each of them is at www.uky.edu/comminfostudies/irjci/Kylocalhealthtaxes.xlsx.