In solving the state’s budget woes, Minnesota policymakers have repeatedly stated a need to look at each and every option available. While many of these options certainly deserve further exploration, one option which they should not (re)consider is raiding the coffers of state health-related licensing boards.
Minnesota’s various health-related boards collectively serve to promote the health, safety, and welfare of Minnesotans through careful regulation. These 15 boards cover a wide spectrum of health-related disciplines such as nursing, psychology, veterinary medicine, social work, and marriage & family therapy. Funding for these boards comes from various licensing fees imposed on individual practitioners, and the fee revenue is pooled together as a sub-fund within the State Government Special Revenue Fund to be later distributed among contributing boards*. These boards then use their allocated portion of the funds to cover their particular licensing and administrative costs.
Sometimes, if a fee is set too high or if costs unexpectedly decrease, a board may accrue a surplus, which must be stored within the State Government Special Revenue Fund. This can be used to lower future fees, expand services, cover unexpected legal costs related to contested cases, and to serve as a rainy day fund, should something unexpected occur in the future.
Nevertheless, in recent years Minnesota has gotten into the habit of raiding the fund’s accumulated surplus when pressed for money. In FY04-05, the state of Minnesota transferred $3.5 million of health board money from the State Government Special Revenue fund to the general fund; in FY08, $3.219 million. In neither case were the funds paid back.
Given the state’s financial difficulties and recent history of transfers, boards are bracing for the possibility that the state will request another transfer. Currently there is a positive balance in the fund, and those involved say another transfer request could come within the biennium.
At first glance, this may not appear so bad. If the state is hard-pressed for money while a fund sits around with extra cash and a steady stream of revenue, what’s wrong with transferring over a few dollars?
At the heart of this issue is the distinction between a tax and a fee; a tax is a compulsory charge from the state for carrying out the common good, whereas a fee is a voluntary payment for the privilege of using or receiving a particular good or service. In this case, we are dealing with a fee; the voluntary payment is the money provided by the health practitioner in exchange for the specific service of licensing, registration, certification, etc.
The trouble is that the moment these practitioner fees are used to support the common good, they are no longer fees; they are also taxes. While there is nothing wrong with a tax per se – indeed, modest tax increases combined with spending cuts may offer the most efficient solution for our current crisis – the Governor’s method of underhanded and unexpected taxation is rather problematic.
For one, there is the unmistakable problem that this creates for the licensing boards, which must find ways to cope with arbitrary extractions from their savings. While most health-related boards were fortunate to have had significant reserves, others – specifically the Board of Behavioral Health and Therapy, the Board of Chiropractic Examiners, and the Board of Veterinary Medicine – were forced into the red by the most recent transfers.
For Kari Rechtzigel, Executive Director of the Board of Behavioral Health and Therapy (BBHT), the prospect of yet another transfer is particularly distressing.
“In 2003 and again in 2008 legislation was passed authorizing funds to be taken from the Special Revenue Fund to support the General Fund,” Rechtzigel said. “This was devastating for BBHT since our share [in 2008] was $90,000. This means that the equivalent of 23% of our base budget was taken to fund other programs…We had worked so hard to run our programs in a fiscally responsible manner.” She added, “If more Special Revenue Funds are seized this year and the Executive Director Forum votes to spread out the cost, I have no idea how the BBHT will be able to operate.”
Ultimately, however, the burden falls on health practitioners. Beyond the fact that their funds are not being used for their intended purpose, the transfers create an additional problem. As board balances drop, the adjustment mechanism used to ensure program solvency is fees; while a high level of savings would allow fees to adjust downwards, a reduction in savings counteracts this effect.
For the Board of Behavioral Health and Therapy and the Board of Chiropractic Examiners, the reductions in savings have forced fee increases. For the other boards, the transfers have discouraged and prevented fee reductions. In other words, if you are a nurse, a psychologist, a social worker, a physical therapist, or any one of Minnesota’s 270,000 practitioners working under the health-related licensing boards, you are paying artificially high licensing fees to support the Governor’s “no new taxes” policy.
Unfortunately, it doesn’t appear as though this practice will change anytime soon. Technically, the licensing boards are part of the state’s executive branch, and must dutifully execute whatever instructions are given. Although board directors may want to balance revenues and expenditures, ultimately, this decision isn’t their own. As one director who wished to remain anonymous said, “Legislative authority is required to reduce fees, and this has not been granted. We have tried to increase our spending authority, and that hasn’t been granted either. So, we aren’t left with much that we can do.”
As the Governor tries to balance the state budget without raising taxes, we should be cautious of this method of revenue creation. Unexpected taxation on arbitrary groups of people is not the most transparent or effective method of governance, and it would be to the benefit of the entire state to look elsewhere for solutions.