Compromise: LBJ will get $3 Mil; taxpayers will get bill
If signed into law by Gov. Togiola Tulafono, the cash-strapped LBJ Medical Center will receive a $3 million cash infusion, but all workers in the territory will pay a new 2% wage tax, according to the final language of a Senate bill (S.B. 32-26) approved by the Fono.
A final decision on the bill, which was the subject of three days of debate between conferees from both the Senate and House, was reached yesterday morning in a full Fono conference committee hearing.
After several arguments were made, Sen. Tulifua Tini Lam Yuen moved to have the Fono leaders make the final decision, because no consensus was reached. Senate President Gaoteote Tofau Palaie moved to approve the measure with the amendments made by the House.
The conference committee report was then endorsed by both chambers during their respective sessions.
The bill’s original language was to have the $3 million be a direct payment to LBJ and the funding source is the $4.5 million in the Workmen’s Compensation Account. However, the House amended the bill to reflect that it is a loan, to be repaid by a new 2% wage tax. Once the loan is paid off, 50% of all revenues collected will go to the ASG general fund and the other 50% to the LBJ off-island medical referral program.
Gaoteote told the conference committee that the only change he wants in the final language is that nothing goes to the general fund after the loan is paid. Instead, he would have the other 50% go to LBJ operations to ensure that there is continued long term funding for the hospital, he said.
Lawmakers believe this bill will provide on-going funding for the off-island medical referral program, which is needed in order for the hospital to send local patients off-island for treatment not available at the territory.
According to the bill, the wage tax — which is in addition to the current ‘minimum income tax’ law - “shall be paid by the wage earner and reported on the wage earner’s tax return”. Additionally, the wage tax shall take effect and commence in tax year 2012 and revenues generated from this wage tax shall be deposited in the Treasury Department. The bill also outlines the process by which the Treasury Department is to make payments to the loan and LBJ.
House members stated during this week’s conference committee hearings that the new wage tax should collect about $4 million annually, based on information from the Treasury Department. Additionally, the loan should be paid off before the end of the year.
For the loan provision, the bill states that the $3 million “shall be considered as and shall be in the form of a no-interest loan” from the Workmen’s Compensation Account to LBJ to be repaid with the wage tax.
According to the bill’s preamble, LBJ’s financial condition “is rapidly deteriorating for several reasons” and the “inability of the hospital to provide a proper and adequate level of medical care threatens the well-being of the public as a whole.”
“In order to avoid the serious consequence that can result from inadequate financial support, and to improve the level of health care in the territory, it is necessary to provide an additional, sustained and reliable revenue stream to support” for the hospital, it says.
Hospital officials testified last month that their immediate need is for close to $3 million in ASG subsidies, which were not received in the last fiscal year.
It remains unclear as to whether or not the governor will approve this bill. However, Radio New Zealand is quoting Cabinet members saying Togiola will reject the measure with the governor’s main concern, the source of funding.
It’s also unclear if the hospital board of directors will move to halt fee hikes and stop the proposed furloughs of more than 200 employers now that this additional funding has been approved by the Fono.
Further, Samoa News notes that with this money coming from the loan, and the 2% wage tax identified as a consistent revenue source (after the loan is repaid) for the hospital, will the government subsidy to the hospital be continued?
For FY 2012, the LBJ subsidy, which is required to be paid under law, is more than $4 million. It is suppose to be paid out in monthly installments. However, Samoa News understands that nothing has been paid, since December 2011.
In addition, with a consistent revenue source established, if signed into law, will the authority then request the Department of Interior to redirect the funds that are currently being sent to ASG to pay for the matching funds for Medicaid back to the LBJ hospital?