With the recent surge in U.S. shale gas production, a common narrative has developed that cheaper natural gas will crowd out the power markets for renewable generation. Yet, both the Brattle Group and the Center for Climate Energy Solutions (“C2ES”) recently released studies suggesting that natural gas and renewables can actually help support one another.

Last week, the Brattle Group released a study entitled “Partnering Natural Gas and Renewables in ERCOT,” which highlights how lower natural gas prices can complement renewable generation. While the report is focused on Texas, several points made in the report are applicable throughout the U.S. First, renewable producers are unable to ramp up or down generation, and instead, they must “feed their electricity into the grid” irrespective of whether production exceeds demand. Energy storage technologies show promise for harnessing excess generation, but these technologies still face cost challenges. Natural gas plants, however, can quickly and cost-efficiently scale up or down their generation, offering a strong complement to renewables. In a related point, the Brattle Group report states that coal-fired plants face operational and cost challenges to quickly increasing or decreasing generation to support renewable production.  Consequently, coal-fired plants, once up and running, must operate a “a certain number of hours or days before they can be turned off again,” resulting in additional operational and maintenance costs.

The C2ES study notes that energy sector GHG emissions are at their lowest levels since 1994 due partially to the “substitution of natural gas for coal in the power sector.” In addition, the C2ES report argues that “natural gas expansion should be leveraged to enable the expansion of renewable generation.” Consistent with the Brattle Group study, the C2ES study emphasizes that natural gas generation can quickly ramp up or down to complement intermittency of renewable generation. Moreover, the non-existent or negative fixed fuel prices of renewables offer utilities hedges to potential increases in natural gas prices.

These studies underscore the fact that natural gas and renewables can complement one another in the power sector, and provide the U.S. with the benefits of reduced CO₂ emissions, competitive electricity prices, and enhanced reliability. With the Administration potentially releasing a suite of climate initiatives next month, policy makers should weigh ways to enhance natural gas-renewable partnerships in the power sector.

Each week, our Health Policy team recaps recent health care developments in two reports, Weekly Health Care Wrap-Up and Health Insurance Exchanges: State of the States.

Weekly Health Care Wrap-Up is our weekly look at regulatory developments affecting health care at the federal and state level. This week, CMS released additional exchange regulations while a pair of bipartisan health bills were introduced on the Hill.

(Scheduling note: This week there will not be an edition of Health Insurance Exchanges: State of the States)

Joe Dowley served as Chief Counsel of the Committee on Ways & Means, U.S. House of Representatives when Congress last undertook fundamental tax reform.

On Friday, June 14th  the two tax-writing committee chairmen, Rep. Dave Camp (R-Ill) and Sen. Max Baucus (D-MT), are scheduled to have another public session with the press to discuss prospects and plans for addressing tax reform in 2013.

At their first such session, the two kicked off a new organization (taxreform.gov) to support the concept, and went to great lengths to demonstrate their belief that reform is “doable” in this Congress. No doubt, they will continue to exert leadership and act as cheerleaders for what they both view as very necessary legislation. Both have devoted substantial time and political capital to reform efforts, and there is no question that they are each sincere advocates. At the end of 2014 Sen. Baucus retires, and Rep. Camp’s term as Chairman is scheduled to end then as well.  Both are very motivated.

A confluence of events, however, calls into question whether 2013 will be the year Congress meaningfully takes up landmark tax reform.

For starters, the economy is partly to blame. Tax reform was going to be part of a “grand bargain” needed sometime in the May-July timeframe to deal with the nation’s debt and budget woes, when the Treasury Department was likely to be nearly out of options to buy more time before hitting the statutory borrowing ceiling. However, increased government revenues from an improving business climate and new revenues from ATRA (American Taxpayer Relief Act of 2013) have pushed back the latest debt ceiling “day of reckoning” to the fall – maybe even late fall.  Members, of course, know this and know that tax reform, even on a revenue neutral basis, is very tough on politicians: for every winner there is normally a loser. So, given a chance to think about things some more, Congress generally will. This is where we are presently. The new day of reckoning is far enough in the future that “the heat is off” for now.

The old adage, “if it ain’t broke, don’t fix it”, is also part of the mañana mentality. Some Members who might otherwise be inclined to act may be thinking now isn’t the time to rearrange the tax code in a fundamental way – just as the economy is noticeably improving.

Also, the idea of not starting tax reform until later in the year calls into question whether such difficult legislation could be accomplished before the rigors of a new election season begin early in 2014. Although people sometimes forget that the Tax Reform Act of 1986 was passed well into an election year, the old truism that you don’t do tax reform when voters are headed to the polls dies hard.

There is also a suspicion that with ATRA’s increased income tax rates on higher income individuals, the Administration has gained ground in its efforts to make the system more progressive and is less than excited about getting into give and take reform legislation which could skew the balance back towards what it was under prior law. Although President Obama mentioned tax reform as a priority in his State of the Union address, there is a clear contrast between his actions on behalf of reform and those of former President Reagan in the era of the ‘86 Act.  For example, there has been no Oval Office presentation (with charts!) about why reform is a good idea.  Although Speaker Boehner has reserved “H.R. 1” for tax reform, he is rumored to be lukewarm, at best.

Still, prudence dictates that nothing is set in stone here.

The White House and House Republican leaders continue to discuss some form of “grand bargain”, albeit sporadically and notwithstanding their public pronouncements decrying each other’s lack of commitment to be reasonable in resolving the nation’s fiscal woes. As odd as it sounds, it isn’t beyond the pale that somehow, some way, a deal might still be struck this year which would spur big changes to the tax system. If such a compromise plan were to catch on – admittedly a big “if” – tax reform, including all of the work done in the tax writing committees to date, would quickly become politically correct instead of notably irrelevant. For outside groups, especially those on the sidelines so far, there would be plenty of catch-up ball to be played – if time permitted.

So, would a betting person bet on tax reform succeeding in 2013?  The better bet is still probably “no.”

But, since tax reform impacts just about all of us, it might be useful to pay attention to what the committees have done so far.  See www.finance.senate.gov and www.waysandmeans.house.gov for information on the two tax writing committees’ reviews of the existing tax code.

By Ben Keane

Late last year, Politics, Law and Policy blog highlighted for its readers the efforts of several state governments around the country to turn up the pressure on politically-active, non-profit organizations to reveal their financial backers and spending activities. Leading the charge were California, Idaho, Montana and Maine, which all took concerted and aggressive actions to promote greater transparency by 501(c)(4) social welfare organizations and other non-profits participating in various forms of political engagement. As one might have expected, the action of those four jurisdictions was just the beginning, as an increasing number of states have begun charging headlong into the battle over transparency and non-profit political engagement.

The state grabbing most of the recent reform headlines is New York, which predictably came down on the side of aggressive enforcement by implementing new disclosure requirements for non-profit organizations that engage in specific forms of “electioneering” activities – namely, express advocacy and “election targeted issues advocacy”.  Those regulations, officially adopted by New York Attorney General Eric Schneiderman on Wednesday June 5^th, require non-profit groups (including 501(c)(4) entities) that are registered with the state to report data regarding the percentage of their organizational expenditures that go toward federal, state and local electioneering. In cases where a particular organization spends at least $10,000 to influence state and local elections in New York, itemized disclosure of expenses and contributions will also be required.  Such disclosures will then be made publicly available on the Attorney General’s NY Open Government website.

Transparency advocates, particularly those on the political left, have been quick to praise and embrace the Empire State’s approach to disclosure. Michael Waldman, President of the Brennan Center for Justice at NYU School of Law, hailed Attorney General Schneiderman’s regulations as a “national model” for non-profit transparency. Meanwhile, Melanie Sloan, the Executive Director of Citizens for Responsibility and Ethics in Washington (CREW), characterized the rules as “common sense regulations that will pull back the curtains on shadowy political groups masquerading as social welfare organizations.”  At present, the accuracy of these soaring superlatives remains to be seen, but there is little doubt that the Empire State’s new regulatory framework is part of a growing trend of non-profit transparency reform in the states.

For example, earlier this spring, both Maryland and Utah cast their lots with the rapidly expanding non-profit transparency and enforcement caucus. In May, Maryland Governor Martin O’Malley signed into law the Campaign Finance Reform Act of 2013, which will subject non-profit organizations to state campaign finance registration and reporting requirements if they make certain donations to individuals or entities for the express purpose of supporting independent expenditures, electioneering communications, or political disbursements in Maryland. The Old Line State’s actions followed on the heels of similar legislative action in Utah, where Governor Gary Herbert signed H.B. 43, requiring all non-profit organizations to disclose “donor” information to the state when they make political issue expenditures valued at $750 or more.

In recent weeks, the transparency momentum appears to have even spread south to Texas. For those of you who missed the news out of Austin last month, the Lone Star State’s Republican-controlled legislature passed a non-profit transparency bill, S.B. No. 346, which would have required politically-active organizations, including 501(c)(4) social welfare entities, to disclose the identity of their high-level donors. Specifically, the proposed bill would have obligated persons and organizations making political expenditures (including independent expenditures) in excess of $25,000 during a calendar year to disclose all donors who contributed more than $1,000 to the person or entity. This would have been a drastic departure from current Texas law, which requires such persons and organizations to disclose only political expenditures in excess of $100. It was not to be, however, as Governor Perry deemed the potential chilling effect on political speech as too high, and vetoed the legislation on May 25^th.

With the ongoing IRS scandal limiting any chance at federal reform in the transparency arena, the states will continue to serve as the primary laboratories in the regulation of non-profit political engagement. Moving forward, we will certainly see more states (like New York) experimenting with new methods of promoting non-profit transparency, and many other states (like Texas) struggling to reconcile the benefits of reform with the protection of First Amendment freedoms. We here at the Politics, Law & Policy Blog are interested to see how it all shakes out in both Democrat and Republican-leaning jurisdictions, and will continue to keep our readers up-to-date on the latest.

Each week, our Health Policy team recaps recent health care developments in two reports, Weekly Health Care Wrap-Up and Health Insurance Exchanges: State of the States.

Weekly Health Care Wrap-Up is our weekly look at regulatory developments affecting health care at the federal and state level. This week, the head of CMMI announced he is stepping down and SBA posted Affordable Care Act materials.

Health Insurance Exchanges: State of the States update is our weekly State of the States report on Health Insurance Exchange developments. This week, CMS initiated training webinars, Illinois adjourned without passing an exchange bill and DC passed a temporary measure impacting small businesses.

Dennis Smith served as Director of the Center for Medicaid and State Operations at the Centers for Medicare and Medicaid Services (CMS).

There were no big surprises in the release of the Trustees’ Reports on Medicare and Social Security last week, but the current trends are concern enough. There is little reassuring about the news on Medicare or for people who rely on disability benefits. The Disability Trust Fund will be depleted in 2016. The Hospital Insurance Trust Fund (Part A of Medicare) will not be able to meet its obligations in 2026. But that date should not give a false sense of security as to the  situation in Medicare.

Medicare and Social Security are funded very differently. Social Security is funded almost exclusively through payroll taxes (except for the recent accounting maneuver used to accommodate the temporary payroll tax reduction) and interest on assets but Medicare is designed to rely heavily on general revenues.

Medicare pays out more than it receives from payroll taxes and beneficiary premiums which guarantees it competes against other budget priorities. The true picture of Medicare is found at Table II.B1.—Medicare Data for Calendar Year 2012 at page 10. Combined total expenditures of each of Medicare’s three Parts, A, B, and D were $574.2 billion. A little math shows that only $307.4 billion in income is derived from the payroll tax, interest, taxation of benefits, and premiums. Just 53 percent of Medicare expenditures are financed by Medicare-related sources.  The rest comes from sources outside Medicare—overwhelmingly from general revenue and a little from the states. In 2012, this additional amount needed by Medicare was roughly equal to the combined outlays by the Departments of Agriculture, Homeland Security, and Transportation.

Moreover, to get a more accurate picture of Medicare’s situation, one must read a separate May 31, 2013 memorandum from the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary, “Projected Medicare Expenditures under Illustrative Scenarios with Alternative Payment Updates to Medicare Providers.” It explains that the Trustees’ Report requires them to provide estimates based on current law. But current law assumes reductions in provider rates that the actuary considers “implausible.” Under current law, Medicare physician payments decline from about 80 of private health insurance levels to 61 percent. Access to care would be threatened if this actually happens.

Medicare costs continue to increase faster than Social Security benefits, workers’ earnings, and the economy as a whole. The cost of health care will consume a larger and larger share of retirees’ income. The Trustees’ Report puts out a challenge:

Projections of Medicare costs are highly uncertain, especially when looking out more than several decades. One reason for uncertainty is that scientific advances will make possible new interventions, procedures, and therapies. Some conditions that are untreatable today will be handled routinely in the future. Spurred by economic incentives, the institutions through which care is delivered will evolve, possibly becoming more efficient. While most health care technological advances to date have tended to increase expenditures, the health care landscape is shifting. No one knows whether these future developments will, on balance, increase or decrease costs.

Greater efficiency is rewarded in the rest of our economy, why not in health care? Since current law clearly is not the solution, the federal government needs to open wide the doors to innovators who can answer the challenge.

Each week, our Health Policy team recaps recent health care developments in two reports, Weekly Health Care Wrap-Up and Health Insurance Exchanges: State of the States.

Weekly Health Care Wrap-Up is our weekly look at regulatory developments affecting health care at the federal and state level. This week, HHS/Treasure/Labor published a final rule for Wellness Programs and additional ACA regulations arrived at OMB.

Health Insurance Exchanges: State of the States update is our weekly State of the States report on Health Insurance Exchange developments. This week, HHS released a SHOP final rule and announced receiving more than 800 letters of intent for running Navigator Programs.

An en banc United States Court of Appeals for the D.C. Circuit will now decide the Wagner v. FEC case, unfortunately delaying an opinion on whether the Federal Election Campaign Act’s ban on political contributions by federal government contractors is unconstitutional.

We originally blogged about the Wagner case last April, in which three small contractors holding personal service contracts challenged the 73-year old ban found at 2 U.S.C. § 441c(a).  Plaintiffs are optimistic the Supreme Court’s rationale in the watershed Citizens United decision of 2010 (which broadly recognized the right of corporations and unions to make expenditures toward “electioneering communications”) similarly applies to the contribution ban.  They argue the ban violates both the 5^th Amendment by unfairly discriminating against government contractors and the 1^st Amendment by restricting political speech without serving any compelling governmental interest.  They argue that the risk of corruption is remote, since the ban applies to contributions to the President and Congress, who do not make decisions regarding federal contract negotiation, award, or administration.  At the U.S. District Court, Judge James Boasberg denied the plaintiffs’ motion for preliminary injunction in April 2012 and granted summary judgment in favor of the FEC last November.

In an unsigned per curiam opinion today, the three-judge panel of the D.C. Circuit found that it had no jurisdiction, as 2 U.S.C. § 437h requires that the merits initially be heard only by an en banc panel of the appellate court (that is, all judges on the court as opposed to the traditional panel of three) and confines the district judge’s role to a mere establishment of the record and certification of the issues to the en banc court.  Importantly, the panel vacated Judge Boasberg’s opinion; the en banc D.C. Circuit will therefore hear the case anew without the application of any deferential standard of review.

The judge must certify facts and questions to the en banc court for consideration within five days.  Due to the need for additional briefing, oral argument, and judicial consideration, it is likely a decision on this important issue will not be forthcoming for several months.

While the focus on Arkansas premium assistance has faded, states should look further north to another state bordered by the Mississippi River—Iowa.  Under the Iowa Health and Wellness Plan, individuals with income between 100 and 138 percent of the federal poverty level will be provided with a subsidy to purchase coverage on the Exchange.  But rather than provide the full Medicaid benefit package as Arkansas apparently will be required to do, the benefit package in Iowa will look more like what state employees receive.  Mental health and dental benefits will be added to meet the Essential Health Benefit package.  Iowa will also charge sliding scale premiums for coverage.  The premiums can be waived if individuals participate in healthy activities.

Arkansas went the waiver route which ceded leverage to the federal government.  Iowa, on the other hand, is positioned to insist on its statutory authority to employ premium assistance under Section 1937, if they choose.  Section 1937, added to Medicaid by the Deficit Reduction Act of 2005, gives the state the option to offer a benefit package based on state employee plans.  If they take this route, State officials will need to be prepared to stick to the famous “Iowa Stubborn” attitude in their dealings with the federal government, but with implementation of the “Patient Protection and Affordable Care Act” (PPACA) under intense scrutiny, states that hold their ground have an advantage.  

Just as Iowa political leaders struck their compromise, the Congressional Budget Office (CBO) provided a timely reminder as to why premium assistance makes sense in the first place.  In releasing its May 2013 Baseline on Medicaid, the State Children’s Health Insurance Program (SCHIP) as well as new estimates on the effects of PPACA, CBO reveals some important shifting among the populations.  The combined number of children on Medicaid and SCHIP in 2012 was 42.2 million.  In 2017, this combined total will decline slightly by 800,000.  CBO projects SCHIP enrollment will peak in 2015 at 12.7 million then drop to 4.9 million in 2016.  As SCHIP funding declines, children will join their parents in private coverage.  All of the children in SCHIP are in families with income above 100 percent of the federal poverty level (FPL).  In states that do not expand Medicaid, adults with income between 100 and 138% will be eligible for the new tax subsidies.  In some states, this population may be 25% of the currently uninsured.  Keeping children connected with their parents by purchasing family coverage should be a bargain for states and the taxpayers. 

The combined total adults on Medicaid will increase 68 percent from 20 million to 34 million according to CBO.  So the net new enrollment in Medicaid comes exclusively from adults who are generally more expensive to cover than children.  This is important for states as payers and health plans which need to know in advance what their caseload mix will be.  In general, this will mean higher managed care rates and greater costs through higher utilization.

Whether the healthy, young adults will enroll into Medicaid and the exchanges remains uncertain.  States know from their own experience (more than 20 states have provided coverage to the childless adult populations either through Medicaid waivers or state only programs) that the population that is more likely to enroll is older, sicker, and more likely to become disabled than on average.

Medicaid enrollment in many states is 25 percent higher than pre-recession levels.  As the economy improves, enrollment of individuals with income above the poverty level will decline.  Thus, the real solution to Medicaid costs is a healthy economy.  In the meantime, if a state does expand Medicaid, premium assistance should be a viable option because millions of people on Medicaid won’t stay on Medicaid forever.  Instead of having families churn on and off of Medicaid, maintaining private coverage is a commonsense solution.  States interested in premium assistance should look to Iowa and Section 1937.  Doing so may help accomplish what the federal government is struggling to do—attract the young and healthy populations to the new insurance pool.

In this, the 2nd edition of the MLA charter schools practice newsletter, we are excited to announce that Craig M. Johnson, former New York State Senator, has joined our national Government Affairs practice as Managing Director in our New York, NY and Albany, NY offices, effective May 20, 2013.

While in the New York Senate, Senator Johnson served as the acknowledged leader in New York State and New York City education reform movements, both in efforts to expand charter schools in New York State, as well as to protect these incubators of education reform. He also played an instrumental role in ensuring New York State qualified for, and won, $700 million in Federal Race to the Top dollars, a U.S. Department of Education sponsored contest to spur innovation and reform in state and local district K-12 education. Craig’s initiatives were praised by numerous education reform advocates who praised him as a “Hero of Reform.”

In this edition, our Public Policy attorneys and advisors offer timely insights into recent updates at the federal and state level of government. Next, our Corporate attorneys provide thoughtful advice on the selection of boards of directors when forming a charter school. Our Litigation practice lawyers then illustrate a recent settlement in California that resulted in facility space being offered to a charter school at local high school. Finally, our Labor and Employment lawyers describe updates to a recent National Labor Relations Board decision likely to have profound implications for labor-management relations at charter schools nationwide.

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