Giffords’ SB1065 Vote Analyzed To Death

A pseudonymous blogger called Dogma, who says that he is a 45-year-old military systems analyst from St. David Arizona, wrote a very fair and concise analysis of the controversial SB1065 bill from 2004. The post was buried at the end of a long thread of comments on Art Jacobson’s blog Data Port, on June 9th. I decided that I would promote it here, as it is the clearest explanation of issue I’ve seen. Gabby Giffords is often accused of being soft on big business, or anti-labor, because of her decisive vote on this bill. I’ll let Dogma take it from here:

“Much as been made of Giffords’ vote in early 2004 against SB 1065. The main criticism, most often hurled in the form of an accusation, being that this was an anti-labor vote. After weeks of having the issue raised and raised again, it is time to look at the facts.

The Facts:

SB 1065, an Act titled “Large Employers; AHCCCS; Reimbursement.” It was introduced in January 2004 by Senators Blendu, Binder, Mead, Mitchell, Allen, Cannell, & Cheuvront. It got a hearing by the Committee on Commerce on March 24th, 2004; Giffords being a member of that committee at the time. It’s a very short bill that read as follows:

“36-2930. Employees of large employers; reimbursement for services; definition

A. PURSUANT TO RULES ADOPTED BY THE ADMINISTRATION, IF A MEMBER WHO RECEIVES SERVICES PURSUANT TO THIS ARTICLE IS EMPLOYED BY AN EMPLOYER WHO EMPLOYS AT LEAST ONE HUNDRED EMPLOYEES COLLECTIVELY IN THIS STATE, THAT EMPLOYER MUST REIMBURSE THE ADMINISTRATION FOR THE COST OF THESE SERVICES.

B. FOR THE PURPOSES OF THIS SECTION, "EMPLOYED" MEANS FULL-TIME OR PART-TIME EMPLOYMENT.”

The Background:

Here’s the background as provided in the accompanying fact sheet prepared by the legislative staff:

“A recent study by The Commonwealth Fund that profiled uninsured workers in large firms, found that although large employers are more likely than small ones to offer health insurance coverage, the number of workers in large firms without health insurance is growing. The report stated there are three basic explanations for why workers may not have health insurance:

(1) they declined coverage when it was offered;
(2) they are not eligible for the coverage offered by their employers; or
(3) their firm does not offer health benefits.

The report cited a combination of factors responsible for decreasing health insurance coverage within large firms: the decline in manufacturing jobs and unionization, restrictions placed on benefit eligibility and higher employee premium contributions, as well as service industry trends and the changing structure of large corporations.”

Additionally, an article printed in The Arizona Republic on July 30, 2005, also present some germane information with additional material extracted from the Committee on Commerce’s meeting minutes:

• AHCCCS insures over 1 million Arizonans at a cost of $6 billion a year.

• Nearly half of all the adults enrolled in AHCCCS are the working poor who either are not offered or cannot afford medical benefits our largest retailers, grocery chains, and food service companies.

• State data (not sourced) showed the following breakdown of employees enrolled in this program by employer: Wal-Mart 2,800, McDonald’s 1,000, Bashas’ 700, Circle K 600, and the State of Arizona 500.

• AHCCCS costs the Arizona taxpayers $5,550 on average per participant.

• This average yearly participant cost equates to the following for the major employers noted earlier: Wal-Mart $15.5 million, McDonald’s $5.5 million, Bashas’ $4 million, Circle K $3.3 million, and the State of Arizona $2.7 million.

• Who testified at the committee hearing: Jay Kaprosy, Vice President of Public Affairs, Greater Phoenix Chamber of Commerce, testified in opposition to SB 1065; Michelle Ahlmer, Executive Director, Arizona Retailers Association, testified in opposition to SB 1065; Senator Leff announced the individuals who registered their position on the bill; Rip Wilson, Wal Mart Stores, Inc., testified in opposition to SB 1065. Note that no advocacy groups or unions or anyone not in the legislature appeared in person to testify in favor of SB 1065.

• The 2004-5 state budget was officially “balanced,” though the structural deficit was estimated to be as high as $764 million.

The Vote:

Yeas
Marsha Arzberger (D)
Robert Blendu (R)
Ken Cheuvront (D)
Victor Soltero (D)

Nays
Carolyn S. Allen (R)
Gabrielle Giffords (D)
Jay Tibshraeny (R)
Dean Martin (R)
Barbara Leff (R)

The Analysis

SB 1065 did not propose to alter who received healthcare services under AHCCCS or how those services were to be delivered and cannot, therefore, reasonably be characterized as anti-labor. It was intended to shift some of the financial burden of paying for those healthcare services from Arizona taxpayer to larger businesses. This was apparently driven by an underlying sentiment that larger businesses, such as those named above, were capable of shouldering that burden. The theory being that these businesses were simply exploiting AHCCCS as a mechanism to avoid paying their employees’ healthcare costs, thereby increasing their profit margins on the backs of the taxpayers

While there are many other lines of analysis that could be followed, SB 1065 really boiled down to who should pay for the healthcare delivered under AHCCCS. This issue is symptomatic of the larger healthcare crisis in the U.S. and the debate over universal healthcare. Like it or not, it is not a legal requirement for employers to provide health insurance. It is a fringe benefit mostly intended to attract and retain a quality workforce.

This bill would have, in effect, required businesses employing 100 or more workers (fulltime or part-time) to provide universal healthcare coverage either through a private plan or by reimbursing the state for their employees use of the AHCCCS program. While universal healthcare likely is the solution for the U.S. as a whole, this was an unfair bill that would have punished large companies for being large companies. If the legislature wanted employers to reimburse AHCCCS for their employees and enact de facto universal healthcare coverage for Arizona, then the bill should not have proposed an arbitrary cap on company size. Would this extra burden have resulted in any of the named concerns going out of business? Certainly not. However, there would have been an economic price to pay probably in fewer jobs and slower job growth over time. Additionally, higher costs are inevitably passed along to the consumer (aka taxpayer) who would have paid one way or another (i.e., taxpayers/consumers would have paid either way).

SB 1065 was bad public policy that would have solved nothing, but merely shifted how/where the taxpayer/consumer paid, while potentially resulting in lost jobs and slower future job growth.

While you may not agree with my analysis, I believe it clearly demonstrate that a lefty who believes in universal healthcare (that would be me) could easily find themselves opposing this legislation, which was also clearly NOT anti-labor. So, let us now debate the facts of the bill and what it would or would not have accomplished if you’re not too tired of talking about it.”

I actually agree with Dogma’s analysis – as far as it goes. Everything he says is true; I just think it misses the point. From a progressive standpoint, his analysis focuses far too much on macro-economics, and far too little on the political effect of major employers having healthcare costs cutting into their profit margins and not being able to pass them on directly to taxpayers.

True, consumers will ultimately pay the costs of whatever businesses do, but according to Dogma’s logic, private employers should be allowed to pass any cost of business on to taxpayers through government subsidies in the name of lower cost to the consumer. That quickly becomes a reductio ad absurdum.

The purpose of a free market is to set correct prices. When corporations generate externalities such as this taxpayer subsidy of employee healthcare, the market is distorted, not improved. The reason retailers like Wal-Mart are able to out compete is more than just excellent logistics and leverage over suppliers due to market position. It is because they really don’t play fair and are able to deploy their political muscle to create externalities (like tax abatements, land use exceptions, and indirect subsidies like those addressed by SB 1065) that distort the market unfairly and put retailers who play be the rules at a disadvantage.

The result is a short-term gain for consumers, but at the cost of killing sustainable local businesses. The impulse behind this bill was to re-internalize a significant cost of doing business that major employers had suceeded in externalizing onto taxpayers as a whole – which is not identical to the customers of the business, as Dogma implies. Re-internalizing such costs is a laudable goal and smart policy that helps the economy and eliminates the very market distortions that allow the United States to continue as the sole industrialized nation without universal healthcare.

The political effect of such legislation would be to push major employers in low wage service and retail industries into supporting universal healthcare to avoid being tapped for healthcare costs which may disadvantage them against smaller businesses, or act as a drag on profitability. If you want to work toward a system of universal healthcare, putting the screws to powerful economic interest groups so as to make it in their economic interest to support universal coverage is smart politics. The bill would certainly have some deleterious effects on business and job creation, but you have to break a few eggs to make an omelet.

Giffords did cast the sole Democratic vote, which prevented SB 1065 from getting out of committee – that’s undeniable – and she was the only Democrat on the committee siding with the GOP on the issue – that also is undeniable. Maybe the bill would have gone down anyhow; almost certainly it would have in the 2004 Arizona Senate. But she decided to prevent the referral of the bill. She may have good reasons for having done it, but Gabby supporters can’t make the vote go away by calling the questioning of it ‘an attack’ or saying it’s not a legitimate issue.

It’s not only a legitimate issue, it’s an important one. Sure, it is only one vote, and on a bill that would likely have died anyhow, but her decision to vote against it does provide insight into how she makes decisions and how she sees the public good. It gives us information as to her philosophy of government, and whose side she’ll take in a hard fight. And making good decisions and sticking by those who brought her to the dance is pretty much the entire job description for the position she’s interviewing for.

I attended the LD 28 monthly meeting recently at which Gabby was asked about this issue, and she did not have a good rejoinder as to why she voted as she did. In fact, the person who brought it up was treated fairly shabbily and quickly shut up – not by Gabby, but by the Democrats in attendance. People treated him like a heckler for asking a simple question about her vote as an elected officer. It was pretty shameful.

In my view, an adequate rejoinder to the issue of Gabby’s SB 1065 vote would have to recognize the cost to the state for healthcare for the low wage employees of these large employers, and explain why continuing that subsidy is justified. It would also have to explain the political logic in not turning up the heat on the business community in an effort to bring them to the table on a system of universal healthcare, which Gabby says she supports.

I’ve yet to hear such a such a satisfactory answer from her or her campaign.