Is an Elected Official an Employee? It Depends…

During a recent discussion on the implications of the Affordable Care Act (i.e., Obamacare) on Monroe County Government, a vigorous discussion emerged on the question of whether an elected official of an employer (i.e. Monroe County Government) counted as an employee under the Affordable Care Act, and if so, how to measure the number of hours per week an elected official works.  The distinction matters because of the new Affordable Care Act requirements to provide affordable, minimum essential coverage (these terms have precise definitions) to full-time employees (or at least 95% of full-time employees), or face a penalty.

As it turns out, the answer is complicated, and not entirely clear in the end with respect to the Affordable Care Act. An elected official is an employee, by IRS regulations. However, an elected official is not an employee by the Fair Labor Standards Act (FLSA). The blog posting Is an Elected Official an Employee an excellent summary of the conflicting legal standards with respect to elected officials (although it is written from the perspective of Illinois law rather than Indiana).  It should also be noted that, contrary to popular opinion, there is no such thing as a “full-time” elected official vs. a “part-time” elected official. Although the salaries of some elected officials (e.g., Auditor, Assessor, Treasurer, Clerk, Recorder) in Monroe County are closer to that which a full-time employee would receive, and others (e.g., County Council) are closer to that which a part-time employee would receive, there is no distinction in law or policy.

So back to the question that prompted this brief discussion — is an elected official an employee from the perspective of the Affordable Care Act? That answer doesn’t seem to exist in the Act, nor in any case law falling from the Act (as there is essentially no case law yet). The conclusion of those in the discussion I participated in was that the safest position was to treat elected officials as full-time employees and offer them health insurance (as Monroe County Government currently does).

Update on Cuts to Casino Gambling Revenues

On February 22, I wrote about possible cuts to the casino gambling revenues received by local governments in Indiana (Riverboat Wagering Tax to Monroe County May be Cut).  Since then, Senate Bill 528 passed the full Senate and was sent to the House for consideration.

The version of SB528 that passed the Senate makes some major changes to the taxes levied on gambling businesses, including eliminating the riverboat admissions tax (paid by casinos based on the number of people that go through the turnstile at the casino, regardless of amount paid by casino patrons), and replacing it with a 3.45% supplemental wagering tax based on the adjusted gross receipts of the casino.

In addition, and of direct interest to non-casino counties such as Monroe, SB528 replaced the flat $33M/year revenue sharing arrangement (which allocated $33M of riverboat admissions taxes to local units of government in non-casino counties based on their relative populations) with a new arrangement in which 5.1% of the taxes collected (after June 30, 2014, and other than from the French Lick Casino) will be distributed to local units of government in non-casino counties.

Legislative Services Agency, in the Fiscal Impact Statement for SB528, estimates that this change will result in a net loss of $6.65M in revenue to non-casino casino counties as of FY2015 and beyond.

The Association of Indiana Counties (AIC) provides a projection of the impact of this change on each local unit of government in Indiana. I did my own projections based on the FY2015 change in overall receipts from the 5.1% tax as projected from the Fiscal Impact Statement, and came up with slightly different numbers from AIC — but they only differ by a few hundred dollars, which is well within the margin of error for the $6.65M revenue reduction, in any case.

The table below then summarizes the impact of this legislative change on Monroe County for FY2015 (including both AIC’s projections and my projections). It appears that Monroe County as a whole will see $164K or so less in revenues from casino gambling in 2015. This is clearly something that needs to be taken into account in budgeting for the next few years — but is not a game-changing (pun intended) hit to our community’s revenues for public services.

Unit of Government  2012 Distribution  AIC Projected Loss 2015 Projected Distribution (McKim) 2015 Projected Loss (McKim)
Monroe County Government  $302,078.48  $60,415.70  $241,205.09  $60,873.39
City of Bloomington  $476,312.84  $95,262.57  $380,328.59  $95,984.25
Town of Ellettsville  $37,782.77  $7,556.55  $30,168.97  $7,613.80
Town of Stinesville  $1,172.94  $234.59  $936.57  $236.37
Monroe County Total  $817,347.03  $163,469.41  $652,639.22  $164,707.81

And of course — anything could happen to this bill as it hits the House! So stay tuned…

Analysis Shows Indiana Tax Structure One of the Most Regressive

The Institute on Taxation and Economic Policy (ITEP), a non-partisan research institute, just released the fourth edition of their landmark study “Who Pays? A Distributional Analysis of the Tax Systems in all 50 States.”  The study analyzes the tax structures of all 50 states — the  degree to which each state relies on the different types of taxes (income, property, and sales and excise taxes), the rate structures of each of these taxes, and the overall rates paid by different income groups of taxpayers.

Indiana, unfortunately, made #9 on the list that the authors call the “Terrible 10” — the 10 states with the most regressive tax structures (i.e. tax structures in which the share of family income paid in taxes goes down as income goes up).

In Indiana, the poorest taxpayers (those in the bottom 20% of the income distribution) pay 12.3% of their income on average in state and local taxes. On the other hand, the top 1% pay only 5.4% of their incomes in state and local taxes. Features that make Indiana’s taxes more regressive includes the flat income tax rate and relatively few low income tax exemptions, as well as its dependence on sales and excise taxes. Mitigating factors include the refundable Earned Income Tax Credit and the fact that groceries are exempt from sales tax.

Just as a point of comparison, it is probably not surprising that Vermont has one of the least regressive tax structures. In Vermont, the bottom 20% pay 8.7% of their income in state and local taxes, while the top 1% pay 8%. Not progressive (as the Federal tax system is) — but not nearly as regressive as many other state and local systems.

The study also provides an analysis of the regressivity of various types of taxes. In general, sales and excise taxes are highly regressive — particularly if groceries are included in the base (fortunately in Indiana they are not). Property taxes are mildly regressive. Income taxes can range from mildly regressive to progressive, depending on the way the local income taxes are structured.

Rounding out the Terrible 10 are:

  1. Washington
  2. Florida
  3. South Dakota
  4. Illinois
  5. Texas
  6. Tennessee
  7. Arizona
  8. Pennsylvania
  9. Indiana
  10. Alabama

Cable Franchise Fees in Monroe County Government

IN53-MoCoGov has enjoyed a long winter slumber — but it is time to get moving again. A lot is happening in local government, and of course our friends in the General Assembly are at it again.

House Bill 1432 — Eliminating Cable Franchise Fees

House Bill 1432, which is currently in committee in the Indiana General Assembly, would eliminate the franchise fees that cable companies (actually “video service providers”) that are regulated by the Indiana Utilities Regulatory Commission pay to local units of government, in return for use of the public right-of-ways for their wiring systems. As you might imagine, this bill is being very heavily lobbied by the cable industry — and there are some legitimate arguments that the franchise fees are market-distorting (there are many providers of video services, including satellite, that don’t have to pay any fees to local government).

In 2012, cable franchise fees from the three cable providers serving Monroe County (Comcast, AT&T, and Smithville), brought in $527,064 to Monroe County Government — revenue that would be nearly impossible to make up and would result in noticeable cuts in service from County Government.

Community Access Television Service

The biggest expenditure from cable franchise fees in Monroe County Government is on CATS — our Community Access Television Service. CATS, organized as a department of the Monroe County Public Library, receives funding from the City of Bloomington, Monroe County Government, and the Town of Ellettsville. CATS provides televised access to local government and other community meetings. They are there gavel-to-gavel for every County Council meeting, every County Commissioners meeting, every City Council meeting, school board meetings, etc. I believe that having these meetings televised and available to the public is absolutely central to a transparent local government — and without cable franchise fees funding, CATS would not be able to provide such extensive and accessible coverage of local government meetings.

In 2012, CATS TV provided:

  • Coverage of 407 Government meetings for the City of Bloomington, Monroe County, and Town of Ellettsville, plus MCCSC and RBBCSC and the Library board
  • 400 Community events
  • 1,558 Patron-produced programs
  • 109 Public service announcements, including Candidates on Demand
In the library’s August 2012 community survey (n=746 Monroe County residents) they learned that, at least a few times a year:
  • 69% watch City government meetings.
  • 58% watch County government meetings.
  • 60% watch educational and cultural programs.
  • 31% watch SCOLA international news.

(These stats are courtesy of library director Sara Laughlin).

We cannot afford to lose funding for CATS. Transparency in government must be considered an “essential service”, and without cable franchise fees revenues, our local governments here in Monroe County will have to find some other source to support public access television.

Cable Franchise Fees Revenue

The following table shows the revenues that come each year to Monroe County Government each year from cable franchise fees, as well as the expenditures from that revenue on CATS (labeled CATS Expenditures) and on other government services (labeled Non-CATS Expenditures).

Year Revenues CATS Expenditures Non-CATS Expenditures Total Expenditures
2001  $241,669  $84,914  $192,349  $277,264
2002  $224,070  $100,000  $186,254  $286,254
2003  $286,757  $100,000  $131,483  $231,483
2004  $384,248  $100,000  $196,445  $296,445
2005  $357,986  $90,000  $201,017  $291,017
2006  $370,941  $100,000  $178,931  $278,931
2007  $392,091  $110,000  $151,793  $261,793
2008  $434,796  $151,574  $140,466  $292,040
2009  $430,168  $200,000  $145,966  $345,966
2010  $450,848  $216,000  $179,465  $395,465
2011  $539,286  $221,000  $335,361  $556,361
2012  $527,064  $221,000  $497,130  $718,130
2013  $527,064  $227,330  $408,900  $636,230

The following graph shows how the revenue has changed over the past 10 years.

Cable Franchise Fees 2001-2012

For most of the last decade, it has increased steadily. The last two years saw a leveling-off and even a slight decline. This decline will likely continue, as clearly there are far more technological choices available to consumers today for video delivery, including satellite and other wireless options, so cable franchise fees may not be a sustainable revenue source in the long run. But local governments will need the ability to develop alternate revenue sources to maintain the services currently supported by these revenues.

Cable Franchise Fees Expenditures

So, other than community access television, what does Monroe County Government spend this revenue on? Although the revenue is not legally restricted, and can be spent on any lawful expense of county government, if appropriated by the County Council, the general principle has been that this revenue has been raised through fees on communications lines, and should be spent on communications-related expenses.

In 2011, the following expenditures were made from cable franchise fees revenues:

  • $221,000 for support of CATS
  • $141,784 for telephone and data services for Monroe County Government
  • $59,228 for radio service for the Sheriff’s Department
  • $120,025 for software licenses for Monroe County Government
  • $3970 for lease of equipment in the Monroe County Extension Office
  • $5000 for the WFIU weather alert system
  • $5351 for maintenance on the Human Resources management software for county government

In 2012, we spent:

  • $221,000 for support of CATS
  • $134,906 for telephone and data services for Monroe County Government
  • $29,333 for radio service for the Sheriff’s Department
  • $98,721 for software licenses for Monroe County Government
  • $3270 for lease of equipment in the Monroe County Extension Office
  • $12,000 for licenses for a grants management system to manage over $19M in grants to Monroe County
  • $5000 for the WFIU weather alert system and $2000 for the WFHB weather alert system
  • $2970 for maintenance on the Human Resources management software for county government
  • $4698 for GPS field tracking equipment
  • $116,230 in technology upgrades to the Nat U. Hill room

The last expense deserves a bit more note. Until the recent courthouse renovation, technology to support meetings in the Nat U. Hill Room (the room in which all county council, commissioners, plan commission, board of zoning appeals, etc. meetings are held) was almost non-existent. Although laptops and projectors were available, presentations were almost unreadable as broadcast on TV, making it difficult for the public watching the meetings to see the same materials that meeting participants were seeing. Further, there was no permanent CATS TV installation in the room, so every single meeting required almost two hours of setup by CATS staff, and a half hour or so of teardown.

When the courthouse was renovated, the County Council appropriated funding out of the Cable Franchise Fees Fund to upgrade the meeting room to add two monitors, which allow meeting participants and the public to more easily view presentations, and to add a permanent CATS installation. Further, the monitor video feeds also now go directly into the CATS TV feed, so presentations are much more readable to the public. This means more CATS can cover more meetings, since it doesn’t require such an enormous investment in staff time to setup and tear down from meetings, and it means better meeting broadcast quality to the public.

Cable franchise fees expenditures in 2013 look to be very similar to 2012 (other than the one-time expenditures on upgrades to the meeting room). Council appropriations for 2013 are:

  • $227,000 for support of CATS
  • $150,800 for telephone and data services for Monroe County Government
  • $40,000 for radio service for the Sheriff’s Department
  • $190,000 for software licenses for Monroe County Government
  • $3600 for lease of equipment in the Monroe County Extension Office
  • $12,500 for licenses for a grants management system
  • $5000 for the WFIU weather alert system and $2000 for the WFHB weather alert system
  • $5000 for maintenance on the Human Resources management software for county government

What’s Next?

All of the expenses paid for by cable franchise fees are essential. Some are highly visible, like CATS TV and the weather alert systems for local public radio stations. Others are not as flashy — maintenance fees on software applications and data services used to maintain county government, an organization with over 500 employees and a budget of over $60M. All would require some other funding source if cable franchise fees were eliminated. All will ultimately require some other funding source in the long run as franchise fees revenues decline naturally. However, local communities — and counties in particular — are hamstrung by the state in terms of their abilities to raise revenues. Although we do have limited home rule, we do not have meaningful home rule– and we certainly don’t have it where it counts, in terms of taxation. That is really the big issue here.

On the particulars of cable franchise fees, we at least may have received a bit of a reprieve. Yesterday at the League of Women Voters Legislative Update, Representative Eric Koch (R-Bedford), chair of the Utilities and Energy committee, said that the bill would not receive a hearing this year, in order to give legislators more time during summer study committees to study the data on how local governments are using the franchise fees revenues (data which is not due until later this year).

Despite this temporary reprieve, it is likely in the foreseeable future that cable franchise fees will be changed — maybe by reducing them and adding fees to satellite operators, but probably more likely in reducing or eliminating them entirely. The broader story is that local communities — local governments — need to have a greater say in raising revenue for government services.  If franchise fees are eliminated, we will need some alternate revenue source, particularly to support public access television. Budgeting is always about setting priorities — and as public access television is one of the few things that county government supports that it isn’t statutorily required to support — without a revenue stream, we would not be able to fund it — at least not anywhere near the level that we currently do. And that would be a shame for our democracy.