SB2139.DOC

SECTION 1. A forty-six year old program, medicaid is a federal-state partnership that is a cornerstone in Hawaii's social safety net. The legislature finds, however, that the economic crisis that began with the recession in 2008 has placed the integrity of this fundamental program in jeopardy.

Currently, states, including Hawaii, see approximately 16 cents of every general fund dollar directed toward covering the costs of their medicaid programs. It appears likely that the amount the State will have to spend will continue to increase, due in large part to the escalating cost of health care. Costs have already begun to place a strain on the state budget with the number of residents eligible for medicaid continuing to rise in response to stagnant economic growth.

The legislature further finds that when federal health care reform takes effect in three years, the budget will face an additional strain as eligibility rules will change, resulting in even more medicaid-eligible residents. In addition, the maintenance of effort provision requires that the State continue to cover anyone who was enrolled in medicaid as of March 2010, decreasing any flexibility that might be required to contain costs.

However, the legislature further finds that maintaining the integrity of this critical piece of the social safety net is paramount to the welfare of the State's most vulnerable populations. Sixty-seven cents of every dollar spent on medicaid covers long-term care and services for the elderly and severely disabled. These groups cannot afford to lose this level of assistance.

Therefore, the purpose of this Act is to provide an additional dedicated funding stream to support the state's medicaid program by:

(1) Creating a medicaid special fund into which a beverage container surcharge will be deposited;

(2) Establishing a 0.5 cents deposit beverage container surcharge to the deposit beverage container fee to be deposited in the medicaid special fund; and

(3) Authorizing the department of human services to expend moneys from the medicaid special fund to cover any fiscal shortfall in the State's medicaid program.

SECTION 2. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§346- Medicaid special fund. (a) There is established in the state treasury a medicaid special fund to be administered by the department, into which shall be deposited all revenues from the deposit beverage container surcharge pursuant to section 342G-102(e). All interest earned or accrued on moneys deposited in the medicaid special fund shall become a part of the medicaid special fund.

(b) Moneys in the medicaid special fund shall be used to cover any shortfall in the state's medicaid program, including provider payments, fee-for-service payments, and administrative costs; provided that up to ten per cent of the moneys in the medicaid special fund may be used by the department to reimburse the department of health for administrative costs associated with collecting the deposit beverage container surcharge. Appropriations or authorizations from the medicaid special fund shall be expended by the director."

SECTION 3. Section 235-18, Hawaii Revised Statutes, is amended to read as follows:

"[[]§235-18[]] Deposit beverage container deposit and surcharge exemption. This chapter shall not apply to amounts received as a deposit beverage container deposit or surcharge collected under part VIII of chapter 342G."

SECTION 4. Section 237-24.75, Hawaii Revised Statutes, is amended to read as follows:

"§237-24.75 Additional exemptions. In addition to the amounts exempt under section 237-24, this chapter shall not apply to:

(1) Amounts received as a beverage container deposit or surcharge collected under chapter 342G, part VIII;

(2) Amounts received by the operator of the Hawaii convention center for reimbursement of costs or advances made pursuant to a contract with the Hawaii tourism authority under section 201B‑7[[]; and[]

[](3) Amounts received[]] by a professional employment organization from a client company equal to amounts that are disbursed by the professional employment organization for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick leave, health benefits, and similar employment benefits with respect to assigned employees at a client company; provided that this exemption shall not apply to a professional employment organization upon failure of the professional employment organization to collect, account for, and pay over any income tax withholding for assigned employees or any federal or state taxes for which the professional employment organization is responsible. As used in this paragraph, "professional employment organization", "client company", and "assigned employee" shall have the meanings provided in section 373K-1."

SECTION 5. Section 342G-102, Hawaii Revised Statutes, is amended to read as follows:

"§342G-102 Deposit beverage container fee[.] and surcharge. (a) Beginning on October 1, 2002, every deposit beverage distributor shall pay to the department a deposit beverage container fee on each polyethylene terephthalate, high density polyethylene, or metal deposit beverage container manufactured in or imported into the State. The fee shall be imposed only once on the same deposit beverage container. The fee shall be 0.5 cents per deposit beverage container.

(b) Beginning on October 1, 2004, every deposit beverage distributor shall pay to the department a deposit beverage container fee on each deposit beverage container manufactured in or imported into the State. The deposit beverage container fee shall not apply to deposit beverage containers exported for sale outside of the State. The fee shall be imposed only once on the same deposit beverage container. The fee shall be 1 cent per deposit beverage container.

(c) No county shall impose or collect any assessment [~~or fee~~], fee, or surcharge on deposit beverage containers for the same or similar purpose that is the subject of this chapter.

(d) Beginning January 1, 2005, and every August 1 thereafter, the department shall notify deposit beverage distributors in writing of the amount of the deposit beverage container fee. The effective date of changes to the fee amount shall be September 1. The fee shall be based on the redemption rate calculated annually based on the redemption rate information submitted to the department for the previous period of July 1 through June 30. The fee amount shall be as follows:

(1) If the redemption rate is seventy per cent or less: 1 cent per container; and

(2) If the redemption rate is greater than seventy per cent: 1.5 cents per container.

(e) Beginning September 1, 2012, there shall be added to the fee assessed in this section, a deposit beverage container surcharge, to be deposited into the medicaid special fund established under section 346- . The surcharge shall be imposed only once on the same deposit beverage container. The surcharge shall be 0.5 cents per deposit beverage container.

[~~(e)~~] (f) The director may temporarily suspend an automatic increase of the deposit beverage container fee if, after consultation with the auditor, it is determined that the deposit beverage container deposit special fund contains sufficient funds for the purposes of section 342G-104(b)."

SECTION 6. Section 342G-104, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is established in the state treasury the deposit beverage container deposit special fund, into which shall be deposited:

(1) All revenues generated from the deposit beverage container fee as described under sections 342G-102 and 342G-105[;], except for the surcharge as described under 342G-102;

(2) All revenues generated from the deposit beverage container deposit as described under sections 342G-105 and 342G-110; and

(3) All accrued interest from the fund."

SECTION 7. Section 342G-105, Hawaii Revised Statutes, is amended to read as follows:

"§342G-105 Deposit beverage container inventory report and payment. (a) Payment of the deposit beverage container fee and surcharge as described in section 342G-102, and deposits as described in section 342G-110, shall be made monthly based on inventory reports of the deposit beverage distributors. All deposit beverage distributors shall submit to the department documentation in sufficient detail that identifies the net number of deposit beverage containers sold, donated, or transferred, by container size and type.

(b) The amount due from deposit beverage distributors shall be the net number of deposit beverage containers sold, donated, or transferred multiplied by the sum of the prevailing deposit beverage container fee [~~and~~], the refund value of 5 cents[.], and the surcharge of 0.5 cents. Payment shall be made by check or money order payable to the "Department of Health, State of Hawaii". All inventory reports and payments shall be made no later than the fifteenth day of the month following the end of the payment period of the previous month."

SECTION 8. Section 342G-111, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (d) to read:

"(d) Payment of the deposit beverage container fee [~~and~~], and surcharge as described in section 342G-102 and deposits as described in section 342G-110, shall be made monthly based on reports of the deposit beverage distributors under subsection (c)."

2. By amending subsection (f) to read:

"(f) The amount due from a deposit beverage distributor shall be the net number of deposit beverage containers sold multiplied by the sum of the prevailing deposit beverage container fee [~~and~~], the deposit value of 5 cents[.], and the surcharge of 0.5 cents. Payment shall be made by check or money order payable to the "Department of Health, State of Hawaii". All reports and payments shall be made no later than the fifteenth day of the month following the end of the previous payment period."

SECTION 9. The department of human services shall submit a report to the legislature detailing the implementation and use of the deposit beverage container surcharge, detailing all expenditures made from the medicaid special fund, and including any proposed legislation, no later than twenty days prior to the convening of the regular sessions of 2013 and 2014.

SECTION 10. Any fund balance remaining unencumbered and unexpended as of June 30, 2014, in the medicaid special fund shall be transferred to the credit of the state general fund.

SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 12. This Act shall take effect on July 1, 2012, and shall be repealed on June 30, 2014; provided that sections 235-18, 237-24.75, 342G-102, 342G-104, 342G-105, and 342G-111, Hawaii Revised Statues, shall be reenacted in the forms in which they read on the day prior to the effective date of this Act.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2139
TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII