Tax bill clears committee with blessing of hospitals

ATLANTA -- Georgia Republicans are rallying around a new tax on hospitals to help close the state's widening budget hole.


On Tuesday, after House and Senate leaders brokered an 11th-hour deal with state hospital groups, a key House committee approved a plan that would slap hospitals with a 1.4 percent tax on their revenues. It would raise about $175 million.

It was an about-face for the hospital industry, which had previously opposed the plan, and for House GOP leaders, who found themselves supporting a tax increase.

Republican legislators -- some of whom have pledged to balance the state budget without a tax increase -- had been cool to Gov. Sonny Perdue's plan to slap a tax on hospitals.

But in recent weeks, as the depths of the state's budget woes have come into focus, some GOP leaders have grudgingly come on board. Grappling with 15 months of declining tax collections, legislators have been forced to make deep cuts to schools, colleges, public safety and welfare programs.

"I do expect it to have strong support (from the GOP caucus)," House Majority Leader Jerry Keen said Tuesday of the hospital tax plan.

"When you're staring at virtually no money in the budget there are some things you do that you wouldn't do otherwise."

The House Republican caucus discussed the measure at a Tuesday morning caucus meeting. Members of the House and Senate met with the state's hospital industry groups Monday night.

Hospitals had opposed the initial plan for a 1.6 percent tax, which was expected to bring in about $300 million to Georgia's strained coffers. Last month, health care professionals balked at the proposal, instead backing a measure that would boost the tax on cigarettes.

Rural health providers were especially vocal, because most of the state's 34 indigent care providers are in those areas.

The governor countered with a plan to slash Medicaid reimbursements to hospitals by 10.25 percent if they did not support the hospital tax. The sobering number sent all sides to the negotiating table.

Tuesday's compromise was the best deal for the state and patients, said Earl Rogers of the Georgia Hospital Association.

"This process has not been easy," Rogers told lawmakers, who applauded his remarks during the House Appropriations Committee hearing on the bill before the vote. "But the hospital community recognizes that we need to be part of the solution. This is a reasonable, solid proposal that will help the state with its budget situation."

Perdue had also proposed eliminating the state sales tax exemption for nonprofit hospitals -- which would force them to pay sales taxes for purchases.

Under the compromise, the sales tax exemption would remain in place.

The bill now moves to the Rules Committee, which can vote to send it to the House for a full vote.

Controversial measure

The controversial hospital tax proposal cleared a crucial committee after House and Senate leaders brokered an 11th-hour deal with state hospital groups. Under the bill, hospital revenues would be taxed 1.4 percent, which would raise about $175 million. The original plan calling for a 1.6 percent tax would have brought in about $300 million.