Jun 5, 2005 By Marc Levy Associated Press Writer 4 min read

HARRISBURG, Pa. (AP) – Gov. Ed Rendell found a unique way to pay health care bills for more people when he reached a deal in February with the state’s four Blue Cross/Blue Shield companies to pour money into state programs for the uninsured. Advocates for the poor hailed the agreement as historic, and others said Rendell showed leadership in finding an innovative way to fund government.

The deal is unique in other ways, too.

State lawmakers say they have never seen a similar agreement with an outside donor, particularly one that so circumvents their constitutional role to approve all state revenue collection and spending.

The legal question might be easier to resolve, except for the fact that the Legislature’s Republican leaders disagree with the Democratic governor over how the money should be spent.

“We’re just frankly confused as to how that arrangement legally is established,” said Rep. Sam Smith, the House GOP leader from Jefferson County.

The issue will loom over the 2005-06 budget negotiations, which will pick up speed after lawmakers reconvene Monday.

The growing cost of public health care is expected to dominate those discussions as the Rendell and GOP lawmakers hash out their differences over the state’s next fiscal year budget, which takes effect July 1.

Administration officials contend that the Blues are donating the nearly $1 billion over six years to fulfill a traditional and legal mission to be socially responsible, and that makes the companies different than any donor.

The Blues will give $145 million in the 2005-06 fiscal year, most of which will go toward adultBasic, a health insurance program for low-income working adults that costs $32 a month and has a waiting list of about 100,000.

For now, the administration is showing no signs of bowing to lawmakers over how the money should be spent.

“The agreement specifies how the money is to be used,” Rendell’s budget secretary, Michael Masch said. “This is a voluntary agreement that (the Blues) have entered into. We don’t believe that you can legislate changes to a voluntary agreement and make it into something other than what it is.”

The Blues agreed to the deal in the face of heavy public criticism for the size of their surpluses.

Three days after it was publicized, the Rendell administration said its 21/2-year examination of the Blues’ combined reserve stash of $3.9 billion concluded the reserve was appropriate.

The timing raised eyebrows, and Smith and other lawmakers accused Rendell of using the state’s regulatory muscle to extract money from the Blues – a scenario that Masch dismissed.

“I think (the Blues) recognized that having surpluses that large at a time when the number of uninsured Pennsylvanians was growing so quickly was not a viable position for the Blues to take and they had to do something about it,” Masch said.

For their part, the Blues companies insisted the agreement simply formalized the kind of charitable contributions they were already making to their communities.

GOP lawmakers and their staff members say they will have to confront the Rendell administration over how the money gets spent.

If a governor can simply collect and appropriate revenue without legislative approval, the state’s constitutional checks and balances are out the window, they say.

“Clearly not the kind of process that the framers conceived of,” said Stephen C. MacNett, senior legal counsel to the Senate Republicans.

Robert M. Stern, the president of the Center for Governmental Studies in Los Angeles, said that donations to government through a private agreement, and outside the process of checks and balances, could raise the question of what the donor expects in return.

“Are they expecting some favorable treatment in terms of regulation or tax matters?” Stern said. “Companies, even nonprofits, usually don’t give things away.”

And once the constitutional question is answered, Republicans will want to enforce their will over how the money is spent, possibly to soften Rendell’s proposed Medicaid cuts or make private-sector health insurance more affordable.

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Marc Levy covers state government for The Associated Press in Harrisburg. He can be reached at mlevy@ap.org.