Politics & Government

Nonprofits say Senate budget would hurt

North Carolina hospitals, universities and thousands of other nonprofits stand to lose millions of dollars under tax changes in the proposed Senate budget.

One hospital official said the provisions “would cripple the health-care industry.”

The changes could cost Charlotte-based Carolinas HealthCare System around $45 million a year, Novant Health $22 million and all hospitals $220 million a year, according to the N.C. Hospital Association. They would affect virtually all of the state’s other 10,000 non-profits.

The tax changes are part of the $21.5 billion Senate Republican budget tentatively approved Wednesday, largely along party lines. Senate supporters have consistently sought to eliminate tax breaks and carve-outs.

But nonprofits see a potential double-whammy.

The measure would lower the cap on the sales tax refund they get now. It’s now capped at $45 million a year, which effectively exempts virtually all non-profits from sales taxes. It would drop to $1 million by 2020.

In addition, the bill would cap itemized tax deductions at $20,000. That would remove a big incentive for the large financial gifts that colleges and many other nonprofits depend on.

In a statement, Paula Vincent, senior vice president of Novant Health and president and chief operating officer of Presbyterian Medical Center in Charlotte, said she is also concerned about proposals affecting Medicaid managed care and the state’s certificate-of-need law.

The proposed budget “will cripple the health-care industry and monumentally impact access to emergency and preventive healthcare,” Vincent said.

“Together, these changes will systematically dismantle North Carolina’s healthcare infrastructure,” Vincent said in the statement. “These changes will seriously damage hospitals’ ability to provide access to care in our communities and to respond to unexpected emergencies and care for the indigent, the elderly or those with serious health complications.”

David Heinen, a vice president of the N.C. Center for Nonprofits, told a news conference,“These tax changes would mean that fewer North Carolinians would be served by nonprofits and would increase the demand for government services.”

Hit to other groups

Representatives of hospitals, universities, YMCAs and churches all said the changes would affect their ability to provide services.

Britt Davis, a vice president of Campbell University, said the cap on tax deductible gifts would not only threaten the school’s programs, but “frankly our survival.” Along with tuition, he said gifts are one of the major revenue sources for the state’s independent colleges and universities.

Kathy Bailey, president and CEO of Blue Ridge Healthcare, a Burke County facility managed by Carolinas HealthCare, said small hospitals are particularly dependent on the money they get back in sales tax refunds. She said her hospital gets back about $1.6 million a year, and any reduction could cause job losses or limit the ability to serve the poor.

Lost revenue for hospitals also could impact their ability to undertake programs with groups such as YMCAs, Michael DeVaul, a senior vice president of the YMCA of Greater Charlotte, told the Observer. And DeVaul said his organization also would be hurt by the limit on tax deductability.

“It’s never good to constrict people who are giving,” he said. “We want to reduce all barriers for those who want to give and help.”

Facing bad choices

Doug Luckett, chief executive officer of CaroMont Health, said estimated the sales tax rebate alone would cost $5 million – $6 million for the system which runs CaroMont Regional Medical Center in Gastonia.

“That’s my subsidy for my psychiatric care unit,” Luckett said, explaining that many of those patients don’t have insurance but must be accepted. “I’ve got to take whoever the sheriff or EMS or the police or family members bring to us.”

Luckett said hospitals also would be affected by repeal of the certificate-of-need law, which also is in the Senate budget.

Repealing the law, which determines where and when new hospital facilities can open, could cost the system $17 million - $18 million, he said, by allowing single-specialty surgery centers to open without the responsibilities of running 24-hour emergency departments or accepting patients without insurance.

He said that loss of income has to be made up “some other way, through (higher) charges or layoffs or reducing services. That’s the only thing I can control.”

Several Republican House members came out to support the nonprofits.

Rep. Jason Saine, a House GOP leader from Lincolnton, said by providing needed services, non-profits help the state.

“The role that nonprofits play reduces the size of state government, and as a conservative, that’s important,” he said.

“Its not an opportunity to push the panic button,” he added. “It’s just an opportunity to start a discussion.”

Morrill: 704-358-5059

Garloch: 704-358-5078

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