Joint Fiscal Office Testifies About Provider Tax

by Angela Chagnon

Steve Klein, an analyst with the Joint Fiscal Office, raised some concerns about the proposed provider tax in the Misc. Tax Bill (H.436) during his testimony to the Senate Finance Committee.

“Hospitals are bringing in less revenue than their budgets are anticipating,” Klein observed. A lower than expected budget would affect the amount of tax revenue that would go to the state. Klein estimated the impact to be “a million dollars in loss.”

“What happens is, there are two parts to this provider tax,” explained Klein. “One is, you raise provider rates. And the same time we raise provider rates, we charge a provider assessment. If you charge a percentage based on the budget amount, and the budget amount…is reduced, then the amount coming in for the assessment goes down. The rates are already built in. You end up paying out more than you are bringing in. It changes the relationship between those two items.”

Klein said that the million dollar difference wasn’t a “huge deal”, but suggested that the Committee put language in the tax bill to allow hospitals to adjust the assessment amounts to fit budgets that come in less then projected.

Klein also expressed concern about basing the assessment on budgets instead of actuals. Using actuals, the tax would be based on what hospitals brought in during the last complete fiscal year. Basing the tax on budgets would allow the state to use the budget for the current year, but would result in an amount of tax revenue that may be less than expected should budget projections not be realized.

Klein estimated that the actuals route would cost the state about $3.3 million for government structure to collect the tax. To make up the $3.3 million, Klein suggested accelerating claim speed or using other tax revenues.

The Committee may also consider raising the cigarette tax to offset the provider tax. Committee Chair Ann Cummings (D-Washington) said that hospitals had informed her that they didn’t want to pay more than $7.4 million in assessment taxes.

The JFO’s fiscal estimates for H.436 can be found here: (