Senate OKs BCBS tax break

Topeka Capital-Journal, The, Mar 22, 2007 by Tim Carpenter

By Tim Carpenter

THE CAPITAL-JOURNAL

The Senate passed a $2 million tax incentive Wednesday to strengthen the bid by a Blue Cross and Blue Shield of Kansas subsidiary to win a four-state Medicare contract tied to 550 jobs in Topeka.

Shawnee County's three senators hailed the measure sent to the House as a prudent economic development investment, while Sen. Chris Steineger, D-Kansas City, criticized the business tax break as "corporate welfare" for a company with rapidly escalating executive salaries.

Senate Minority Leader Anthony Hensley, D-Topeka, said compensation of Blue Cross and Blue Shield executives wasn't relevant to deciding the merits of this tax incentive bill.

The Legislature's focus should be on retaining 350 existing jobs in Topeka to be lost if the contract bid fails, as well as about 200 new jobs to be created in the city if the bid is successful, he said.

"The impact of this bid on the economy of Topeka and Kansas would be significant," Hensley said. "I think this is going to pay back the state of Kansas in the long term."

Blue Cross and Blue Shield's subsidiary, Wheatlands Administrative Service, is competing for a Medicare services contract for a region covering Kansas, Nebraska, Iowa and Missouri. About 2 million people live in the four-state service region.

Medicare is the federal health insurance program for people 65 or older and certain younger people with disabilities.

Winner of the government contract, expected to be announced by July, would assume control of Medicare work for all of Kansas and parts of Nebraska and Missouri now handled by the 350 workers in Topeka.

Under the Senate bill, an existing tax benefit available to Blue Cross and Blue Shield would be passed to the Wheatlands subsidiary. The $2 million tax break would be spread over five years.

"It's an all-or-nothing deal with us," said Graham Bailey, spokesman for Blue Cross and Blue Shield. "We would like to use those incentives to help make that bid more competitive."

During a Senate debate on the bill, Steineger read off salaries of Blue Cross and Blue Shield executives. He read from a report on compensation paid from 2002 to 2004. It showed the salary of the company's top executive nearly doubled, from $335,000 to $671,000, in the three-year period.

Steineger said eight other high-ranking employees at the company received significant salary increases.

"We're trying to manage the people's money," he said. "All of us, whether Republican or Democrat, need to do a little bit better job of not caving in, not folding, frequently and quickly to every big corporation that wants money from the people."

Sen. Dennis Wilson, R-Overland Park, said Steineger shouldn't mix issues of executive pay with a campaign to retain and add jobs.

"The state of Kansas is going to be better off, specifically Topeka, Kansas, and Shawnee County, Kansas," he said.

Tim Carpenter can be reached at (785) 296-3005 or timothy.carpenter@cjonline.com.