Will the County’s Settlement Agreement Withstand Constitutional Scrutiny?

Billy Guice has reminded the public at every turn that is unconstitutional for the county to  fund the pension plan.  He is referring to Section 96 of the Mississippi Constitution which states:

Extra compensation and unauthorized payments prohibited.

The Legislature shall never grant extra compensation, fee, or allowance, to any public officer, agent, servant, or contractor, after service rendered or contract made, nor authorize payment, or part payment, of any claim under any contract not authorized by law; but appropriations may be made for expenditures in repelling invasion, preventing or suppressing insurrections.

About as clear as mud. The gist of it is what Guice is saying: public money can’t go to private citizens, trusts, etc.  We will take Mr. Guice at his word for the sake of argument.

1. Guice has been adamant that no county money will be used to fund the pension.
2. The agreement he drafted calls for a sequestration of funds in order to avoid the appearance of funding the plan.
3. The agreement he drafted purports to provide funding for “indigent care” and “bond support.”
4. He has signed a settlement agreement acknowledging the county’s responsibility.  The county is not a party to the lawsuit.

Guice is pushing an unconstitutional transfer to the pension trust under a thinly veiled “Contribution Agreement” signed by the county and the hospital. A learned lawyer friend of this publication has informed us of a crucial two-pronged legal test: the duck test.

1. Does it walk like a duck?
2. Does it talk like a duck?

First we examine the purported reasons for the settlement, bond support and indigent care.

Bond Support

The Contribution Agreement purports to be primarily for the basis of bond support, wherein it notes “… there existed a real danger of default of payment of the bonds,” and that the county is offering to contribute $13.6 million primarily to prevent bond default subject to certain contingencies.

Section VI. B. of the Contribution Agreement requires that if the hospital misses any bond payment, that the county will cut off any payments due under the agreement. The section also states that if the hospital is in covenant default and doesn’t receive a waiver, the county will also cut off the money.  A covenant default would most likely come from the hospital not having enough cash-on-hand.

According to this section, when the hospital reaches the most dire straits and most needs a cash infusion, the county will not provide it.  If the agreement were truly for bond support, it would provide for funding regardless of payment of covenant default – or provide a more robust mechanism for determining further action by the county and hospital in the event of default.

The bond support is also entirely contingent upon the hospital’s settlement of only one of dozens of pending lawsuits. Regardless of any pending litigation, Singing River is still in danger of bond default as noted by the Contribution Agreement.  Why then, should bond support only be provided as a contingency for the settlement of one suit?

Indigent Care

The Contribution Agreement also purports to provide funding for indigent care.  It is no secret to the county that the hospital has long required assistance with meeting the financial burdens involved with caring for the county’s poor and un(der) insured. With increasing insurance premiums and no forthcoming expansion of Medicaid, this funding gap is only expected to worsen with time.  There existed in the past, there exists now, and will exist in the future a deficiency in hospital funding due to the enormous amount of uncompensated care the hospital provides.

As a county hospital, it is the hospital’s primary mission to serve all those who require medical attention regardless of ability to pay. In keeping with this mission and public policy, statutes allow for an unlimited, but prudent, contributions to the hospital by the county.

We enumerate the reasons for which the county can stop payments for “indigent care” according to the Contribution Agreement:

1. No settlement is reached in litigation
2. A settlement not satisfactory to the county is reached
3. SRHS defaults in any way on its bonds and does not receive a waiver
4. SRHS  files for bankruptcy
5. SRHS does not provide all information on KPMG to allow Billy Guice to try his hand at a $3 million fee
6. SRHS does not cooperate with the turnaround firm in satisfactory manner

Despite the acute need for indigent care, there is a litany of reasons why the county might not provide it. The county apparently only sees the need for indigent care funding as having very clear start and end dates. It appears that SRHS only needs funding for indigent care in the case of a settlement and that need for funding will evaporate in 2024. Further, the county does not use any sort of prudency test in determining and forecasting what might be an appropriate level of funding to support indigent care. Perhaps the county consulted with Miss Cleo.

Payment Schedule

Perhaps the most critical element of the duck test is the payment schedule. If the county were truly providing funding bond support and indigent care, a well-reasoned observer would assume that the amount and timing of these payments would match the actual obligations of the hospital. Bond support payments would be timed to match when the bond payment is due. Indigent care funding might provided at consistent level each month so as to ease cash flow concerns on both the part of the hospital and the county.  Bond support payments might reflect those amounts which Singing River requires to avoid default, and indigent care funding provided at a level stipulated by the county and hospital, say 25% or 50%. There is no requirement for such, and the county could choose arbitrary amounts and dates for payment.  In this case, those arbitrary amounts and dates align exactly with Singing River’s obligations to the pension trust.

Compare the schedules for yourself:

The schedule of dates and amounts align exactly between the county and SRHS. By now you should be seeing a feathers, beak, and a couple of webbed feet.  That sound you hear is quacking.

Folks, this is a contribution to the pension by any other name.  Simply attaching another name to these payments does not change the reality or intention of their design.  This will also cause the Board of Supervisors to have a brush with another constitutional issue, which we will later address.

Note: There is a requirement for escrow accounts for county money. The county is requiring the hospital to play a shell game with funds.  Assume you have only one checking account you use to pay household bills.  You aunt wins the lottery and agrees to pay your $1,200 mortgage each month, but she doesn’t want you spending that money on booze.  She requires that you set up a second checking account where she will deposit the $1,200 and you can only write checks to the mortgage company from that account. Now that your aunt has paid the mortgage, you have a surplus of $1,200 in your regular checking account.  You can spend that $1,200 on whatever you like, including booze.

We have not neglected the issue of attorney’s fees and shall address these in a subsequent post.