Joseph Krist

Publisher

HOSPITAL MERGER

Saint Peter’s University Hospital is the largest component of Saint Peter’s Healthcare System, Inc. approximately $587 million in FY 2022 total revenue system located in New Brunswick, New Jersey. It was upgraded to Baa2 by Moody’s in 2023. While the hospital has managed to maintain adequate financial results, it faces potential pressures from the need to update an aging physical plant. It also sticks out in its market as a single site hospital which is dominated by larger systems.

This has led the hospital (owned by the Catholic Church) to pursue mergers with one of the large multi-hospital competitors in New Jersey over the last several years. Saint Peter’s previously tried to partner with RWJ Barnabas Health but ran into anti-trust action from the federal government related to the parties no longer having to compete to provide the lowest prices and the best quality and service. Both organizations mutually agreed not to go forward with that merger in 2022.

Atlantic Health System (AHS) is a large multi-hospital (6 acute care sites) system with numerous ambulatory and physician practice sites and over $5.1 billion in revenue. The System provides a broad range of adult and pediatric services over an eleven county service area, including services to Pike County in Pennsylvania and Orange County in New York. The flagship hospital, Morristown Medical Center, includes a Level III NICU, a cardiac surgery center and a children’s hospital.

In June 2024, AHS and Saint Peter’s University Hospital, NJ (Baa2 stable) signed a definitive agreement to merge. The organizations had not yet received regulatory approval as of July of this year. Now, the two entities announced that the proposed merger has been called off. This puts St. Peter’s in a tough spot as it does not have the resources on its own to make significant capital expenditures needed to keep up with competitors.

ILLINOIS AND FEDERAL CUTS

The Illinois Governor’s Office of Management and Budget (GOMB) has released its annual assessment of the state budget and its outlook reflecting a quarter of activity. Through the first three months of fiscal year 2026, several revenue sources have shown stronger than expected results, but GOMB expects the negative impacts of H.R. 1 on business tax collections will far outweigh any overperformance in other areas. As a result, GOMB estimates a combined $449 million net decrease to the General Funds revenue forecast.

The State’s three largest revenue sources (individual income tax, corporate income tax, and state sales tax) are estimated to total $43.548 billion, a net decrease of $827 million (1.8 percent) from the revenue estimate at the time of the fiscal year 2026 budget enactment.

The fiscal year 2026 budget’s revised estimated operating expenditures are $55.115 billion. This amount includes a $303 million continuing appropriation that was invoked by the State Employees’ Retirement System (SERS) at the start of the fiscal year. This continuing appropriation authority may be invoked annually to true-up the State’s contribution to the system if the previous fiscal year’s General Revenue Fund appropriated amount is less than what the certified percent contribution relative to actual General Revenue Fund personal services payments would require.

The result is an estimated deficit for fiscal year 2026 of $267 million. Based on the current assessment of revenues and maintenance budget pressures for fiscal year 2027, estimated expenditures would exceed revenues by $2.2 billion. Illinois now joins Florida and Colorado in facing looming budget gaps in the wake of the OBBBA.

OREGON TRANSPORTATION FUNDING

The Oregon legislature finally passed a transportation funding package which allows the state to avoid layoffs in the Oregon Transportation Department (ODOT). The final votes to enact the legislation were held up by one member’s health issues with interim actions keeping funding alive until a vote could be held. The legislation would raise about $4.3 billion over the next 10 years to fund road maintenance and operations by raising the gas tax by six cents, nearly doubling most vehicle registration fees and doubling the payroll tax used to support public transit from 0.1% to 0.2% of a paycheck  — among other fee hikes for electric vehicles. 

The details include a gas tax increase from $0.40 to $0.46, effective Jan. 1, 2026; an increase in annual registration fees from $43 to $85 for passenger vehicles; $63 to $105 for utility vehicles, light trailers, low-speed vehicles and medium-speed electric vehicles; and $44 to $86 for mopeds and motorcycles. The bill increases title fees for passenger vehicles from $77 to $216. The legislation also funds public transit by doubling the payroll tax used to support public transit from 0.1% to 0.2% until Jan. 1, 2028.

Electric vehicle owners will see an increase to registration surcharges for electric and highly fuel-efficient vehicles, from $35 to $65 annually for cars with a 40+ mpg rating and from $115 to $145 annually for electric vehicles. The legislation also phases in a mandatory road usage charge program for electric vehicles by 2031. Electric vehicle drivers have been able to opt into the OReGO and pay 2 cents per mile in exchange for lower registration fees. The proposed change would mandate electric vehicle drivers participate in that program or pay a flat $340 annual fee. 

CLIMATE AND ENERGY

The Nebraska Attorney General sued the Omaha Public Power District (OPPD) this week seeking to stop a plan to retire three of five power-producing units at the utility’s North Omaha Station and switch the other two coal-fired units to natural gas. The suit seeks to stop the changes as well as prevent OPPD from pursuing any policy that prioritizes considerations other than price or reliability, including “environmental justice.” 

The issue will come down to whether the plan violates a 1963 Nebraska law requires that the state “provide for dependable electric service at the lowest practical cost.” OPPD’s plan says moving forward is contingent on opening new power-generation facilities this year. The politics of the move are obvious as the defendants in the lawsuit are OPPD, its CEO and president and six of eight elected OPPD directors who support the plan.

The goals of the plan are not new as they date back to 2014 and 2016, when OPPD directors agreed that, by 2023, OPPD would retire the three North Omaha units in operation since the 1950s and switch the other two in operation since the 1960s from coal to natural gas. The oldest three units switched to natural gas in 2016. The plan was revised in 2022 and then made contingent upon the construction of two new power-producing stations. Those facilities would produce 600 megawatts, more than all of the units operating now in North Omaha.

As that litigation unfolds, another front has opened in the carbon sequestration debate. The Tallgrass’ Trailblazer pipeline, which extends several hundred miles and transport CO2 from ethanol plants in Nebraska, Colorado and Wyoming to an underground storage site in Wyoming, reported its first shipment. The pipeline formerly carried natural gas, but the company was able to convert the pipeline to instead sequester liquified carbon dioxide. That allowed it to avoid many of the issues stopping other carbon pipeline projects.

Nebraska does not require state approval for CO2 pipelines. 

COAL

Sandy Creek is a single-unit, 932-megawatt (MW) plant located near Waco, Texas. It is the newest large coal-fired power plant in the United States having started commercial operations in May 2013. It is the type of plant favored by climate conservatives for its reliability. That makes it a bit more ironic that the facility will generate no power until March 2027, according to the Electric Reliability Council of Texas (ERCOT). The repairs to remedy two major outages in 2025 will take that long.

Since the end of February of this year, Sandy Creek has been in operation for less than 48 hours. When the plant opened in 2013, the EIA reported that coal provided 38.1% of Texas’ power; gas accounted for 42.2%, nuclear 9.8%, solar 0.04%, and wind 9.2%. By 2024, coal had fallen by two-thirds to 12.6%. Meanwhile, gas rose to 47.8%, nuclear was 7.4%, solar rose to 7.6%, and wind increased to 24%.

SALT RIVER PROJECT

Arizona’s Salt River Project (SRP) will add a 5-MW/50-MWh iron flow battery to its system through a pilot project and storage purchase agreement with a private developer. The capacity will be sold to SRP under a 10-year energy storage agreement. The company’s technology uses a combination consisting mainly of iron, salt and water to store and discharge energy.

The unit will join others under tests at SRP’s Copper Crossing Energy and Research Center in Florence, Arizona. Those projects include a gas generation unit and a solar complex. The plant will be the second battery test which does not rely on what are generally referred to as rare earth minerals at the Florence Center. This continues into SRP’s efforts to use non-lithium batteries and support long duration energy storage (LDES) technologies. It also enables the project to claim a 90% domestic supply content.  

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