Bleak Budget: Cuts & Caps Considered…

Friday, November 14th, 2008

* Schwarzenegger proposes significant midyear cuts in health, other vital services
* Legislative Analyst predicts $28 billion shortfall without corrections
* Assembly Budget Committee holds hearings on proposals
* MRMIB/Healthy Families considers waitlist for eligible children

Click for What’s New on the Health Access WeBlog: More on today’s budget hearing; Assemblyman Dave Jones gets more facts; How SCHIP votes impacted the election; President-elect Obama on the false choice of economic reform vs. health reform; Unhealthy Healthy Families Proposals; Responses to the Baucus plan; Federal health reform gets serious!

Get Tickets for Health Access’ 20th Anniversary Forum & Reception, Thurs, November 20th

Less two months after Gov. Arnold Schwarzenegger signed an overdue and painful budget, significant budget cuts are back in discussion, with the threat of denying care and coverage to hunderds of thousands of Californians.

GOVERNOR’S MID-YEAR BUDGET PROPOSAL: Last week, in light of an $11.2 billion gap in income (partially a fallout from the global financial crisis), Schwarzenegger put forth a proposal for additional cuts this year and a tax increase. The additional cuts come on top of more than $10 billion in cuts already enacted in the 2008-09 budget.

The proposal includes cuts to health services of $141.9 million in the current year, but would quickly grow to nearly a billion in future years as the policy changes get implemented, denying nearly a half-million low-income Californians coverage, and eliminating benefits and/or raising costs for over 2.5 million parents, seniors, and people with disabilities. A detailing these cuts is available on the Health Access website, at:

LAO PROJECTIONS: The indepdent Legislative Analyst weighed in this week with their assessment of the problem: an estimated $28 billion deficit at the end of the year if lawmakers and the governor do not act soon to close part of the budget. The Schwarzenegger administration did not dispute those numbers, and added that the hole could be bigger, given that more people must rely on state programs during an economic slump because they have lost jobs, benefits, etc. and that would, in turn, increase state spending.

ASSEMBLY HEARING: The Assembly Budget Committee held a hearing on the mid-year proposal Friday.

“There’s no way we can solve this budget problem with just cuts or just revenues,’’ cautioned outgoing Assembly Budget Committee Chair John Laird. “People on all sides will resist one or the other. I urge anyone to avoid any lines in the sand….” including “avoid(ing) taking any pledges.’’

Yet nearly all Republicans have signed a no-tax pledge.

Roger Niello, the Republican vice chair of the budget committee, said in his opening statements, “It makes no sense to begin immediately talking about increased taxes, when we haven’t done everything we possibly can to eliminate ineffective programs.’’

The legislative analyst said eliminating waste, fraud and abuse would not resolve our near-term budget problems, though ideas would be worth a second look.

Assemblyman Dave Jones said he wanted to see more analysis of how the economy would respond if services were cut versus the avoidance of a tax increase – particularly an upper income tax.

“A lot is being asked of poor Californians,’’ said Jones. “We need to ask everyone to participate in this problem,’’ he said, including wealthier Californians. (Health Access did an analysis earlier this year reviewing the economic impact and the coverage impact of the cuts contained in the May Revision.)

Schwarzenegger was hoping that with the election over, and about one-third turnover in the Legislature, the current lawmakers whose terms expire November 30th, would have more freedom to approve the 1.5-cent sales tax increase that he has proposed (yielding $4.5 billion), in conjunction with an equivalent amount in cuts.

Without corrective action, the state will be operating on dangerously thin margins in December, and will have insufficient funds in February and March if lawmakers don’t act, the administration and legislative analyst reported. Additionally, the state’s ability to borrow money would also be compromised. The state Treasurer would be unable to sell California deficit bonds if Wall Street does not perceive that Sacramento has a strategy to rectify its now-perennial budget problem.

“We’re in a new ballgame now,’’ said new Legislative Analyst Mac Taylor. Taylor says this is the worst fiscal situation he’s seen in his 30 years analyzing the budget. “It’s imperative to act early.’’

DEADLINE LOOMS: The governor and legislative leaders have been meeting throughout the past week, but a breakthrough does not seem imminent. The current legislative session expires on November 30th, although some speculation suggests lawmakers would need to vote on some kind of package by next Friday, November 21st – maybe Nov. 26th, right before Thanksgiving, at the latest — in order to allow the Legislature’s computer system to be changed over to be ready for the swearing-in of the new legislative session beginning December 1.


In related news, the Managed Risk Medical Insurance Board, which administers the Healthy Families children’s coverage program, will be considering on Wednesday – November 19th – the institution of a wait list for eligible children who apply, beginning in mid-December.

The reason: the program is currently operating at a deficit, albeit a small one, projected at $17 million.

This is, in part, due to the economic recession and increased demand from Californians: Healthy Families reports enrolling more children than ever, with 27,000 new children signing up per month. Currently, there are 900,000 children enrolled in the program, the most ever since it began in the late-1990s.

If a waitlist is imposed, then MRMIB estimates that 162,750 children would be on that waitlist within six months. Even more starkly, enrollment is estimated to drop from 904,000 in November to 787,000 in June 2009.

Incoming Senate Pro Tempore Darrell Steinberg urged the board, which will make a decision in December, to not rush into anything. Steinberg told the Sacramento Bee: “I would urge (the Managed Risk Medical Insurance Board) to hold up on such a vote…There are a lot of moving parts, including a new administration in Washington and a Congress committed to putting children’s health at or near the top of the agenda.”

In particular, Congress could consider a stimulus package before the end of the year that could increase the federal matching rates for Medicaid, which could provide potentially $2 billion in assistance for California’s health programs. Additionally, Congress needs to renew the State Child Health Insurance Program (SCHIP) before March 2009, when its current authorization expires. SCHIP is what funds Healthy Families with a $2 –to-$1 (state dollar) match.

OPPORTUNITIES FOR ACTION: A full update and alert on this issue is available at the website of the 100% Campaign coalition of children’s advocates, at:

In particular, child and health advocates are:
1) urging MRMIB, at the Wednesday, November 19th public hearing and in other venues, not to impose the wait list on children’s coverage;
2) urging state legislative leaders and Governor Schwarzenegger to keep Healthy Families funded, and direct MRMIB not to go forward with the wait list;
3) urging federal legislators to include and maximize state assistance to Medicaid (“increased FMAP”) in any economic stimulus package as soon as possible, and to prioritize SCHIP funding and reauthorization.

For information, contact the author of this report, Hanh Kim Quach at

Health Access California promotes quality, affordable health care for all Californians.

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