An Unhappy New Year’s Eve…

Wednesday, December 31st, 2008

* Under Governor’s Budget, Hundreds of Thousands of Californians Would Lose Coverage
* Over 2.5 Million Would Lose Dental, Vision, Podiatry, and Several Other Benefits
* Public Hospitals Cut; Low-Income Aged, Blind and Disabled Would Have to Pay More

New on the
Health Access WeBlog: More on the New Year’s Budget; Obama’s Holiday House Meetings; The Limited Options in a Recession; Congressional Musical Chairs; Searching for a Simpler System; The Impact of the Economy on Health Coverage; The CBO Report on Health Reform; A Fond Farewell to Hanh Quach; Congratulations, Secretary Solis!; The Governor’s Veto Threat; A Majority-Vote Budget Package?

Governor Arnold Schwarzenegger’s Department of Finance released today, on New Year’s Eve, a summary of the Governor’s budget proposals for the current budget year, to close a $41.6 billion budget gap.

The budget proposes $14.3 billion in tax increases and other new revenue, and $17.4 billion in spending cuts over the next 18 months, which includes both the first half of 2009, and the 2009-2010 budget year. It still includes significant borrowing, as well as the previously-approved securitization of the state lottery.

The Governor introduces this budget for the new year while he continues to negotiate (via videoconference line from his holiday vacation in Idaho) with legislative leaders around a mid-year budget package of $18 billion in additional cuts and revenues. That package that was passed the legislature by majority vote a few weks ago, but the Governor has threatened to veto. In the name of economic stimulus, he is demanding changes to worker and environmental protection laws.


The budget includes many cuts that were previously rejected by the Legislature as too severe. It proposes to deny coverage to over a half-million Californians, and to deny specific benefits like dental, optometry, podiatry and psychology to millions more. The proposals would significantly impact not just state’s health system, but also have an economic impact as well: California would lose hundreds of millions of dollars in federal matching funds, more than doubling the negative impact of these cuts not just in the health system, but the economy as a whole.

Regarding just the health care cuts, the Governor’s budget proposal would:

* Deny over a half-million low-income working parents Medi-Cal coverage, by lowering the eligibility from 100% to 72% of poverty level, cutting off eligbility for parents in families of three making more than $13,000. The cut would be $5.2 million in 2008-09; $176.4 million in 2009-10, and $342 million in 2011-12, ultimately impacting over 429,000 California parents. Over 100,000 additional Californians, largely legal immigrants, would lose most of their coverage under other proposed cuts.

* Eliminate dental, optometry, podiatry, psychology, and several other benefits for 2.5 million parents, seniors, and people with disabilities on Medi-Cal coverage. This cut would be $39.4 million in 2008-09 and $258.8 million in 2009-10.

* Impose significant additional costs on low-income aged, blind and disabled Californians–over 73,000 who make just over $890/month as individuals would have to pay potentially hundreds of dollars a month or forgo care and coverage. This cut would be $28.6 million in 2008-09, and $371.6 million in 2009-2010.

* Siphon funds away from counties, providers, and public hospitals on which we all rely. For public hospitals, the proposal would reduce rates by $54.2 million, at exactly the time the demand for their services is increasing. For counties, the proposal would also suspend cost-of-living increases, a cut of $24.7 million, that counties need to administer the Medi-Cal program. For providers, the proposal would also cut $85.5 million by delaying payment to Medi-Cal fee-for-service providers–effectively forcing these health providers to lose a month of reimbursements.

* Eliminate the First Five Commission, and thus significant funding for a variety of health coverage and other services for young children, such as “Healthy Kids” programs in various counties. This cut would be $275 million, but would require voter approval. A version of this proposal had been offered by Republican legislators, but this is the first time it has been adopted as part of the Governor’s proposal.

There are also significant cuts to mental health, developmental services, in-home supportive services, CalWORKS, SSI/SSP, food assistance, and other human services. There are over a billion dollars in cuts to health and human services in the budget year, and that number significantly increases as the cuts are fully implemented in future years.

Health Access California, the statewide health care consumer advocacy coalition, has a quick one-sheet detailing the health cuts proposed by the Governor (not including the new First Five Commission cut), along with estimates of the numlber of Californians impacted, on our website:


Despite his history, Governor Schwarzenegger has proposed some tax increases to deal with this monumental budget problem. They do not match the $16 billion in cuts that have already been made recently, much less the additional cuts that he puts forward in his proposal announced today.

The Governor’s budget put forward the following “major revenue proposals:”

* Temporary 1.5-cent increase in the Sales and Use Tax rate.
* Broaden the Sales and Use Tax base to include certain services.
* Increase the Beverage excise tax by a per gallon surtax equivalent to a “nickel-per-drink.”
* Adopt a 9.9-percent Oil Severance Tax.
* Reduce the personal income tax dependent exemption credit to equal the personal exemption credit.
* Increase the vehicle registration fees.
* Shift Tribal Revenues from Transportation to General Fund.
* Transfer and borrow balances from special funds.

While these revenues may be inadequate to prevent the severe proposed cuts to health, education, and other vital services, the Governor acknowledges the need for additional revenues, unlike Republican legislators, who have signed pledges against any tax increases–thus forcing even additional cuts. Those Republican legislators–whose votes are needed to meet the 2/3 vote threshold to pass a budget and/or taxes–have so far refused to vote for any proposed budget or taxes as a result.

Because of the Republican blockade, the Democratic majority in the legislature passed in late December a mid-year $18 billion budget package that included cuts and fees–which can be passed by a majority, rather than 2/3, of the legislature. They are currently negotiating with Governor Schwarzenegger, who himself has held out in signing that package.

All experts warn that if at least some budget solutions (cuts and/or revenues) are not passed in the next few weeks, California will run out of money as early as February.

The budget will be the top priority of the new year 2009. More analysis about the budget will be available on the Health Access daily blog, at:

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

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