After marathon legislative sessions that started the evening of Valentine’s Day, a state budget proposal and various other legislative proposals was passed by the California legislature early this morning, to address a $42 billion deficit in the current and next budget year was.
But this budget deal is no victory. The budget will have significant negative impacts on health care, now and into the future.
Here’s a general overview. While there were major changes to the overall package (constitutional amendments, even!), the health portions were not substantially changed from earlier in the week… although there was a late night change to take more of the federal economic recovery money for deficit filling, and thus increase the threshold by which many health and human services cuts were “triggered off.” It was $9.1 billion, now California needs $10 billion for the general fund before a portion of additional taxes and cuts are nullified.
We’ll do a more official run-down (and E-mail Update) after the Governor signs it… we are expected to see many line-item vetoes, so the damage is not done yet!
The overall framework includes, even after $19 billion in cuts in the past three years, an additional $15 billion in spending reductions, as well as $14.4 billion in new and increased (but temporary) taxes, and $12 billion in borrowing. The package also includes rollbacks of worker and environmental protections, some corporate tax giveaways, and pending a May 19th ballot vote, a spending cap and redirection of money raised by Propositions 10 and 63.
In particular, the spending cap would be devastating for health care. This artificial limit on health spending would not just prevent any restorations and reforms to our broken health system, but which would force cuts into existing services into the future. When Californians find out about the impact of a cap on health and other vital services, we believe they will reject it at the ballot box.
The specific cuts and impacts on health care fall into three categories.
* CUTS: Amidst very serious cuts to human services, there a $24.7 million health cut to counties from suspending the 2009 cost-of-doing-business increase for Medi-Cal administration, which means fewer county workers to enroll and process Medi-Cal applications for families. There were much more significant human services cuts as well.
While the package includes increased taxes to raise revenues during this significant downturn, they are temporary. There are corporate tax breaks, however, that are permanent. Such tax breaks reduces the ongoing general fund dollars that are available for health, education, and other core services, creating greater pressure in future years to further cut these areas. The over $1 billion in permanent tax cuts and corporate giveaways that will create budget pressure in future years to make further cuts, especially after the temporary revenue increases expire.
* MORE CUTS, DEPENDING ON THE AMOUNT OF FEDERAL HELP: These proposals would cut $183.6 million from health care, but this amount is included in a section that will “trigger off” depending how much money California gets from the federal economic recovery package. Director of Finance Mike Genest and Treasurer Bill Lockyer are to determine by April if we get over $10 billion in general fund money in the requisite period of time, which then will allow them to prevent these and other significant cuts. The potential cuts in health care include:
** a 10% cut to public hospital reimbursement rates (the Safety Net Care Pool), and
** eliminating specific Medi-Cal benefits for 3 million parents, seniors, and people with disabilities (here’s a fact sheet on the financial and health impacts) including: dental, podiatry, optometry, psychology, acupuncture services, audiology services and speech therapy, chiropractic services, and incontinence creams and washes
* EVEN MORE CUTS, DEPENDING ON A MAY 19th BALLOT MEASURE: Several components of this plan would require voter approval, since they are either modifying initiatives that were previously approved by the voters, or changing the Constitution. These and other elements are proposed to be placed on the ballot on May 19th, 2009:
** Two different proposals would redirect some but not all funds from Prop 10 (tobacco tax for services for children 0-5) and Prop 63 (upper-income tax for mental health services). Proposition 10, the California Children and Families Act of 1998, is a major funder of children’s programs throughout the state, including county-based “Healthy Kids” universal coverage programs. The budget transfers Prop. 10 reserve funds of $340 million in the current year to fill the general fund deficit, and then proposes to transfer $268 million annually for five fiscal years to the general fund. The budget proposes to shift money for children’s health and other services, forcing the First Five Commissions to defund many of these programs.
** A spending cap would also be on the ballot for voters approval, which would limit California ’s ability to invest in health, education and other vital services, and in fact is projected to force steep cuts every year into the future. It would be tied to extensions of the temporary tax increases. If the cap is approved, the temporary taxes last for five years; if the cap is defeated, the taxes are in place for only two years.
For health care, the concern is that an artificial spending cap would lock us in to the current broken, resource-starved health system that we all rely on, which includes over six million uninsured Californians and the lowest per-patient Medicaid spending in the nation. As the limit does not take into account medical inflation or the costs of an aging population, health care would be particularly vulnerable under the cap. The cap would thus force cuts into existing programs and services, and prevent ever addressing unmet needs.