Special to the John & Rusty Report –
January 15, 2013
Gov. Jerry Brown released his January budget today, emphasizing the state’s improvements and the impact of federal cuts and policies on California. The budget released today calls for a $97.7 billion general fund budget, contains small increases to education but generally resists any increases that will lead to “the fiscal mess that the last few governors had to deal with.”
“The way you avoid it is by holding the line, by exercising a common-sense approach to how we spend our money,” Brown said.
The governor’s budget gives each state university system an increase of $250 million, which means university officials can decide whether to pursue tuition hikes.
On health care, the Governor cited the development of the Health Exchange and the expansion of the medi-Cal system by 1 million people, as envisioned by the Obama health plan. He acknowledged that these expansions would put pressure on health care provider rates as demand increases. He said this demand pressure was something they would be keeping in mind.
The governor proposes two options for the expansion of Medi-Cal. He proposed a smaller state-based program that does not cover long-term care for the newly eligible, who will typically be poor, childless adults, as well as an alternative would hold the counties responsible for that population, building on the Low Income Health Program that has been developing in certain counties and that leaves local officials to decide what benefits to offer.
Brown estimated that the federal changes to Medi-Cal will lead to an increase of $350 million in 2013-14, largely due to enrollment increases.
Significant adjustments to the health care budget, are as follows:
* A savings of $310 million General Fund as a result of extending the hospital fee, which would otherwise sunset December 31 of 2013.
* A gross premiums tax on Medi-Cal managed care, which the Governor proposes to reauthorize permanently, which will generate general fund savings of $85.9 million in 2012-2013 (it will be applied retroactively) and $217.3 million in 2013-2014.
* A decrease of $135 million General fund in 2013-2014 as a result of “additional efficiencies in managed care” that were unspecified.
* A decrease of $1 million general fund as a result of having Medi-Cal beneficiaries select their health plans each year instead of the ability to switch monthly.
* The coordinated care initiative (CCI) for dual-eligible Medi-Cal beneficiaries is expected to save $170.7 million in 2013-2014, and expected to grow to $523.3 million annually. They are now estimating that it will affect 560,000 beneficiaries, suggesting it will be smaller than previously anticipated. The budget also calls for a slowing phasing in of the CCI, beginning in September 2013 instead of March. Los Angeles County will phase in over 18 months. San Mateo County will phase in at once. Orange, San Diego, San Bernardino, Riverside, Alameda and Santa Clara counties will phase in over 12 months. But the state continues to work with the federal government on a shared savings methodology for the program.
He called Obama’s health care reform “heroic” and said that he would do everything he could to see that it works.
Funding for K-12 schools and community colleges will increase from $53.5 billion to $56.2 billion. The governor is proposing an overhaul of school funding through a “Local Control Funding Formula,” which the governor has funded at $1.6 billion for the first year. He also wants to use $1.8 billion to reverse delayed payments to schools that had been one of the strategies to balance the budget in prior years.
The budget also calls for a $1 billion reserve, which would be partially funded by two Medi-Cal taxes–one on managed care plans and the other on hospitals that draw down matching federal funds. The Legislature will need a two-thirds vote to pass them, but that will be much easier this year and there has typically been no opposition from the health plans and hospitals because of the way the money comes back. But plans and hospitals have demanded that the monies go back into the program.
There is also a significant adjustment to the Electricity Program Investment Charge Program–an increase of $192.2 million in program funds and 58.5 positions to implement the program, which supports cost-effective energy efficiency and conservation activities, renewable energy resources and public interest research and development within the operating areas of Investor-Owned utilities.
The governor also talked about the “wall of debt.” He said that the state could get to 1.3 billion by 2016. He also said that he did not like the “yo-yo economy” of providing a benefit then taking it away, and so he wanted to maintain spending consistent with revenues. He said that he did not want to play the game of spending money that “we don’t have” and then have to have another $20 billion deficit for another Governor to fox. He said he wanted to fix the long-standing problem, that they had fixed it, but that he wanted to stay on the road to long-term stability. He said he wanted to do what was compassionate, what was good for the state and what they could maintain over time.
A reporter asked whether the budget numbers reflected $40 billion in debt to the feds. The Governor said that the state owed only $10 billion, and that the state was continuing to borrow and that that was a problem, a long-term indebtedness that they would pay off annually. And at some point the state would probably have to raise unemployment taxes. He assured them that the state would manage the unemployment insurance fund.
Asked how he would get the Legislature to go along, Brown hesitated and then said, “Well, that will require a .. .lot of…charm.” That got a round of laughs.