Brown’s Revised Budget Comes Amid High Health Care Spending

Editor's Note: The Office of the Governor has released his revised budget proposal. This story has been updated.

On Tuesday, Gov. Jerry Brown (D) released his revised fiscal year 2014-2015 budget proposal as the state faces financial challenges, such as higher-than-expected health care spending, the Los Angeles Times reports.

Brown also is facing "pent-up demand" for funding for social services, such as home care for the elderly and individuals with disabilities, according to the Times (Megerian, Los Angeles Times, 5/12).

Background

In January, Brown released the first draft of his $154.9 billion FY 2014-2015 budget proposal.

The proposal would allocate $670 million to expand Medi-Cal and would prevent health care providers in the state from having to repay a 10% retroactive cut in the program's reimbursements. Medi-Cal is California's Medicaid program.

Overall, the proposal would seek a 5% increase in spending from FY 2013-2014 (California Healthline, 1/9).

Details of Revised Budget

The revised budget includes more than $2 billion in additional spending over Brown's initial budget proposal.

The revised plan includes $1.2 billion in additional funding for Medi-Cal compared with the January budget plan, as well as higher spending on:

• Additional contributions to CalPERS;
• Additional staffing for the state's unemployment insurance program.
• Early childhood education;
• Emergency drought assistance; and
• Increasing In-Home Supportive Services' caseloads.

In a release, Brown said the revised budget "shows that California can afford to provide health care to many more people, while at the same time paying its debts and shoring up the long-troubled teachers' retirement system" (Office of the Governor release, 5/13). 

Details of Challenges

Brown previously urged lawmakers to be fiscally conservative, but the state's revenue has outpaced the governor's projections by nearly $2 billion, according to data from the Legislative Analyst's Office. Because of the surplus, Assembly Budget Chair Nancy Skinner (D-Berkeley) said holding funding back from social services "will be harder to justify" this year (Los Angeles Times, 5/12).

However, a summary of the revised budget states that spending on "health care, drought and other programs [has] increased by essentially the same amount" as revenue (Richman, San Jose Mercury News, 5/13). In addition, H.D. Palmer, deputy director for external affairs at the California Department of Finance, said, "While revenues have continued to improve, we continue to caution that they are one-time in nature" (AP/Sacramento Bee, 5/13).

Meanwhile, California officials had estimated that one million to two million additional residents would enroll in Medi-Cal through the end of 2014, but about 1.9 million consumers already had registered for the program by the end of March and an additional 900,000 applications are pending.

The state is responsible for paying half the cost of new Medi-Cal beneficiaries who qualified for the program before the Affordable Care Act went into effect. California Department of Health Care Services spokesperson Anthony Cava said the state still is determining how many of the new Medi-Cal beneficiaries were previously eligible.

Next Steps

The state Legislature is required to advance a budget plan by June 15.

Once the governor signs a plan passed by the Legislature, the new budget will go into effect on July 1 (Los Angeles Times, 5/12).

Rainy Day Fund Agreement

In related news, Brown last week announced an agreement with lawmakers to save up to 10% of the state's general fund for a reserve fund, the AP/Sacramento Bee reports. Under the agreement, some of the money would be used to pay off the state's debts and unfunded liabilities (AP/Sacramento Bee, 5/13).

Money will be deposited in the reserve fund when there are increases in the state's capital gains revenues. In addition, annual deposits also would be required under the plan.

The plan replaces a proposed November ballot measure for a rainy day fund (Office of the Governor release, 5/8).