Budget Signed; Line-Item Vetoes Take Heavy Toll on Health Care

On Tuesday, Gov. Arnold Schwarzenegger (R) eliminated $489 million in state funding for programs using line-item vetoes and signed a budget revision aimed at addressing California's budget deficit, the Los Angeles Times reports (Rothfeld/Goldmacher, Los Angeles Times, 7/28).

The governor said the line-item vetoes were needed to provide a reserve fund for the state after the Assembly rejected two elements of the budget package that would have yielded about $1.1 billion next year (Joseph, Orange County Register, 7/28).

Line-Item Vetoes

The budget agreement approved by the Legislature cut state funding for health care programs by about $1.6 billion (California Healthline, 7/28).  The line-item vetoes impose deeper cuts to the programs. Cuts are summarized below.

• Medi-Cal: Schwarzenegger's line-item veto cuts $60.5 million in funding for counties to cover the cost of administering Medi-Cal, California's Medicaid program (Zapler, San Jose Mercury News, 7/28). The Legislature approved $1.3 billion in cuts to Medi-Cal (California Healthline, 7/27).
• Healthy Families: California's Children's Health Insurance Program stands to lose another $50 million under the governor's line-item vetoes.  Together with cuts the Legislature approved, Healthy Families stands to lose $178.6 million in state funding (Miller, Riverside Press-Enterprise, 7/28).
• Office of AIDS Prevention and Treatment: Schwarzenegger's $52 million line-item veto of funding for the agency will eliminate state funding for HIV/AIDS prevention, education and housing for HIV-positive people.  The state will continue to provide funding for medications and efforts to monitor the disease.  The Legislature did not cut funding to the agency in budget bills it approved.
• Department of Aging: The governor's line-item vetoes will cut $6.2 million by eliminating funding for two programs aimed at helping seniors and people with disabilities continue to live in their own homes, rather than in nursing homes.
• Department of Mental Health: The agency's Caregiver Resource Centers program will lose $4 million under the line-item vetoes.  The effort is targeted at family members who care for people with Alzheimer's disease and other forms of dementia (Buchanan, San Francisco Chronicle, 7/29).

According to the Sacramento Business Journal, the governor's line-item vetoes appear to eliminate state funding for traditional clinic programs.

Tim Lynn, budget manager for employee compensation in the Department of Finance, said the line-item vetoes also cut $55 million that would have gone to 150 state agencies to cover the cost of an average 2.9% increase in employees' health care premiums.  Lynn said the agencies cannot cut pay or benefits so the money will have to be shifted from other initiatives (Robertson, Sacramento Business Journal, 7/28).

Outlook for Medi-Cal

The cuts to Medi-Cal rely on about $1 billion in federal waivers to reduce coverage and payments for services that the federal government would cover through Medicare.

Andrew LaMar, a spokesperson for the California Medical Association, said the federal government has resisted previous attempts by California to shift Medi-Cal costs to the federal government.

However, Finance Department spokesperson H.D. Palmer said Schwarzenegger administration officials have had "productive conversations" with HHS Secretary Kathleen Sebelius on the matter (Yamamura, Sacramento Bee, 7/29).

Implications for Healthy Families

Advocates say the cuts to Healthy Families could result in more than 580,000 children who currently are enrolled in the program being dropped from its rolls.  Wait lists could prevent another 335,000 children from receiving coverage, according to advocates, who estimate that the drop in funding will result in the number of uninsured children in California roughly doubling (San Jose Mercury News, 7/28).

According to the Sacramento Bee, how many kids are affected will ultimately depend on decisions by the Managed Risk Medical Insurance Board, which administers Healthy Families. MRMIB is scheduled to meet tomorrow to evaluate its options.

Staff members have recommended beginning to disenroll tens of thousands of children from the program each month starting in the fall (Wiegand, Sacramento Bee, 7/29).

Aides to the governor have said they hope California's First 5 program will help mitigate the state funding cuts to Healthy Families.  First 5 administers proceeds of a state tobacco tax increase, funding early childhood health care and education programs (San Jose Mercury News, 7/28).

Advocates React

Kelly Hardy of Children Now said, "This really puts California in the backwater of children's health coverage.  Other states are moving forward, and we're moving backward" (Russ, "KXJZ News," Capital Public Radio, 7/28).

Michael Weinstein, president of the AIDS Healthcare Foundation, said, "The governor's heartless act is not only deadly, but guaranteed to cost California taxpayers millions more in the future" (Lin, AP/San Diego Union-Tribune, 7/28).

Mark Cloutier, executive director of the San Francisco AIDS Foundation, said the cuts to HIV/AIDS programs will lead to more infections (San Francisco Chronicle, 7/29).

Carmela Castellano-Garcia -- president and CEO of the California Primary Care Association, which represents clinics -- said, "At a time when clinics and health centers are seeing up to a 50% increase in the uninsured patients walking through their doors and are working so hard to keep people out of our emergency rooms, the governor's action is just plain thoughtless and irresponsible" (Sacramento Business Journal, 7/28).

Legality Questioned

In a statement, Senate President Pro Tempore Darrell Steinberg (D-Sacramento) questioned the legality of some of the line-item vetoes and said, "We will fight to restore every dollar of additional cuts to health and human services" (San Jose Mercury News, 7/28).

Steinberg said the budget package is not subject to line-item vetoes because it is a revision of an existing budget, not a new appropriation (Wiegand, Sacramento Bee, 7/29).

Steinberg said, "The governor has the right to blue pencil an appropriation.  The funding levels in the budget revision in many cases are not new appropriations." He added, "This is not the last word" (Sacramento Business Journal, 7/28).

Assembly Speaker Karen Bass (D-Los Angeles) announced that she has asked the nonpartisan Legislative Counsel for an opinion on the matter (Steinhauer, New York Times, 7/29).

Aides to the governor said the line-item vetoes are legal (Schultz, Fresno Bee, 7/28).

Broadcast Coverage

On Tuesday, Schwarzenegger Press Secretary Aaron McLear discussed the budget in an appearance on KPCC's "Patt Morrison" (Morrison, "Patt Morrison," KPCC, 7/28).