Budget To Face Strain as Stimulus Funds Run Dry, Health Reform Starts Up
California's budget is likely to face dual pressures from the tapering of the 2009 federal economic stimulus package and the implementation of the federal health reform law, "California Watch Blog" reports.
Last week, the Legislative Analyst's Office released a report projecting that California would face a $25.4 billion deficit over the next 18 months.
Stimulus Funds Running Out
The LAO report noted that California will have used up roughly $4.5 billion in federal stimulus funding by the end of the next budget cycle. Stimulus funding has helped the state reduce general fund spending and expand Medi-Cal, California's Medicaid program.
The stimulus package raised the federal government's Medi-Cal matching rate from 50% to 62%. To obtain the higher federal match, California expanded Medi-Cal to residents who previously earned too much to qualify for the program.
Although the higher federal matching rate is slated to go back down next year, California likely will maintain the broader Medi-Cal eligibility requirements to comply with provisions of the health reform law.
Reform Law To Require Resources
The LAO report states that there is significant uncertainty about how the reform law will affect California's budget. However, it notes that the reform law's expansion of Medicaid eligibility could create costs for the state (Jewett, "California Watch Blog," 11/15).
Although the federal government will provide funding to help states expand their Medicaid programs, states still will need to provide the staffing and resources to run the programs (Colliver, San Francisco Chronicle, 11/13).
In addition, the ongoing recession might drive more residents to enroll in Medi-Cal, according to the LAO report. The report also notes that an overall growth in health care costs could place additional strain on California's budget ("California Watch Blog," 11/15).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.