State Officials Study Stimulus Funds, Weigh More Budget Cuts

At a Capitol hearing Tuesday, hospital officials and various advocacy groups urged California officials to account for money from the federal stimulus package in a way that lets the state scale back a tax increase and avoid deeper cuts to Medi-Cal and other services, the San Francisco Chronicle reports.

Medi-Cal is California's Medicaid program (Yi, San Francisco Chronicle, 3/18).

Under the budget agreement Gov. Arnold Schwarzenegger (R) signed in February, state Treasurer Bill Lockyer (D) and Finance Director Mike Genest have until April 1 to determine whether California will receive at least $10 billion in stimulus money that can be applied to the state general fund through mid-2010 (Zapler, San Jose Mercury News, 3/17).

If the state does not hit that threshold, personal income tax rates would increase by 0.25 percentage points and government services would be cut by an additional $948 million (Yamamura, Sacramento Bee, 3/18).

Of those cuts, at least $183.6 million would hit health care programs, in part by:

• Eliminating dental, podiatry and other services for some Medi-Cal beneficiaries; and
• Reducing reimbursements to public hospitals by 10% (San Francisco Chronicle, 3/18).

Early Estimates

A preliminary report from the state Department of Finance indicated that the state would be able to apply about $8.2 billion in stimulus money to the state general fund (Sacramento Bee, 3/18).

A report from the state's nonpartisan Legislative Analyst's Office reached a similar conclusion (Lin, AP/San Francisco Chronicle, 3/17).

In addition, Kurt Sjoberg -- a former state auditor who Lockyer hired as a private consultant on the matter -- said he did not disagree with the estimate (Sacramento Bee, 3/18).

However, critics maintain that Genest is interpreting the law too narrowly by not taking into account $4 billion in stimulus funds that could be applied to education and health care programs financed through the state general fund.

Genest said he could not count such funds toward the $10 billion mark unless the governor and Legislature appropriate them in that way (San Jose Mercury News, 3/17).

In addition, Beth Capell, a lobbyist for the Service Employees International Union, questioned why the federal Government Accountability Office estimated that California would receive more money for health care (Sacramento Bee, 3/18).

According to KQED's "Capital Notes," one of the most contentious issues of the hearing was how to account for stimulus funds for health care for low-income residents (Myers, "Capital Notes," KQED, 3/17).

Lockyer and Genest said they would not make a final decision until later in the month (Sacramento Bee, 3/18).

However, the Mercury News reports that Lockyer and Genest indicated that they expect the tax increases and service cuts will be needed.

Toward the end of the hearing, Lockyer raised the prospect of deeper cuts to safety net services if the tax increases are not allowed to proceed (San Jose Mercury News, 3/17).

What It Means for Ventura County