Latest Schwarzenegger Budget Plan Calls for Cuts to Health Care

On Wednesday, finance aides to Gov. Arnold Schwarzenegger (R) released his latest proposal to address the state's budget deficit in part by cutting funds for Medi-Cal and other health care programs, the Sacramento Bee reports (Yamamura/Wiegand, Sacramento Bee, 1/1). Medi-Cal is California's Medicaid program.

The plan aims to close the $40 billion budget deficit that the state is projected to face over the next 18 months and provide a $2 billion reserve.  Schwarzenegger's plan calls for borrowing, tax increases and spending cuts.

Medi-Cal Cuts

Schwarzenegger proposed cutting $744.2 million from Medi-Cal spending by:

• Eliminating coverage for dental, psychological, optometry and other services;
• Limiting benefits for some documented immigrants;
• Increasing the income eligibility requirements to pre-2000 levels;
• Reducing hospital reimbursement rates by 10%; and
• Scaling back increases for county-based administration of Medi-Cal services (Sacramento Bee, 1/1).

The proposed cuts to Medi-Cal come as President-elect Barack Obama's administration considers increasing federal matching funds to states for Medicaid as part of an economic stimulus package.  Schwarzenegger's proposed cuts would reduce the amount of federal funding that California could receive (Zapler, San Jose Mercury News, 12/31).

Prop. 63, First 5

The governor's most recent proposal also adopts elements of Republican lawmakers' budget proposal, notably a plan to ask Californians to approve reallocating funds for mental health services and early childhood health care and education programs to the state general fund (Yamamura, Sacramento Bee, 1/1).

In 2004, California voters approved Proposition 63 to increase the state income tax on residents whose annual incomes exceed $1 million to fund mental health services.

In 1998, voters approved Proposition 10, which increased the state tobacco tax to help fund early childhood health care and education programs (California Healthline, 12/17).

Schwarzenegger proposed:

• Shifting Proposition 63 funds for mental health services to mental health managed care services. Schwarzenegger estimates that the proposal would save the state $226 million (Sacramento Bee, 1/1); and 
• Eliminating the state First 5 Commission and shifting its funds to the state general fund for children's programs.  The move also would shift half of the funds currently held by 58 county First 5 commissions to the state general fund.  The governor projects that the plan would save the state $275 million.

Both plans would require voter approval, likely in a special election that the governor could call this year (Yi et al., San Francisco Chronicle, 1/1).

Regarding the plan to shift Proposition 63 funds, Senate President Pro Tempore Darrell Steinberg (D-Sacramento) said, "That is a nonstarter for me."

Steinberg was an author of the 2004 ballot measure (Rau/McGreevy, Los Angeles Times, 1/1).

Other Health Care Cuts

Schwarzenegger called for:

• Decreasing state payments for In-Home Supportive Services health workers to the minimum wage, restricting eligibility for IHSS, increasing IHSS fees for some people and eliminating cost-of-living adjustments due in June 2010 to save $473 million;
• Cutting $422.8 million from the Department of Developmental Services, which provides services for people with developmental disabilities (Sacramento Bee, 1/1);
• Reducing funding from court-appointed prison medical receiver J. Clark Kelso's programs by $180 million (Furillo, Sacramento Bee, 1/2); and
• Eliminating caps for monthly fees for residents of state veterans' homes to save an estimated $2.8 million annually (Schultz, Fresno Bee, 1/2).

Changes in Health Care Coverage for State Workers

The Schwarzenegger administration also proposes shifting responsibility for contracting for health insurance benefits for about 560,000 state workers and their families from CalPERS to the state.  The governor estimates that contracting directly with insurers would save the state about $132 million.

Representatives of at least two state workers unions have spoken out against the proposal (Ortiz, Sacramento Bee, 1/1).

Government Reorganization

As part of his budget proposal, Schwarzenegger also has revisited elements of a 2004 plan to reorganize state government, in part by consolidating, realigning or eliminating some boards, commissions and programs, according to the Bee. 

The 17 proposals Schwarzenegger put forward include a plan to consolidate the state Hearing Aid Dispensers Bureau with the Speech-Language Pathology and Audiology Board (Wiegand, Sacramento Bee, 1/2).

Revenue Anticipation Warrant

Schwarzenegger's calls for new revenue and spending cuts fall short of the budget deficit by about $5 billion.  The governor proposes covering the remaining budget gap by selling a revenue anticipation warrant in July.

The warrant would not have to be repaid until fiscal year 2010-2011 (San Francisco Chronicle, 1/1).

What Comes Next

This week, Schwarzenegger plans to submit his official budget language to the legislature (Sacramento Bee, 1/1).

Broadcast Coverage

KQED's "The California Report" included a discussion of the governor's budget proposal on Thursday (Shafer, "The California Report," KQED, 1/1).

Capital Public Radio's "KXJZ News" reported on health care cuts in Schwarzenegger's latest spending proposal (Weiss, "KXJZ News," Capital Public Radio, accessed 1/2).