Resurgent Budget Deficit Could Result in More Health Care Cuts
California lawmakers might be forced to make deeper cuts to health care services and other programs to patch a newly projected $20.7 billion budget hole, the Sacramento Bee reports.
Legislative Analyst Mac Taylor released his budget projection on Wednesday (Yamamura, Sacramento Bee, 11/19).
Reasons for the Gap
Taylor's report suggests that the latest budget deficit has emerged because this summer's budget revision package did not achieve its projected revenue goals. For example:
- California did not meet its lower spending target for Medi-Cal, the state's Medicaid program; and
- Officials have yet to sell the State Compensation Insurance Fund for $1 billion (Robertson, Sacramento Business Journal, 11/18).
In addition, a federal judge earlier this week blocked a 10% scheduled Medi-Cal rate reduction for 21 hospitals.
The state also faces several legal challenges to various health and social services cuts and state employee furloughs. If the courts side against the state, California's deficit could grow even wider (Buchanan, San Francisco Chronicle, 11/19).
Plugging the Hole
Taylor's report suggests that California cannot reduce Medi-Cal or education funding during its upcoming budget round because the state accepted federal stimulus funds for the two programs (Small, "KPCC News," KPCC, 11/18).
California already is spending nearly the minimum amount required by the federal government for Medi-Cal and education, which account for more than half of the state's $84.6 billion general fund budget.
With Medi-Cal and education cuts off the table, state lawmakers might have to turn to other program cuts to patch the gaping budget shortfall.
For example, the Bee reports that Gov. Arnold Schwarzenegger (R) might pursue a previous proposal to eliminate or drastically reduce funding for Healthy Families, California's Children's Health Insurance Program.
Taylor suggested that lawmakers could pursue ballot initiatives to reclaim tax funds dedicated to mental health care and the First 5 early childhood health and education program. Voters rejected similar measures earlier this year.
Taylor also recommended that the state could pursue new revenue sources by ending certain tax breaks for businesses. Schwarzenegger on Wednesday said he does not intend to consider any new tax hikes.
Finally, Taylor said California could seek federal assistance to help mend its budget gap (Sacramento Bee, 11/19).
Schwarzenegger will need to present his fiscal year 2010-2011 budget proposal to the legislature by Jan. 10, 2010. His plan is likely to include cuts to health care services, education and prisons, according to the San Francisco Chronicle (San Francisco Chronicle, 11/19).
State Controller John Chiang (D) said the state might have difficulty making payments as early as next spring if state tax revenue falls below expected levels (Woo, Wall Street Journal, 11/19).
Even if the state succeeds in mending its latest budget gap, California will continue to face serious financial challenges in the coming years, according to Taylor's report.Taylor predicted that the state would face a $21.3 billion shortfall in FY 2011-2012 and a $23 billion deficit in FY 2012-2013 as temporary taxes expire and the state repays money it borrowed from local governments (Goldmacher, Los Angeles Times, 11/19). 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.