Legislative Hearing Frames Looming Impact of Federal Cuts

Edwin Park was not exactly a ray of sunshine.

The policy expert from Washington, D.C., testified recently at an Assembly budget subcommittee hearing in Sacramento on the effects of impending federal budget cuts to California.

“The major Medicaid proposals [being considered] would substantially shift cost to the states,” Park said. “Some Medicare savings would also shift cost to the states. And states like California will have to compensate for these cuts.”

The numbers for that national deficit reduction plan are huge, according to Park, who is vice president of health policy for the D.C.-based Center on Budget and Policy Priorities. The congressional “super committee” has until Nov. 23 to come up with a $1.2 trillion deficit-reduction plan for the next decade. That plan would need to be approved by Congress and President Obama by Dec. 23.

If the committee can’t come up with a plan to increase revenues and cut spending, or if that plan is not approved, then the cuts would be made automatically, Park said, in the process known as sequestration.

In the event of sequestration, Park said, the first-year wave of cuts will hit states beginning in January of 2013 — likely totaling $110 billion the first year, he said.

Half of those cuts would hit defense spending, and the remaining $55 billion would come from discretionary and entitlement programs — such as Medicare.

“Reductions in Medicare payments to providers and insurance plans would be limited to 2% of such payments in any year,” Park said, “so that alone is approximately $10.8 billion in 2013.”

According to Jean Ross of the California Budget Project, a public policy research group in Sacramento, the state is projected to lose about $1.5 billion over 10 years — but that number climbs steeply if the automatic cuts kick in.

“When you look at the cuts required by sequestration,” Ross said, “you’re looking at a loss of about $3 to $4 billion. So this would have a significant impact on California.”

Ross ticked off the list of public services that are likely to lose money under that scenario — schools, housing starts, economic development, unemployment assistance and most public health programs including substance abuse and mental health block grants.

“Virtually everything that touches the state budget would be affected,” Ross said. “We are looking at reductions in the WIC [Women, Infants and Children] program, Head Start, Early Start, and at the other end of life, we’re looking at programs that affect the elderly.”

Special education cuts will be felt particularly keenly, she said, because the federal mandate for special ed would remain in place.

“I can give a couple of examples to bring these huge numbers down to the California level,” Ross said. “If you look at the potential losses from sequestration, you’re looking at 135,000 fewer people in the WIC program, many of them young children. The Head Start program plays an anchor role in lower-income communities, and we’re looking at 10,000 fewer children going there.”

The solution, both Park and Ross said, lies in the work of the super committee. If it can cobble together revenue sources and less-damaging cuts to submit a viable plan by Nov. 23, that could mitigate the severe damage they see coming to California with federal sequestration.

“At a time when our economy remains mired in what’s now being called a weak recovery,” Ross said, “this is a big impact. On top of the [health care safety net] cuts California has already made, this will certainly hurt people.”

Subcommittee chair Holly Mitchell (D-Los Angeles) said the state can make its voice heard by outlining all of the concerns in writing. “We want to develop recommendations,” Mitchell said, “and forward them to our members in Congress.”

Assembly member Mariko Yamada (D-Davis), who sat in on the subcommittee hearing, said now is the time to speak up.

“While we wait to see what’s going to happen at the federal level, we need to articulate what our priorities are, and take those recommendations to Washington,” Yamada said. “It’s a cold winter ahead if we don’t make our voices heard.”

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