When Gov. Brown released his May Revise budget proposal based on new revenue projections on May 14, the projected revenue shortfall had grown from an estimated $9.2 billion in January to $15.7 billion, largely attributed to three causes:
• Decreased state tax revenues,
• Increased spending on programs due to rejections of previously approved cuts by the federal government and courts, and
• Increased costs for schools.
Budget solutions total $16.7 billion, including $8.3 billion in program changes and reductions, $5.9 billion in new revenues through a ballot initiative, and $2.5 billion in fund shifts and other measures.
These solutions will close the gap and create a $1 billion reserve.
As in Gov. Brown’s original budget proposal, the May Revise assumes new revenues for education and guaranteed funding for counties through voter approval of the Schools and Local Public Safety Protection Act of 2012 (see Health Matters April edition) in the November elections. The Schools and Local Public Safety Protection Act would raise an estimated $8.5 billion in FYs 2011-2013 through personal income tax increases on the wealthiest Californians and a state sales tax increase of one penny for every four dollars for all residents. If voters do not approve new revenues, $6.1 billion in additional cuts to K-12 schools, higher education, public safety and state parks will take effect Jan. 1.
Cuts, Fees, and Program Changes
The May Revise budget includes a total of $103.9 billion in funding for health and human service agencies and programs. This includes significant cuts to hospital and nursing home providers in the Medi-Cal program. Additionally, reductions were made to community-based social services, such as the In-Home Supportive Services program. Some savings come from readjusting population and service utilization estimates. Others are more concrete cuts. The dollar amounts below are for 2012-2013 and 2013-2014 budget years combined, unless otherwise specified.
Readjustments
• Assumes that Medicare and Medi-Cal hospital admissions and nursing home stays will be reduced through the Coordinated Care Initiative and use of community and other services like In-Home Supportive Services ($1.5 billion).
• Reduces Medi-Cal funding by $200 million in FY 2011-12 and $700 million in FY 2012-2013 based on decreased caseload projections ($900 million).
• Estimates a decreased population to help meet an operational shortfall in the department of state hospitals ($21 million).
• Reduces supplemental payments to hospitals and eliminates public hospital grants ($225 million).
• Institutes co-payments for Medi-Cal beneficiaries to $15 for non-emergency room visits and $1-$3 for certain prescription drugs ($202.2 million in FY 2012-13).
• Splits unspent funds from the 1115 Medicaid Waiver program between the hospital and the general fund where previously they rolled over into the next year ($109 million).
• Changes non-designated public hospital reimbursements to align with designated public hospital payments ($75 million in FY 2012-2013).
• Rescinds previously approved 2.4 percent rate increases for nursing homes and appropriates a 1 percent reserve for supplemental payments to the general fund ($70.9 million in 2012-2013 budget year only) .
• Assumes $40 million from the First 5 California Children and Families Commission goes to programs serving children from birth through age five resulting in a Medi-Cal General Fund decrease ($40 million).
Program Changes
• Phases in long-term care services based on the expansion of managed care to all counties starting in March 2013.
• Maintains the proposal to transition children from the Healthy Families program to Medi-Cal over nine months, starting in October ($48.6 million).
• Delays the transition to a new diagnosis-related group based payment methodology for hospitals by six months, from next Jan. 1 to July 1, 2013 (no savings estimated).
The budget also assumes a number of legal outcomes. Although CMS denied the state’s attempts to implement co-pays for Medi-Cal, the May Revise assumes that more targeted co-pays will be approved. The budget also puts sufficient money aside in case it does not win a separate lawsuit over provider cuts.
Lawmakers have until June 15 to pass a balanced budget. The Assembly and Senate Budget Subcommittees are likely to delve into budget negotiations the week of June 6.
The California State Assembly and Senate Budget subcommittees have posted their hearing schedules.
Community Health Councils will continue to monitor and provide updates on the state budget. For more information, contact CHC Policy Director Sonya Vasquez.
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Ms. Taylor, of Community Health Councils, may be contacted at janice@chc-inc.org
