The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Disconnect: The Budget and Health Care Reform

Posted by Alan on November 9, 2007


Yesterday I posted comments on a George Skelton column in the Los Angeles Times that described the disconnect between the health care reform debate and the state’s escalating budget crisis. The gist of the article is that California faces a $10 billion budget deficit next year. Adding a $14 billion health care reform package is evidence of public officials in denial.

Aurelio Rojas in the Sacramento Bee makes a similar point today. What struck me, however, were the comments by lawmakers in response to the situation. Mr. Rojas reports Governor Arnold Schwarzenegger as believing “the deficit provides even more urgency for policymakers to agree on a fix for the 6.7 million Californians without health insurance. Doing so would allow policy makers to concentrate on managing the deficit next year without cutting health care ….”

He quotes Senate President Pro Tem Don Perata as saying, “‘We are entering into one of those dark periods in the California economy. We have to do this now and move it off the table to get our attention on the budget, which will dominate next year.'”

Maybe I’m missing something, but revenue for state services come from taxes and fees paid by California individuals and businesses. That’s it. OK, it comes from bonds and tourists, too. However, California taxpayers pay the interest on those bonds. And tourists create jobs and justify Disneyland, so we’ll give them a pass. So yes, I’m oversimplifying a bit, but it comes down to there being just one faucet to turn. Whether what flows out is designated to a particular purpose or used generally, there’s only so much water that’s going to come out of the thing. Water is water and there’s only so much of it. Taxes and fees are taxes and fees. There’s only so much it too, or at least only so much people will tolerate paying.

This reality doesn’t seem to have taken root in Sacramento. For instance, I’m fine with increasing the cigarette tax by $2.00 a pack to subsidize health insurance premiums as Democrats propose. I’m also able to acknowledge that this is money which won’t be available to clean-up the environment, educate our children or to fight crime. I recognize the trade-off involved. But then, I don’t work in Sacramento, which seems to be 96.3 square miles surrounded by reality.

This is a systemic problem in California. The Sacramento Bee article notes, “[S]ome budget experts say the practice of creating a funding stream for a particular program — a mechanism that has increased in California in the past two decades — eliminates money that could be used to shore up the state’s finances.” Put another way, the state is earmarking so much revenue for so many specific purposes, discretionary spending is rapidly dwindling. And discretionary spending is what can be cut when the state faces a $10 billion deficit.

The harm this causes to our residents is real. Consider this year’s infamous 52-day budget stalemate, which was over “just” $700 million in spending. To break the log jam approximately $66 million in funds targeted at enrolling some of the nearly 500,000 California children eligible for, but not enrolled in, Healthy Families was cut from the budget. Why? Because there weren’t a lot of other places to cut. (Granted, lawmakers could have cut out the deduction for people who buy yachts out-of-state, but then there wouldn’t have been a two-thirds vote to approve the budget).

Governing is about setting priorities. But by directing particular revenue sources to particular spending the state is handcuffing it’s future self. Those revenues won’t be available for other priorities.

To be fair, one aspect common to both the Governor’s and the Democratic Leadership’s health care reform plans might actually help the state’s economic situation. By increasing Medi-Cal reimbursements to doctors, hospitals and other providers the state will increase the amount of federal matching funds it receives. This would, presumably, result in a net gain for the state. Hopefully lawmakers can and would figure out a way to capture these federal dollars regardless of the fate of the rest of the reform package.

I’m all for the health care reform debate moving forward. It would just be nice to have people recognize the impact of what they’re deciding and justify it to their constituents.

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