Friday, 18 May 2012 00:00
State Budget Update - May Revision
On Monday, Governor Brown released the May Revision to his 2012-13 state budget. Setting the tone for what is to come, Governor Brown said "I would urge a modicum of stoicism, and less of indulging your propensity to immediate gratification.” The revised budget proposes cuts far deeper than those in his January budget. It increases cuts by $4.1 billion, bringing total cuts to state employee compensation, welfare, health care, higher education, courts, and other government programs to $8.3 billion to close a now projected $15.7 billion deficit. Noting that the economic recovery is proceeding more slowly than anticipated, the Governor stated the painful budget cuts are a necessary result of lower tax revenues, coupled with federal government actions that have blocked $1.7 billion in cuts, making a deeper budget hole. The revised May budget cuts spending in almost every part of government, but includes a proposed a 16 percent increase in funding for K-12 education, subject to voters approving his November 2012 ballot initiative.
The Legislative Analyst Office (LAO) also released its update of the state revenue picture, finding that the state General Fund revenue forecasts are now fairly similar (a few hundred million dollars of bottom-line difference) to the Governor’s estimates.
The Governor’s May Revision proposes additional cuts to health and human services. Attached is a summary of the proposed health-related reductions affecting hospitals. Starting on Monday, the both the Senate and Assembly Budget subcommittees on Health and Human Services will begin its hearings on the Governor’s revised budget.
Friday, May 11, 2012
State Revenues and May Revise - Expect More CutsThis week, state controller John Chiang released his monthly report covering California's cash balance, receipts and disbursements in April, showing monthly revenues came in $2.44 billion below the latest projections contained in the Governor's proposed 2012-13 budget. The largest variance came from personal income tax, which came in almost $2 billion lower than anticipated. Sales and use tax, and corporate taxes accounted for the rest.
To date, total General Fund revenues were $3.5 billion lower than expected by this point in the year. The state ended last fiscal year with a cash deficit of $8.2 billion. The combined current-year cash deficit stands at $19.2 billion. Those deficits are being covered with $12.8 billion of internal borrowing (temporary loans from special funds) and $6.4 billion of external borrowing.
Next Monday, Governor Brown will release his May Revision that will certainly include additional, serious cuts to the budget he proposed in January given the current revenue projections. The state’s nonpartisan Legislative Analyst estimates the pending budget shortfall to exceed by $3.5 billion the Governor’s January 2012 estimate of $9.2 billion. The Governor’s May Revise will include revenue and shortfall estimates from the Department of Finance. It is anticipated that legislative leaders will likely make the lesser of the two estimates the number to solve for in the 2012-13 budget. Word around the Capitol is that the Governor is contacting the various stakeholder groups, including health care/hospitals and state employee unions, to ask for more spending reductions. It is expected that while there will be meetings and budget negotiations over the next several weeks between the Governor and legislative leaders to get a budget deal by the June 15th deadline, expect no public action in the Legislature until after the June 5th primary elections.
Meanwhile, on Thursday the Governor began submitting signatures to county elections officials to qualify his tax measure for the November ballot. The Governor has said this measure will generate about $9 billion a year with an increase in the state sales tax for four years and an increase on incomes of more than $250,000 through 2018. Of course, if voters do not approve the proposed tax increase in November 2012, then the budget shortfall number will take a big jump.
Friday, May 4, 2012
CHA and SEIU-UHW Announce Agreement
On May 2 the California Hospital Association (CHA) and SEIU-United Healthcare Workers – West (SEIU-UHW) reached an agreement dealing with the future of health care in California. Click here for CHA’s memorandum to its members announcing the agreement, a joint CHA/SEIU Media Statement, and the signed agreement. As noted in the documents furnished by CHA, the agreement resulted in SEIU’s decision not to submit signatures to qualify the charity care and hospital pricing initiative for the November 2012 ballot.
On a related note, see the attached article from Forbes published on April 30. The actions taken and legislation proposed in Illinois to revoke the property tax exemption of nonprofit hospitals has nationwide implications — especially for states looking for revenues to address large structural budget deficits.
Friday, March 30, 2012
Supreme Court Hears Challenges to Health Reform
This week, the U.S. Supreme Court heard six hours of oral arguments challenging key elements of the Patient Protection and Affordable Care Act. Twenty-six (26) states and the National Federation of Independent Businesses have challenged the constitutionality of the health reform law.
Day One: The Anti-Inunction Act. The Justices considered whether this case is even ripe for deciding. Some lower court judges have said that the penalty paid for not having insurance is the same as a tax and, under the federal Anti-Injunction Act, cannot be challenged until someone has to pay it in 2015. Neither side wanted to argue this issue because they believed if did not apply. The high court appointed a "friend of the court" lawyer to make arguments. By all reports of the questioning, it appears that the Justices seemed supportive of the idea that they can rule on the law now, rather than defer judgment until after its penalties take effect.
Day Two: The Individual Mandate. The Justices considered the constitutionality of the health reform law's individual mandate, which require people not covered by group plans to buy government-approved health insurance by 2014 or pay a penalty. By most reports, the state's attorney appeared to have strong arguments to strike the individual mandate from the health reform law arguing that the mandate "represents an unprecedented effort by Congress to compel individuals to enter commerce in order to better regulate commerce," which mirrored a line of questioning by one Justice when he asked whether Congress can create commerce in order to regulate it.
Day Three: Severability. If the high court strikes down the individual mandate or the Medicaid provisions (see below), the Justices considered whether the voided provision(s) can be separated from the rest of the health reform law. If some cannot be separated, then some or all other provisions may be null and void. It was reported that those on both sides of the issue raised concerns whether some of the other provisions (such as requiring insurers to cover people with pre-existing conditions or how insurers set rates) can survive absent the individual mandate. The Justices appeared to be divided, however, on how far to go in striking other provisions or the entire reform law if the individual mandate is struck down. Some Justices questioned whether it would be best for Congress to decide what provisions of the health reform law could remain in tact absent an individual mandate, while other Justices suggested that it would be better to strike the entire law and let Congress start anew. While another Justice suggested that these issues could be remanded to the lower courts.
Medicaid Expansion. And finally, the Justices considered whether Congress improperly coerced states to expand Medicaid. The health reform law requires states to extend Medicaid coverage to people with incomes up to 133 percent of the federal poverty level in order for states to keep their federal matching Medicaid funds. Some states have argued that this requirement leaves them no choice but to expand Medicaid or face the possibility of risking the loss of all of their Medicaid matching funding.
The Justices are expected to rule sometime in late June. Based on the arguments put forth this week, the Supreme Court decision has several possible outcomes, which may include: 1) uphold the entire health reform law; strike down the entire health reform law; strike down just the individual mandate; strike down the individual mandate and other provisions linked to it; strike down the Medicaid expansion; or, (unlikely) decide that the Anti-Injunction Act prevents a ruling at this time.
