California Capitol Report, March 2003

CAPITOL REPORT March 2003 NATIONAL COUNCIL OF LA RAZA

CALIFORNIA BUDGET UPDATE Governor Davis Attempts to Balance a $34.6 Billion Deficit Governor Gray Davis released his 2003­2004 budget proposal on January 10. Facing a $34.6 billion shortfall, the Governor proposes a budget that relies heavily on program reductions and elimination of services, and though revenue increases are introduced in the plan, they are minute in comparison to the slashing of vital health and education programs that serve the Latino community, as outlined below.

The budget outlines $20.7 billion in reductions and savings, $1.9 billion in fund shifts, $2.1 billion in transfers and revenues, $1.6 billion in loans and borrowing, and $8.3 billion in revenue enhancements. Key components of the Governor’s proposal include realignment of health and social services programs, tax enhancement proposals, rejection of the vehicle license fee backfill, and major health and education cuts.

(Please see attached report issued by the California Budget Project for more detailed information on the Governor’s proposal.)

Note: Changes are expected as the Governor’s proposal is reviewed by the legislature.

I. Realignment and Revenue Increases–Governor Davis is proposing for counties to take over the financial responsibility of key health and social services programs which would result a savings of $8.3 billion from state general funding. Davis is proposing that the programs will be funded through his proposed tax increases. The proceeds from his proposed tax increases will be deposited into a special account and allocated to counties to fund the programs. However, Governor Davis did not propose how local government will administer these programs, how programs will be funded prior to availability of tax revenues, nor how funding will be made available to programs as demand for services increase in the coming years.

The tax increases expected to fund the realigned health and social services programs are: • Increase state sales tax by $0.01 ($4.58 billion) • Raise the top income tax bracket to 11% ($2.58 billion) • Increase cigarette tax from $0.87 to $1.10 ($1.17 billion) II. Vehicle License Fee Backfill (VLF)–When the legislature reduced the vehicle license fee, the state compensated for that reduction by reimbursing counties with state general funds. The counties were able to use the funding for their own general purposes. Now, Governor Davis is proposing not to reimburse counties. For more information on the vehicle license fee proposal, go to www.csac.counties.org and click on “State Budget News.” This website lists services for which counties use their VLF backfill funding.

NCLR SACRAMENTO OFFICE ♦ 926 J STREET, SUITE 701 SACRAMENTO, CA 95814 PHONE (916) 448­9852 ♦ FAX (916) 448­9823

III. Health Cuts–The Department of Health and Human Services received the greatest cut, with 34% of the Department’s budget reduced. Major cuts were made to programs that provide health services to low­income and working families and adults. While efforts have been focused on reducing barriers to enroll families and children, Governor Davis’ budget proposal presents more obstacles for Latino families to access and receive preventive health care. Efforts should be focused on reducing barriers to enrollment for children, thereby saving the state costly emergency room visits and preventing children from falling behind in school due to health problems.

Significant changes to health care funding include: •

Rescission of the 1931 (b) to newly­applying working parents. 1931 (b) is the primary Medi­Cal program providing free health coverage for low­income families. Today, families can receive free 1931(b) Medi­Cal if their incomes are under 100% of the federal poverty level (FPL), which is $15,020 for a family of three. Governor Davis’ budget proposal would lower the eligibility level to 61% of the FLP for new applicants, which is $9,162 for a family of three.

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Reinstatement of the Quarterly Status Report for adults receiving Medi­Cal. Medi­Cal recipients would be required to file a report every three months to prove they still qualify for Medi­Cal. Currently, Medi­Cal recipients must submit a report annually and are considered eligible unless the county provides proof that they are not eligible, which is based on the report submitted. Under Davis’ budget proposal, families would be required to submit a report every three months through mail. If they do not send their report, if the county loses the report, or if the report is incomplete, applicants would automatically be ineligible for Medi­Cal. It is estimated that this would reduce the number of adults receiving Medi­Cal by 193,000 in 2003­2004. Studies have shown that burdensome paperwork prevents families and individuals from applying to services even though they are eligible.

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Elimination of eighteen (18) Optional Benefits under Medi­Cal, including dental coverage, psychiatric, chiropractic, acupuncture, podiatric services, rehabilitation therapy, occupational therapy, medical supplies, nonemergency medical transportation, hospice care, optician and optical lab services, durable medical equipment, optometry, hearing aids, prosthetics, speech and audiology services, orthotics, and physical therapy.

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A 15% rate reduction to Medi­Cal Providers, including doctors, nursing homes, and HMOs. This will result in less Medi­Cal patients receiving services since less health care providers will take part in the system due to low Medi­Cal reimbursement rates.

IV. Education Cuts–The Governor’s plan to balance the budget places a dangerous and undue burden on the students in California who face the greatest obstacles to participation and success. Additionally, the proposed cuts will place California schools at risk of failing to meet the rigorous requirements of the federal No Child Left Behind (NCLB) Act. Schools, districts, and the state will be held responsible for helping these students meet adequate yearly progress goals. In the haste to balance a budget for the current and upcoming year, the state will potentially lose federal money that would alleviate the state’s burgeoning educational system in the future.

NCLR SACRAMENTO OFFICE ♦ 926 J STREET, SUITE 701 SACRAMENTO, CA 95814 PHONE (916) 448­9852 ♦ FAX (916) 448­9823

Significant changes to education funding include: •

Reductions to K­12 programs by 7.46% for most Proposition 98 categorical programs in the current year (excluding Supplemental Instruction, Special Education, Preschool, and Nutrition).

This reduction is in addition to a December proposal to cut programs across the board by a 3.66% reduction to the General Fund portion of all Proposition 98 programs, a proposal which thus far has been rejected by the legislature.

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Consolidation of 64 categorical programs into a $5.1 billion block grant. Included in this block grant would be Economic Impact Aid (EIA) funding, which is the only state funding source specifically distributed pursuant to the number of Limited English Proficient (LEP) students enrolled in each district. This consolidation could eliminate parent advisory committees and erase long­standing protections for English Language Learner (ELL) students.

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Increases in student fees for postsecondary education. The budget proposes to raise fees at the California Community Colleges (CCC) from $11 to $24 per unit, and anticipates that the University of California (UC) and California State University (CSU) will further increase their fees to offset General Fund reductions, which may affect direct instruction.

If you would like additional information about the Governor’s budget proposal, please contact the Sacramento Policy Office: (916) 448­9852. You may also contact the California Policy Analysts via email: Cristina Huezo (chuezo@nclr.org) or Patricia Diaz (pdiaz@nclr.org).

NCLR SACRAMENTO OFFICE ♦ 926 J STREET, SUITE 701 SACRAMENTO, CA 95814 PHONE (916) 448­9852 ♦ FAX (916) 448­9823