New Budget Agreement Cuts Children’s Health Care
Three Tax Measures Make November Ballot
Tobacco Tax Goes Up in Smoke
Governor Brown is slowly steering a sinking ship afloat, wringing fiscal reforms from the State’s budget using an equal measure of cuts and tax hikes to reign in a $15.7 billion deficit. Here’s the snapshot synopsis of where we’re at now.
On Thursday, Governor Jerry Brown and Democratic legislators announced a fiscal year 2012-2013 budget deal that would shift children out of the state’s Children’s Health Insurance Program and reduce spending on its welfare-to-work program, the Sacramento Bee reported. On Wednesday, three tax measures qualified for the November ballot taking aim at the State’s wealthiest residents.
The deal comes about a week after legislative Democrats sent Brown a $92.1 billion state spending plan that aimed to avoid deep cuts to safety-net programs for low-income residents.
Details of the New Budget
The new budget deal would:
- Eliminate Healthy Families — California’s CHIP — and move the 880,000 children enrolled in the program to Medi-Cal, California’s Medicaid program;
- Reduce state child care assistance by 8.7%, which would reduce the number of slots available to low-income families by 10,600;
- Phase in a two-year time limit for new beneficiaries to find work under CalWORKs, the state’s welfare-to-work program; and
- Require higher graduation rates for colleges and universities to qualify for state college aid and reduce financial aid to college students.
Brown dropped his proposal to cut In-Home Supportive Services workers’ hours by 7%. Instead, lawmakers agreed to keep a 3.6% cut that is already in place.
Overall, the new budget agreement involves a slightly lower spending level than the $92.1 billion general fund plan that legislators approved last week.
The deal relies on voters approving a compromise tax hike initiative supported by Brown that would raise sales and income taxes on high-income residents. If the ballot measure is not approved, deeper budget cuts could be triggered and the public school year could be cut by as much as three weeks.
Governor Brown in a statement said, “This agreement strongly positions the state to withstand the economic challenges and uncertainties ahead.” He added, “We have restructured and downsized our prison system, moved government closer to the people, and made billions in difficult cuts. Now the legislature is poised to make even more difficult cuts and permanently reform welfare.”
Senate President Pro Tempore Darrell Steinberg (D-Sacramento) said Democratic legislators “were able to find middle ground with the governor that we believe minimizes the impact on people in need, while at the same time assures significant ongoing savings. If we pass those taxes in November we will be in a new chapter.”
Republican lawmakers expressed frustration that they were not included in the budget negotiations and that there will not be much time to evaluate the plan before lawmakers vote on it next week. Assembly member Martin Garrick (R-Solana Beach) said, “I am outraged that I am not able to effectively review the details of the budget plan that I am expected to vote on,” adding, “The lack of transparency with this budget is embarrassing to our state and our democracy.”
Welfare reform advocates praised the Governor’s position to make health care more efficient. Doctors and advocates for families in the Healthy Families program, however, believe the move would limit access to care. Currently, a family of four can make up to $30,000 a year and qualify for Medi-Cal while the same family could qualify for Healthy Families having an income of up to $56,000. Doctors and health providers receive a higher reimbursement rate from Healthy Families than than they do from Medi-Cal.
The Next Step
The Senate and Assembly are scheduled to hold votes on the budget deal next week.
Brown is expected to sign the set of budget bills in time for the July 1 start of the new fiscal year.
Three Competing Tax Measures Qualify for November Ballot
On Wednesday, three tax measures officially qualified for the November ballot.
The tax ballot measures include:
- A compromise tax hike plan — developed by Gov. Jerry Brown (D) and supporters of the “Millionaires Tax;”
- A tax increase proposal by attorney Molly Munger; and
- A tax initiative by hedge fund manager Tom Steyer.
Details of Brown’s Compromise Tax Hike Plan
The compromise tax hike plan would:
- Increase the personal income tax by one percentage point for individuals who earn $250,000 annually or couples who earn $500,000 annually, and by two percentage points for individuals who earn $300,000 annually or couples who earn $600,000 annually;
- Extend the income tax increases on wealthy residents from five to seven years; and
- Increase the sales tax by a quarter of a cent.
The sales tax hike would expire in four years.
The proposal would raise an estimated $9 billion over the next fiscal year.
The compromise tax hike measure has been incorporated into a fiscal year 2012-2013 budget plan currently being negotiated by Brown and Democratic legislators.
Details of Munger’s Tax Hike Proposal
Munger’s tax hike proposal, called “Our Children, Our Future,” aims to raise income tax for all residents, with highest earners seeing the largest hike. Most of the revenue would support schools and education programs.
Details of Steyer’s Plan
Steyer’s plan would raise about $1 billion annually by changing California’s corporate tax formula.
About half of the funds would go to California’s general fund.
Tobacco Tax Fails
Smokers rejoice. Proposition 29, the initiative to increase the tax on tobacco to pay for cancer research, failed by less than a percentage point after remaining too close to call for more than two weeks.