• Governor Proposes 1 Cent Sales Tax Increase
• Increase Tied to Controlling Budget Spending
• Issue of Revenues Has Major Impact on Spending
• Important Hearing on Budget Related Bill SB 434 Today
Disability & Senior Advocates Worry About Spending Caps On Critical Programs and Services – Budget Delay Impact Will Soon Hit Hard on Community-Based Services and Supports As Providers Go Without Any Payment from State
Governor Arnold Schwarzenegger proposed to legislative leaders on Sunday, a temporary sales tax increase of 1 cent that would raise about $5 billion per year to help close the State’s $15.2 billion budget gap in exchange for major budget reform proposals to control spending and new authority to cut spending in future years. The proposal calls for the State’s sale tax increase to be in place for 3 to 4 years, followed by a gradual decrease in that tax to a point below what it is now (7.25%).
California is now 35 days without a State budget.
The issues and debate on raising new revenues is critical because at stake – depending on which proposals to raise revenues are adopted – are billions of dollars in spending for programs and services that impact hundreds of thousands of children and adults with disabilities, mental health needs, low income seniors, and low income families.
Governor Wants “Budget Reforms”
Schwarzenegger Administration officials have declined to provide publicly further details on the proposal – but the proposal is similar to one he offered in January when he proposed a temporary sales tax increase tied to leasing of the state lottery should the sale be held up by lawsuits or other problems. The Governor has refused to propose any new increases in income taxes however.
Schwarzenegger spokesperson Matt David told the Los Angeles Times that “This compromise must include budget reform that prevents our state from being in this position. The governor is pushing Republicans and Democrats to come to the table immediately and reach a compromise because of the looming cash crisis we face.”
The Governor, in a radio broadcast August 2, said he would not sign a budget without significant and long term budget reforms.
“While I am frustrated that the legislature hasn’t reached an agreement, I am very encouraged that all four legislative leaders recognize the need to reform our broken budget system. And as I have said before, I will not sign a budget without substantive and long-term budget reform. The people elected me to bring sanity and stability to our state’s finances. They wanted Sacramento to end the reckless spending and to finally live within its means” the Governor said.
Talks With Governor and Legislative Leaders Will Continue
Both the Governor and legislative leaders – Assembly Speaker Karen Bass (Democrat – Los Angeles), Senate President Pro Tem Don Perata (Democrat – Oakland), Senate Republican Leader Dave Cogdill (Republican – Fresno) and Assembly Republican Leader Mike Villines (Republican – Clovis) say they will continue talks.
No budget deal appears to be near however – though Bass said today that she was still hopeful that a budget could be passed by the end of the month.
Bass and Cogdill are new this year to the high level budget discussions – with Bass replacing former Assembly Speaker Fabian Nunez and Cogdill replacing Sen. Dick Ackerman – both members being forced out of office this year due to term limits. Perata, who also is being forced out of office this year due to term limits, will remain as Senate President for probably the rest of this month, though Sen. Darrell Steinberg (Democrat – Sacramento) is scheduled to officially be elected as his replacement later this month.
Republicans Oppose Plan – While Democrats Concerned About Reforms
Legislative Republicans have strongly opposed any increases in taxes or fees and said they oppose the Governor’s proposal, saying the problem is not revenues, but spending. Senate Republican Leader Dave Cogdill (Republican – Fresno) said yesterday that Senate Republicans were also opposed to raising taxes in a time when the economy is bad.
Democratic legislative leaders have previously opposed the Governor’s budget reforms that would cap spending on critical programs and give authority to a governor for automatic spending cuts. Democrats also have strong reservations about only raising revenues by temporarily increasing sales tax, which some feel would unfairly target middle and lower income Californians. Others have raised concerns about the proposal’s temporary increase – wondering what happens to the spending versus revenue gap after the increase ends.
The Governor’s proposal to temporarily raise the sales tax appears to propose replacing some of the Democratic plan to raise revenues (meaning the $5 billion in new revenues resulting from the temporary increase of the sales tax would not be on top of the $8 billion or more in new revenues coming from new taxes, fees, etc proposed by the Democrats).
Budget Delay Hits Hard On Community-Based Services for People With Disabilities and Seniors
While the Governor’s executive order rolling back State employee wages and laying off temporary workers has drawn wide spread public attention, the impact of the budget delay will soon grow even worse for community-based services, programs and supports for tens of thousands of children and adults with disabilities, mental health needs, low income seniors as providers go another month without any payments from the State.
Small community-based providers are especially hard hit, many who provide critical services in the home or programs including those for seniors with Alzheimer’s, who are desperate now to meet payroll and other costs.
While larger agencies can take out short term loans to bridge the gap – many smaller agencies and providers don’t have that ability. Providers note that the costs of taking out loans to make up for the lack of State reimbursements for services already provided, are not reimbursed by the State.
Advocates say that the impact of the budget delay makes worse cuts already previously approved last February, including a 10% reduction in payments to Medi-Cal providers, including many community-based providers such as Adult Day Health Centers, that already went into effect July 1.
The 10% Medi-Cal provider cut is the subject of two different lawsuits pending in state and federal courts, which have refused so far to intervene and stop the cut from taking place.
The Democratic budget proposal as passed by both the Assembly and Senate Budget Committees in June would restore most of the Medi-Cal 10% rate reduction – but that budget plan also calls for about $8 billion in new revenues, including new taxes and fees – which legislative Republicans and the Governor so far have refused to support.
Other cuts – including elimination of the 2008-2009 State cost of living money owed to the lowest income persons with disabilities, the blind and low income seniors who receive SSI/SSP (Supplement Security Income/State Supplemental Payment) also was previously approved in February and has already gone into effect. A proposal, in both the Republican and Democratic budget plans, would extend that cut to cover the State cost of living money due June 1, 2009 through May 31, 2010 for SSI/SSP, the 15th time in 19 years that the State has cut that funding.
Advocates Worry About Governor’s Proposal for Spending Caps and Cuts
Disability, senior, mental health and low income advocates have raised concerns about the Governor’s proposed constitutional amendment, called the “Budget Stabilization Act” that he says will put in place needed budget reforms patterned after a similar constitutional amendment in Arkansas. It appears the Governor is linking his budget reform proposal to any increase in the sales tax.
That proposal, which the Governor made as part of his January budget, would establish priorities and caps in spending in programs, create a budget “rainy day” reserve fund, and give authority for a governor to make automatic (pre-approved) spending cuts and reductions.
The Governor has not formally advanced his budget reform proposal through legislation or through signature gathering to place it on the ballot, though in May and early June held a series of town halls across the State urging approval of his proposal.
Secretary of State Debra Bowen has said that the Legislature has until the middle of August to place initiatives on the ballot in time for the November 2008 election.
Advocates are also fear additional cuts to services and programs for children and adults with disabilities, mental health needs and seniors as the price for any budget deal. The Governor and other supporters of the budget reform plan say spending caps, priorities and reserves are needed in order to fix the ongoing State budget problems that will protect vital services and programs. Many advocates dispute that however.
Senate Panel Reviews Governor’s Executive Order On State Workers
While the regular Assembly and Senate Budget Committees have completed its regular budget hearings in mid-June, the Senate Governmental Organization Committee, chaired by Sen. Dean Florez (Democrat – Shafer), held an informational hearing on the impact of the Governor’s Executive Order that would temporarily reduce state worker wages back to the federal minimum wage until a budget is passed, and also lay off about 10,000 temporary State workers.
The Governor said last week he was forced to issue the executive order because the State will not have the cash on hand to pay employees until a State budget is in place and also pay its other bills.
State Controller John Chiang, a Democrat who is the independent State elected official that oversees the agency that cuts State worker checks, told the committee that the Governor’s order was not necessary at this time and disputed the Governor’s claim, saying the State will have enough cash on hand to pay employees their full wages through the end of September and its other bills.
The Senate committee took no action.
Assembly Health Committee Meets Today On Important Medi-Cal Bill–SB 434
Meanwhile, an important bill dealing with continuing a higher level of Medi-Cal reimbursement rates for nursing homes tied to increasing quality of care, that is linked to the budget, is scheduled to be heard in the Assembly Health Committee, this afternoon at 1:30 PM at the State Capitol in Room 4202. The bill has raised concerns from advocates for people with disabilities, seniors, nursing home workers, unions and nursing home providers.
The Assembly on Monday re-referred the bill to the Assembly Health Committee and also Assembly Appropriations Committee.
SB 434, by Sen. Gloria Romero (Democrat – Los Angeles) would require a stakeholder workgroup to be convened by the Department of Health Care Services to look at compliance and quality issues connected to a nursing home receiving a higher reimbursement rate in exchange for paying what some call a “provider tax” or “quality assurance fee” that in turn is matched with increased federal Medicaid money and returned to the State. The State in turn gives some of that increased funding back to the provider that is meant for increased worker wages and quality of care. New amendments to the bill are expected to be proposed during the hearing.
Some advocates have raised major concerns about how the State is monitoring and enforcing quality of care issues for those nursing facilities receiving higher reimbursement money.
Details of Quality Assurance Fee Program in AB 1629 (2004)
The details of the “quality assurance fee” for nursing facilities were contained in previous legislation, AB 1629 by then Assemblymember Dario Frommer (Democrat – Los Angeles), passed and signed into law in 2004. The provisions of that bill became inoperative as of July 1, 2008 and needs to be extended by new legislation. The Budget Conference Committee in late June ended up approving language for a budget related bill (called a budget trailer bill) that extended the quality assurance fee and established other provisions regarding stakeholder meetings.
However that entire budget proposal approved by the Democrats is the budget plan that remains stalled in both houses. It is not clear yet how SB 434 will impact the budget related language already approved.
The California Disability Community Action Network, is a non-partisan link to thousands of Californians with developmental and other disabilities, people with traumatic brain injuries, the Blind, the Deaf, their families, community organizations and providers, direct care, homecare and other workers, and other advocates to provide information on state (and eventually federal), local public policy issues.