Budget: Brown warily eyes federal impact

Gov. Jerry Brown, unveiling his revised state budget, is flanked by a chart showing billions of dollars of Medi-Cal cuts. (Photo: Rich Pedroncelli/Associated Press)

Gov. Jerry Brown’s state budget draft is a no-frills document reflecting fears about the policies of the Trump administration, a Republican-led Congress and the likelihood of an economic recession.

“The potential of a federal reduction in aid to California is real enough,” Brown noted, as he unveiled his revised $180 billion spending plan for 2017-18.

“Make no doubt about it,” he added, referring to a potential recession. “Cuts are coming over the next few years and they’ll be big.”

The heart of the potential federal cuts to California involve health care if the Affordable Care Act is repealed. Under the ACA, the federal government has subsidized much the state’s expanded health care system.

And Brown, flanked by a lurid, red-ink chart depicting California’s potential Medi-Cal deficits, said the state would be hard-pressed to cover those cuts.

“Now, that’s a lot of red,” said Brown, pointing to the chart. “That’s what will happen if the Senate goes along with the House and passes that (ACA) repeal. That’s really bad news, and if you say now, ‘What are going to do?’, you’re not going to get an answer, because what we have to do is ugly. And no one wants to take that up yet. So what we’re doing is we’re going to fight as hard as we can.”

“In California, we don’t live in a fixed world of straight-line revenues that keep rising and never go down.” — Jerry Brown

His revised budget incorporates the latest receipts from the April 15 income tax deadline and was little changed from the budget he proposed in January. Brown characterized the budget as a prudent safeguard against the unknown, and reiterated concerns he has expressed earlier about the potential for a recession in the near future.

“In California, we don’t live in a fixed world of straight-line revenues that keep rising and never go down, he said. “They go up, and the go down. We’ve had 10 recoveries and 10 recessions since the end of World War Two.”

If in “two more years in June and we’re not in a recession, it will be an historic first,” Brown added.

The Democratic governor asked for an additional $6.5 million to help state Attorney General Xavier Becerra – who Brown appointed — in likely legal confrontations with the federal government. The money will add 31 positions to the state Justice Department.

Brown called for about $19 billion to fund California’s share of the decades-old Medi-Cal program, a sprawling health care system financed by state and federal money that services low-income people, the young, welfare recipients and others. Medi-Cal, recently expanded under the federal Affordable Care Act, serves about 13.4 million people – fully one in three Californians.

“They weren’t sent to Congress just to take orders from that crowd of Donald Trump.” — Jerry Brown

But threatened by the dismantling of the ACA in Congress, California could soon lose $6 billion a year in federal money, a loss that could steadily rise to an estimated $24 billion annually over the next decade – money the state would have to make up to keep the huge program operating.  (A March review of Medi-Cal finances is available here from the Legislative Analyst.)

“It would be a massive, gargantuan cut,” said Anthony Wright, executive director of Health Access, a nonprofit that seeks expanded health care. “That is a staggering figure, it would be more than the state spends on higher education and corrections combined.”

Ominously for California, legislation to eliminate the ACA was approved May 4 by the GOP-controlled House  — with President Trump’s support — and sent to the Senate, where it is being rewritten.

“They weren’t sent to Congress just to take orders from that crowd of Donald Trump,” Brown said. “I really don’t understand why those people, particularly in swing districts, are following the dictates of Donald Trump. I think they should think about their constituents.”

Brown said the legislation was actually tax break for the wealthy. “That’s an abomination,” he told reporters.

According to the Legislature’s nonpartisan financial adviser, the ACA cut the number of uninsured Californians in half – from 6 million to 3 million. As of last fall, about 4.6 million people had purchased ACA-funded health insurance either through Medi-Cal or through the market exchange known as Covered California, which was set up by the ACA and lets individuals and small businesses with 50 or less employees shop for insurance at competitive prices.

The budget must be approved by the Legislature by June 15 and signed into law by June 30 to take effect for the new fiscal year that begins July 1.

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