Special Episode: Health Care in CA, Panel 3 – Impact of Budget Cuts

CAPITOL WEEKLY PODCAST: This Special Episode of the Capitol Weekly Podcast was recorded live at Capitol Weekly’s conference HEALTH CARE IN CALIFORNIA, which was held in Sacramento on Thursday, October 3, 2024

This is PANEL 3 – IMPACT OF BUDGET CUTS

Panelists: Jess Bartholow, SEIU California; Michelle Cabrera, County Behavioral Health Directors Association of California; Beth Capell, Health Access California; Scott Graves, California Budget and Policy Center

Moderated by Kristen Hwang, Calmatters

This transcript has been edited for clarity.

KRISTEN HWANG: I’m Kristen Hwang with Calmatters. I’m just going to do some very brief introductions so that we can get into the meat of this. I’m joined on this panel by Jess Bartholow, who is the director of government relations with SEIU California. I have you out of order on my paper… Scott Graves, budget director for the California Budget and Policy Center. Beth Capell, who is a longtime advocate and strategist with Health Access California. And Michelle Cabrera, executive director of the County Behavioral Health Directors Association wait… County Behavioral Health Directors Association of California.

So this panel is about the budget. And just three days ago, I’m sure all of us were sort of glued to our phones and emails waiting to see what was going to be the action on the last few bills on the governor’s desk. Overwhelmingly, the message and the vetoes this year was about maintaining the budget, which had to deal with a $45 billion multiyear deficit and hundreds of unfunded programs were squashed.

The health care sphere, in particular, had kind of took a left turn after a decade of expansion to Medi-Cal, Cal Aim reforms, Covered California subsidies. Many of those investments were preserved in this year’s current budget, but there are certainly challenges that remain.

Scott, I would like to start with you, although anybody can chime in on this topic. So often in the health policy sphere, we like to kind of just think about our own slice of the pie. But what’s happening in the budget, what’s happening in Corrections and Education, all of those other areas impacts how much money is available for health policy. So I’m curious your thoughts on some of the strategies and tools that were leveraged in this year’s budget, how they impact what went on in the health policy sphere?

SCOTT GRAVES: Yeah, well, thank you for that great opening question there to help set the context here. It is important to note that the legislature and governor did find a way this year to close a pretty substantial budget shortfall without significantly slicing into all the programs and services and public systems that we care so much about, and that are so needed to help create economic opportunity in California and ensure that everyone can thrive. And I say that from an organizational perspective that knows we have a lot more work to do. We are the authors of our future, and changes need to be made and should be coming.

“It’s important to keep in mind that much of those additional or unexpected revenues will be claimed by Proposition 98.” – Scott Graves

At the same time, we face pretty substantial constraints. And I know we’re going to talk about some of those constraints on this panel, but one thing that I just wanted everyone in the health policy space to understand is the real importance of Proposition 98 and funding for K-14 education, which is established by very complex constitutional formulas. But that really drives the question of how much money is left for everything else in the budget after you’ve met the proposition 98 guarantee.

Kristen Hwang, Calmatters; Jess Bartholow, SEIU California; Scott Graves, California Budget and Policy Center; Beth Capell, Health Access California; Michelle Cabrera, County Behavioral Health Directors Association of California. Photo by Joha Harrison, Capitol Weekly.

And so some of the ways in which the governor and legislature balanced the budget this year appropriately address the Proposition 98 space. They did that at a very high level by suspending the guarantee for one year and using a very weird maneuver that pushed some spending well down the road. But that will have costs to the non-98 side of the budget – hint, your programs – in the years to come.

And it’s understandable why  they did that. But the reality of the way Proposition 98 works is that when you suspend the guarantee, as happened, any increment of revenues that comes in above projections, and you might have seen Calmatters and others reporting on how, hey, revenues are doing better than anticipated even just a couple months ago. And that is wonderful, right? We all want revenues to do better rather than worse than projections… but it’s important to keep in mind that much of those additional or unexpected revenues will be claimed by Proposition 98. It’s not clear the exact percentage, but in order to rebuild the Proposition 98 base due to the suspension and other factors, and there are other constitutional formulas that are owed money as well. Much of what we see coming in as better than expected revenues, we can’t automatically say, “oh, that can mean more money for my program in the in the coming year,” because much of those dollars may already be spoken for as a result of the very complicated constitutional formulas we had so in our Constitution.

So I just wanted to sort of lay that context out there so we have an understanding of when we hear revenues are doing better than expected, what might it mean in terms of opportunities for program increases in other areas of the budget next year?

KW: Do you know, off the top of your head how much of the budget is unconstrained?

SG: You mean like just discretionary? Yes. It’s. I don’t have a number off the top of my head. Yeah, it’s a fairly substantial percentage of the budget that is sort of… that is subject to constitutional formulas and constraints. And I’m kind of reluctant to give a number because it can change depending on decisions that are made by the legislature and the governor. There’s some wiggle room there. So I’d like to stay away from that one.

KW: Okay. Well, that’s a good segue into the next question I had, which is, you know, you brought up constraints and how Prop. 98 has this significant long term impact on how we’re able to budget in the state. There are ten propositions in front of voters right now. Almost all of which I think there’s only one that does not have something to do with money and spending. And so what what is the potential impact If all or even just some of those get approved. You can take that Scott.

SG: That to me? Yes.

KW: Also anybody else can jump in.

SG: Okay. Let me just give you three. I’m not going to talk about Prop 35 right now, but let me give you three you may not be thinking about.

Proposition 36, an effort to roll back justice system reforms in California… if voters passed that. That will add potentially hundreds of millions of dollars or more general fund dollars going into our state prison system beyond what we’re spending now. So that would be a huge loss and a huge blow to efforts to claim those dollars for other valuable purposes.

There are two bonds on the ballot. School facilities 10 billion. Climate change 10 billion. Add them up. That’s 20 billion. We have to repay bonds with interest over 35 to 40 years. The projections are if voters pass both of those bonds, once the bonds are fully sold, that’s $900 million per year coming out of the general fund to repay the principal and interest. So that’s the trade off with bonds, right? You get a bunch of money up front, you invest it in something valuable, and then you pay it back over time. Just like if you’re a homeowner getting a mortgage. But the reality is, if both of those bonds pass, that’s another claim on the general fund. Those dollars would need to go to principal and interest repayments, not to expansions in the Medi-Cal program or other valuable services.

KW: Michelle, I saw you nodding along with thePprop 36 mention. Is there anything you wanted to add?

MICHELLE CABRERA: I agree with Scott that it would not be good to have both these sort of education side locked up and then grow the Corrections side, because that always puts a squeeze on health and human services more broadly. And the legislature is sort of forced once someone’s incarcerated to pay for their livelihood.

“Medi-Cal is the single largest program administered by the state of California. K-12 plus community colleges is the biggest chunk in the budget, but that’s run by local governments. Medi-Cal is run by the state of California.” – Beth Capell

I would say that there’s an additional hidden cost in an unfunded mandate for counties to deliver substance use disorder treatment services, which again, really good idea to do that, but without any earmarked or dedicated resources to do so that will further constrain local budgets as well.

KW: Yeah, because Prop 36 is both a criminal justice and a behavioral health bill. And it’s sort of on the behavioral health side, creates I don’t know if drug court is the correct terminology, but a mandate for counties to provide court ordered substance use treatment. And I’ve heard from other behavioral health directors and also from my colleagues on the justice side that are reporting on this. That capacity is a really big issue right now. And so I imagine without money coming in, that that will continue to be a problem.

MC: Yeah. I mean, I think one of the things that’s worth noting about substance use disorder treatment services, and particularly the interplay with Medi-Cal is that until seven years ago, Medicaid did not cover inpatient or residential drug treatment for anybody in the United States. Full stop.

It was…. Think about it like a donut hole. California was the first state in the country to pursue a federal waiver of that limitation on coverage. And we’ve done it as a pilot. So a majority of Californians are now covered under what’s called the Drug Medi-Cal Organized Delivery System Waiver. Counties largely had to build out that capacity within existing resources. And we’ve benefited from the new federal match. But it has been really constraining because on the public side, we have not had the benefit of Medicaid coverage for those lifesaving services until recently. And then on the private side, we know that significant number of Californians are severely underinsured by their commercial plans. And so we often pick up the costs of that cost shifting as well.

KW: Jess and Beth, did either of you want to add anything to the sort of broader budget constraints before we move on?

BETH CAPELL: Yeah. Beth Capell, Health Access. I’d like to back up and say, a lot of us went through the decade from the 2002-2003 dotcom bust to 2008, 9,10, when we were facing a really terrible budget and it was very schizophrenic in the health care space because we had we were working towards the affordable what became the Affordable Care Act and the great expansions that went with that. At the same time, we were facing tens of billions of dollars of deficit in our budget.

And Medi-Cal is the single largest program administered by the state of California. K-12 plus community colleges is the biggest chunk in the budget, but that’s run by local governments. Medi-Cal is run by the state of California.

Kristen Hwang, Calmatters, moderated. Photo by Joha Harrison, Capitol Weekly.

So when we faced those terrible years, California had dozens of cuts to the Medi-Cal program, to eligibility, to benefits, to rates. We’ve mostly gotten them back and grown the Medi-Cal program with the Affordable Care Act expansions and adding Health For All in Medi-Cal and many other improvements. The behavioral health one, obviously improvements in benefits. So to come into a year like this, when we’re facing a difficult budget year and to come out the other side with not much at all in the way of cuts, but basically maintaining what we have is a testament to everyone: two governors, legislative leaders, staff, everybody who came out of 2008-9 and said, basically, “never again, we want to be in a better place when the next bad budget happens.”

And so even though we’re facing… and Scott has a long list of the things that might affect us. What I take from looking at this, whether it’s adjusting the Gann Limit or the changes in the tax rules that had that happy tax news this morning, or whatever it is, our ability to actually do better in the future and our ability to look forward.

And we’re with everyone on this panel that there’s a lot more that California should do, whether it’s in the behavioral health space, the social determinants of health that you heard Doctor Pan talk about this morning, housing instability, food The insecurity caregiving demands.. Or whether it’s the remaining half million Californians who are undocumented and uninsured but could be in Covered California if only we’d open the front door to it.

So I think we’re… It’s never fun to face a difficult budget, but for those of us who went through the really dark years of 2008 9, 10, it is good to be in a somewhat better place and to begin to think… And I know Jess has things to say about this… about that broader future moving forward, and how can we move forward to really give Californians what they need? So, yeah.

JESS BARTHOLOW: Thanks for the pitch on that. Jess Bartholow, SEIU, also one of the veterans who was up here during the budget cuts of the Great Recession. During those years, I was at the Western Center on Law and Poverty. Tia [Orr] served as the person who represented Human Services at SEIU. She now leads SEIU. And she remembers, I remember that year the budget proposal from the governor was to end the Calworks program to and to end the entire program.

That’s the kind of devastating cuts we were facing at the time. We had a very significant budget shortfall this year. The creativity, I think Scott called it a “weird budget, a maneuver.” I would call it a maneuver. Creative maneuvers. You know what we all got through together this year? Rejected austerity as a path forward during hard times. And I think we all had hoped that that could happen. But that it happened was so magical. It really was.

If you if you’ve been through all of this, and I see some of you in the audience that are also veterans of those times to know that we learned our lesson from austerity, when California cut so deeply to the bone during the last recession that it resulted in us restoring our economy slower than any other state, mostly because, as according to Moody’s economists, not Jess Bartholow, not even Budget Center or other kind of left or progressive economists, Moody’s economists said the reason we recovered so slowly was because we cut public sector. And those jobs are so hard to come back.

And so our economy lingered and lingered and lingered beyond, you know, delayed beyond the other states. So much so that we couldn’t, you know, we’re still to this day, recovering those jobs. And so to see us be able to get through this recession without doing …or this, this budget shortfall, without causing more problems, without triggering a recession of its own was exciting, even when it was hard.

“When I started in this work on health care in the late ‘80s, the most common cause of homelessness for families was taking the kid to the emergency room, because they would spend next month’s rent. Every time. Every time.” – Beth Capell

You know, on a personal note, and Beth has been in these meetings with me before, where we go to the governor’s office, whichever governor, whether it’s Schwarzenegger, Brown or anybody, and they say, pick your priority, you know, and we always say, “no, you know, these are what we need. We need all of these things. These are the things we need. You don’t ask the bankers to pick their priority. You don’t ask, you know the dot commers to pick their priorities.”

But the bottom line is, having been somebody who’s been homeless, who’s been hungry, who’s, you know, survived domestic abuse and sexual assault, not having health care is one of the most inhumane experiences. You sit at home and either watch your child or your family member be sick and hurt and not know whether or not you should take them to get fixed. It’s humiliating. It’s dehumanizing. The long term harm of that is real.

Both my sister and I have bones that were broken and didn’t get healed. We needed help and we didn’t get it, and the long term harm of that is forever. And our health care system and our state and our government and our society and our families and our friends and our communities will always pay for that. So that we didn’t stop our forward progress on making sure everybody had access to health care is something I really get. I’m getting goose bumps right now about we all should be so proud about. And we are forging a way of how to get through hard times without austerity, and we are going to see that in the long run, that’s going to make our economy stronger and our state stronger.

BC: So I want to add two things to that very moving statement. When I started in this work on health care in the late ‘80s, the most common cause of homelessness for families was taking the kid to the emergency room, because they would spend next month’s rent. Every time. Every time. Because it’s the middle of the night and you got a sick kid, you do what you got to do, and they would never get back to the place where they had first and last month’s rent.

It is clear that the solution to that is to get people health care, to get them health insurance. That’s not… it’s actually not very complicated. I would say when I look at education and health care, the two really big parts of the budget, and I want to ask somebody in the education community this question. I said, “you know, there’s a right to a free public education in the Constitution. Has finance ever suggested suspending that?” And her answer was “no, but they would if they could.” If health care is a right, it ought to be the same way.

Everyone in this room knows that we haven’t always funded education the way we should, that there are lots of problems and inequities and needs in education too. But nobody ever suggested that we eliminate the right to a free public education, not in this state.

“Not having health care is one of the most inhumane experiences. You sit at home and either watch your child or your family member be sick and hurt and not know whether or not you should take them to get fixed. It’s humiliating. It’s dehumanizing. The long term harm of that is real.” – Jess Bartholow

And so every Californian, regardless of immigration, regardless of income, should have health care. And we would go further. We would say health care they can afford where what they pay is scaled to what they make. And, so part of …we didn’t talk about it with the Office of Health Care Affordability… but part of what’s become starkly obvious in that work is that people with employer coverage in this state are the people who are paying the most out of pocket for their health care, and that’s wrong. They pay a lot for health care.

For Covered California and Medi-Cal, where public programs where we’ve invested what people pay is scaled to what they make. That’s as it should be. So there’s always more work to do in health care. Some may think we’ve gotten close to universal coverage and we’re kind of done. But no, there’s more work to do to create a well-functioning health system, which includes a just, equitable and affordable health system for all of us.

KW: Thank you. Yeah. Thank you, all of you, for that very important and sort of powerful reality check in in comparison to where we are in the budget right now. I am curious how those of you who went through the Great Recession years… Like, how did the legislature prepare for the moment that we are in now? What changes were made?

BC: A lot, a lot.

JB: Well, we put together those reserves, the safety net reserves. I think that’s a really big, a big thing that we did.

BC: And I think Scott can speak to this more, but the, the recognition of the. So two other things, I’d say: the recognition of the volatility of our revenue streams that became part of the conversation, as well as and I give them credit for this, even though I didn’t always like it, Governor Jerry Brown paying down the wall of debt that we had accumulated in the prior decade.

And there’s one piece of the wall of debt that doesn’t get talked about. That’s a focus in our work at the Office of Health Care Affordability: Retiree health for public employees is part of the wall of debt. And those are really important benefits that public employees have and should have…. If the cost of health care grows more slowly, that puts less strain on the budget. It’s another place where the budget is strained by the out-of-control growth of health care.

JB: And we did, you know, and we continued to pay those down through 2022. We were still putting deposits and paying down debt in ways that I think were helpful, even in last year’s budget. Tight budget.

BC: Yeah.

SG: Just a quick note about our reserves, just to pat ourselves on the back. If you were around here in 2014, if you voted for Proposition 2, you voted for, you know, greater fiscal responsibility in California. That allowed us to grow a reserve that was about 23 or 24 billion. The legislature and governor pulled a few billion out to help balance this year’s budget with a lot of other tools that they use, very smart and creative tools that they use to get through this year.

There’s a lot of money still left in that reserve. By definition, it’s one time, and when it’s gone, it’s gone and we have to rebuild it. But it does, you know, to provide a more hopeful note. Maybe then my my opening comments, it does provide a cushion heading into the next budget. There’s already a plan to use those dollars as needed in order to help get us through another fiscal year without the need to make devastating cuts to really important programs and services. So that is an incredible backstop that we have. And that is all thanks to decisions that were made by very smart people who saw how horrific it was to go into the Great Recession with nothing in the piggy bank, nothing under the couch cushions, and your only choices were to make deep and devastating cuts, or ask voters to pay more in taxes at a time when everybody was stressed. Except, of course, for those at the very top.

JB: And I think we also we passed propositions that raise revenue, you know, from SEIU led on some of those. Workers, poor service workers, led on those fights to get those things on the ballot and win them and have more revenue coming in. And that was without those revenue, I’m not sure what this would have looked like.

KW: Speaking of reserves, does it concern anybody that the Safety Net Reserve Fund was essentially wiped out in this budget? Because that is specifically for Medi-Cal and Calworks?

JB: Yeah. From the from the anti-poverty community’s perspective, they felt like the Safety Net Reserve was zeroed out. And that should have been the cut. That was a cut… should have been THE cut. But then there were additional cuts proposed to the Calworks program, family stabilization services, family home visiting programs for brand new parents with kids, with little babies, foster and family services were proposed for cuts that were pretty IHHS services for undocumented elderly people and people with disabilities and the 15,000 people that that served them at home and kept them at home and prevented their institutionalization.

Those were all proposed as cuts in addition to the Safety Net Reserve being zeroed out, and that seemed so unfair to the advocates and the people who received those services. And the good news is there was a, you know, I think an acknowledgment of that, and most of the cuts were pared back to a place where they did not impact… they impacted the programs and their ability to offer new families services for a time. But they didn’t take away anything from somebody currently receiving benefits.

Kristen Hwang, Calmatters; Jess Bartholow, SEIU California; Scott Graves, California Budget and Policy Center; Beth Capell, Health Access California; Michelle Cabrera, County Behavioral Health Directors Association of California. Photo by Joha Harrison, Capitol Weekly.

And, and so that was a big part of the conversation. And, and moving forward, we’ve got to talk about how to grow those reserves while also restoring the cuts that were felt so that we can continue to serve everybody who needs services in those programs. I don’t know if you want to add anything else. We had a lot to say about that.

KW: So I’m going to move us on. Or perhaps backwards. Back to propositions. I would be remiss to not bring up Prop 35 with all of you up here and your expertise. The Department of Finance estimates that if the proposition passes, it would create an $11.6 billion gap in the budget over the next three budget cycles. What should.. and, Jess, I’ll let you start first…. What should people know about the potential tradeoffs and ramifications of that proposition passing and sort of whether you and all of you sort of, you know, health equity advocates preparing for?

JB: So SEIU California has a neutral position on this proposition. It was a lively debate internally, though, because what this proposition will do if it’s passed is remove the flexibility that we relied on this year to prevent the cuts I just told you about.

And, you know, before joining SEIU, I was the chief of staff for the Budget Chair. And I can’t emphasize enough from that experience and knowing how important that flexibility to move those MCO funds and use them as the budget requires to serve vital services to improve the health and well-being and access to health care for very marginalized populations in California is… and it will create a hole. It will create a hole in the budget.

We’ll have to figure out how to how to how to fill it in an environment where we also have some, some tax revenues set to expire and creating other holes. And then you heard about some of the other propositions and what they could do to the budget. So if you haven’t seen the polls from PPIC, you should go check them out. It does look like this proposition is likely to pass.

KW: I think it’s 63%.

JB: Yeah. So unless something changes a lot it will be a problem that we’ll have to address and work together. Can we? Yes, we just did. You know, we just did a big thing this year. Can we do this? Yes, but it is. It is frustrating. It’s disappointing that we’re going to have to have that conversation.

KW: Does anyone else want the Prop 35 hot potato?

SG: I don’t want to get in anyone’s way. Okay. I would just echo my organization, put out an analysis of Prop 35, and we don’t take positions on ballot measures… So we, you know, we noted in theory some benefits that could come from a measure like Prop 35. I think the intention there is, hey, if we pay providers for primary care and specialty care, more, maybe more will get into the business and that will help provide greater access to the extent that there are access concerns that are tied back directly to relatively low provider rates. That’s the theory.

We also raise concerns similar to what Jess just noted around loss of flexibility, locking in spending decisions, opening up a hole in the budget that would have to be addressed in the coming year. So those are all issues that voters would need to take into account when they take on this very complicated measure.

One thing I do want to point out here, in case I don’t get another opportunity, is that, yes, this is a creative way of helping to bring more federal dollars into California and maybe offset some general fund costs for Medi-Cal. And the question is, how much, how large should that offset be?

But we can’t allow ourselves to think that solves all of our problems in California, right? If we’re going to make the robust investments in our communities that we know are needed, we need more general fund revenues, right? We need to have a serious discussion around revenue increases in California that will get us to the place that we know we need to be. So this is an important debate. It’s going to be decided one way or the other, but it doesn’t decide forever the question of whether we have adequate revenues in California to support public systems and services.

My organization believes, and others as well, that we do need to have those conversations as difficult as we as they are. We need more revenues in this space in order to make the investments that we know are needed, and we’re hoping we can have those conversations very soon.

BC: So Health Access has chosen to be neutral on Prop 35 for many of the reasons that have already been discussed. We had board members who felt very strongly about the importance of investing in improved Medi-Cal reimbursement for doctors, hospitals, and community clinics. We had other board members who agreed with the governor and the legislature about the budget deal, which made somewhat lesser investments in improved rates, but invested in other things like continuous eligibility for children and adult day health and other important programs that are part of Medi-Cal. And we had board members who saw the virtue in both positions and, and you know, it will create a hole in the current year budget. That’s a challenge, and it will create a greater hole in the future in budget year and future years. And those are that’s those are challenges.

And that’s part of why we too, would welcome a conversation, a larger conversation about improving revenues in order to do what we should be doing for Californians. And so that’s where we’ve ended up.

KW: Michelle, I saw you nodding vigorously to the increased revenue portion.

BC: Somehow behavioral health needs more.

KW: Behavioral health has really been through a whirlwind in the past few years with the CARE Act, with MHSA now, BHSA fund changes… a lot of one time investments for infrastructure and programs. And, you know, but county spending is very much tied to how the state is doing. Can you talk about some of the sort of, you know, what is most challenging for counties and also meeting the need in a very sort of difficult time for Californians?

MC: Thank you. Yeah, I think it is important to just sort of as in terms of context, the way that counties are funded to deliver on the entitlement under Medi-Cal for specialty mental health and substance use disorders is they get earmarked revenue streams. So it’s vehicle license fee sales tax, and then millionaires tax and the vehicle license fee and sales tax portions that they get are fairly stable over time. But there’s not a lot of growth there for things like inflation or caseload. None of the funding that counties get is tied to caseload or need.

So think about it for the Medi-Cal geeks as sort of like a block grant Medicaid program. On top of that, counties are operating a system of care that’s really biopsychosocial. And so I like to say that counties are like the original social determinants of health actors or players, in that they know from the disability rights movement in the 1960s and 70s that in order for people to get into and achieve and sustain recovery, it’s going to take more than a medical model approach to care. Right.

So we’ve had a portion of our monies that go to putting up… we self-finance the non-federal share of Medi-Cal, and then we bring in federal dollars with that. And over the years, the state has, in bad budget times, brokered deals with counties to say, we’re in trouble with the state general fund. So let’s make a deal. You take responsibility for this portion of services, and we’ll give you this earmarked revenue stream, right.

“The millionaires tax is the single most volatile revenue stream that the state has.” – Michelle Cabrera

The problem with that is that, you know, in 2011, counties said, okay, Basta, we’re going to put something on the Constitution that says state, If you try to impose anything new, you need to pay for it. Great idea. Totally. You know. Makes sense logically.

But it sort of locked us into this dynamic where the state is now reticent to add more because then it would obligate them to spend more on our programs. And everything’s turned into this sort of you know, deal with the devil about, like, do I take something that’s optional to Jim’s… Jim Wood’s comments earlier? Right. “Take a half a loaf, take it. Run.”

We did that with peer support specialist services. In 2020. We had a bill on the governor’s desk to for the become the 49th state in the country to pay for peer support specialists in Medi-Cal. And the deal was you have to finance this within existing resources or you don’t get peers. So I went to my members and I said, is half a loaf, good enough? And they said, sure, we’ll take it.

So we now have peers in Medi-Cal, but we’ve had to look for the money within our existing budgets. And I would say, just keep that sort of story in the back of your mind, because that is our reality, and we’re on that Toad’s wild ride with the state in terms of the highs and the lows of the revenues.

The millionaires tax is the single most volatile revenue stream that the state has. And there’s another sort of madness attached to that, which is that historically, the spending under the millionaires tax is very categorical. And so counties, in theory, are supposed to take a, an estimate that’s usually off by about 30% high or low… build a three year spending plan, and then theoretically year to year spend down to the penny on those percentages.

I ask you, could you, would you, right? I think given the circumstances, counties have been amazing stewards of that revenue stream, but we did lift up the issue of revenue volatility last year. And so the administration agreed to put together a revenue stability workgroup to look at various proposals to try to give counties a better through line of how to hit those spending targets. And the only last thing I’ll say is that the BHSA reforms were really a reorganization, rather than an augmentation on the service funding side of things.

“70% of the people who work in the service jobs within health care are women and people of color. Half of those people were eligible for Medi-Cal themselves.” – Jess Bartholow

In other words, there was a bond portion of Prop 1 that did result in roughly $4.4 billion for new bricks and mortar treatment facilities’ capacity and 2.2 billion for housing capacity. But there were no new revenues dedicated to those expanded services. And in terms of the money that counties are already had to work with – the millionaires tax rate, which is a third of our revenues – that money was reorganized. Think about it that way. And we were given a new responsibility to pay for housing that we have to figure out within our existing mental health services budget.

So there are a lot of trade offs that are happening right now. There are a lot of these sort of like new responsibilities that don’t necessarily come with earmarked funds. And there are a number of really significant funding holes in terms of Medicaid coverage and even commercial coverage that I would argue are deeply rooted in stigma and discrimination that go back to the origins of Medicaid and that persists today.

And, you know, I like to say, if you like it, you will pay for it, right? So if you see variation, if you see inconsistency in and behavioral health services. It is a direct result of policy choices and decisions.

KW: Thank you. I have two more questions and then I think we’ll open it up to audience questions. Jess I did want you to talk about because SEIU has news that is less than 48 hours old about the Health Care Worker Minimum Wage taking effect soon. That was one of the biggest sort of debates in the in the health care budget this year. Can you talk about how we how we got here?

JB: Yeah. So how we got here is that the wages in the health care system for all workers across the board, in the service sectors was too low. 70% of the people who work in the service jobs within health care are women and people of color. Half of those people were eligible for Medi-Cal themselves. They were so low paid they were eligible for Medi-Cal.

We should be proud of our Medi-Cal system, and proud that it serves people who aren’t at the very bottom of the income scale. But we cannot be proud of a system that entitles people to health paid by money that doesn’t also entitle the people who are providing that health to serve their family’s basic needs. This is not okay. And so the workers began to organize.

Audience question for Panel 3. Photo by Joha Harrison, Capitol Weekly.

Workers represented by some of our 17 locals, including United Health Workers. So we have some folks in the room from there. 1021… SEIU local 102, locals other locals that represent health care workers started to organize, and they got on the ballot in five cities that they would increase the wages. I want to recognize that because that is an important first step to this movement with with no movement at the capital to address the underpayment of service workers within the health care system, they decided to do what they could do. And they got it. They got movement and signatures from the grassroots up. This is true organizing true democracy with a little D, and got it on the ballot.

And that is disruptive to the health care system because the health care system is looking towards, you know, statewide systems. And what that local organizing did was help us get a place at the table here. We were able to come to the legislature and propose a piece of legislation. I was very sad to have, at the time, been in a situation in which I had to turn down working on that bill inside the building, because it was a really beautiful piece of justice. It was taken up by Maria Elena Durazo in the Senate and her amazing team, and they got that bill passed SB 525.

When there was a conversation in advance that perhaps it would be good to have a trigger, what they call a trigger in the budget, you can have a proactive trigger where you turn on an investment if the certain conditions are met, you can have what’s called a reverse trigger where everybody agrees to this policy. But if the if there’s not good conditions economically, then you can have your program turned off. I’ve been in both those circumstances. It’s really horrible.

525 didn’t have a trigger, but there was conversation that maybe we should. None of us anticipated what was going to happen next, which is that the economic analysis that we were relying upon in California – wasn’t developed by us. It was developed by economists. Many states were relying on the same analysis and had the same problem. They found that the analysis was wrong and what we thought was going to be our revenue coming in wasn’t.

At that point, it made sense to go back to the table and see if there was a trigger that could be used. And so it was delayed. The implementation was delayed from June to July, and then again from July to a trigger date. And the trigger there were a couple different trigger dates. One was we had revenue representing over 5% over what was expected for the first quarter of this fiscal year, which started July 1st. But a second trigger was also in place, and that was actually the trigger that we just met on October 1^st. The state Department of Finance and the Department of Health Care Services certified that they had the data necessary to begin a new tax. Is it a new tax? Is that what we’re calling that? No, we’re not calling it that. We’re calling it the… It’s an adjustment.

KW: Don’t say the T word.

JB: Yeah. So this this trigger was just announced. The letter just came out a couple of days ago. And so that means that on October 16th, 450,000 health care workers are going to get $25 an hour wage as a floor, as a floor.

Some of the workforce already are benefiting from this because some of their employers worked to make sure that their workers would receive that benefit, or that new wage starting June 1st or July 1st. But in total, 450,000 people are getting now $25 an hour.

Some of them… one just reported in Calmatters yesterday or the day before, had been working 14 years as a janitor for health care, making only $20 an hour after 14 years.

So you can see this is really significant. We’re talking about a $500-600 increase for people. When you think about anti-poverty work, which I’ve been in 20 years, deep in, really popular now is guaranteed income. You know, let’s give people a guaranteed income.

If you could tell people, we could give 450,000 people a guaranteed income of $600 that would be a revolution. Well, that’s just what we just did. But tied to their work… for the work they’re already doing for the work, the money they should have already been earning for the portion of their profits they should have already been getting.

And this is just the beginning. We know that there is a lot of profit in the health care system, and we know that the patients and the workers are not benefiting from all that profit from that wealth that we have in our health care system and SEIU and our locals and our health care partners are going to get to the bottom of where the rest of the money is hidden, and how to make sure that it’s going towards care and workforce.

KW: It strikes me that enacting the healthcare worker minimum wage at this time given the budget scenario, that kind of dovetails with the point you made earlier about rejecting austerity and how that helps the economy and helps Californians long term.

JB: That’s right. I mean, these workers are now not they’re going to not need public assistance as much. They’re going to be able to meet their basic needs. There’ll be more housing stable. They’re going to… when low income workers get a higher wage. They don’t go on vacation to Greece. They don’t buy, you know, a third car or their first yacht. They spend it in their community. They spend it in their community. They spend it in their neighborhood.

They buy, you know, they pay a babysitter more so they can go out to eat more down the street. They go to the movies. They invest in their kids’ future. Their kids play sports. They can pay the $100 for the uniform.

Those dollars stay in the community, that creates economic activity and makes all of us and our whole communities stronger. Remember, 70% [are] people of color and women. These are households that are traditionally underserved. Today is Latina Equal Pay Day. Half of the people who will get this increase are Latino Latina people. This is remarkable.

KW: I’m going to open it up to questions from the audience.

RICH EHISEN: Tim is on that end, and I’m on this end. If you have a.

KW: Question just out.

RE: There, we have a hand and get our attention. Do you have anything on zoom?

TIM FOSTER: No, nothing on Zoom at the moment. So if you have a zoom, if you’re on zoom and you have a question, put it in the Q&A function and we will try to get to that.

AUDIENCE MEMBER: Thank you. I remember it was about this debate about the wage increase for, you know, these health care workers. I think one of them was from one of the lawmakers, too, who was against it… that it would affect other rising costs. Okay. Could you speak to that? And is there any truth to that perception?

JB: I think I think the data is clear that when costs are increased, it’s because executives and shareholders have decided for the cost to be increased. There is money outside of the cost of a good to help support the wage increase. And there’s, in every sector, we look in the look at the Special Session and our conversations there. Right. Where are the, you know, as as consumers are paying more across the board for everything. The people who make profit off of those industries are also getting wealthier at the same rate. That’s not a coincidence.

The wages aren’t what’s going to break the bank. The wages aren’t the thing that’s going to trigger the wage increase or the cost of goods. What’s going to trigger that is a decision by executives to absorb that rather from the wealth and the income from the high ups and push it on to the consumer. And so we have to have a shared narrative and understanding that that’s the case, that increasing wage does not necessarily have to increase costs. That’s not a one for one. And we can’t accept that narrative. That’s a false choice that people are showing ,are presenting to us. It’s a lie and we need to call it out for what it is.

BC: So if I recall correctly from the most recent statistics, which are, I think 2022, perhaps 2023… Revenues in excess of costs for hospitals in California are on the order of $9 billion, which is kind of a lot of money. So they’ve clearly recovered.

There was a bad moment during the pandemic. I think we all know that. And hospitals rightly got help getting through the pandemic, although I will say those who had more seem to be more able to take advantage of that help, as is often the case. But I will say we are back to a world in which hospitals bring in billions.

And you notice I very carefully said revenues in excess of costs, because in theory, much of healthcare is nonprofit. But when you have nonprofit systems that have as much in investments as they spend on care, it’s kind of hard to think of them as nonprofits. So.. this is just a perspective that health access has and that we a lot of the work at the Office of Health Care Affordability has helped to reveal.

JB: That’s right. And and we see that lie perpetrated across… every time. It’s like we have amnesia. “Oh, no. The wages are going up. People are going to lose their jobs.” And you saw this happen in the press and certain pundits, not Calmatters…. promoted this idea like, oh, the jobs are going to go away. And when the data came out, the jobs didn’t go away, and nobody apologized.

Nobody apologized to the fast food workers, for example, in that case that organized very poor, unrepresented workers who organize for their wages increased. Nobody apologized for telling this truth and something that had no factual, historical you know, truth to it. And yet the data shows the jobs didn’t go away. People still have their jobs and they have their increased wages. So these myths that we tell about working people’s victories harming all of us, we have to be able to push back on that and and do it together.

BC: So there are now literally hundreds of studies showing that increases in the minimum wage do not substantially affect employment, and that instead, exactly what Jess described is what happened.

The first study was actually an increase in the minimum wage in a state somewhere. Pennsylvania, New Jersey, there’s a third state. One state increased the minimum wage. The others didn’t. And Card and Krueger, they should have a Nobel for this. They did an actual real world… it was a real world experiment. And they went and looked.

What happened was employment increased in the fast food industry because people had money to go out and go and spend. And so exactly what Jess described about how low wage workers who get a raise spend it in their community. They’re not putting it in stock portfolios. They’re not buying yachts. They’re not buying a third house. They’re going to the local store and buying clothes there. Maybe they even get crazy and save a little money for the kid’s college education. It’s the sort of thing people should be able to do.

KW: Are there any other questions. Or, close this out?

RE: Well, I’ve got one here. Unless someone else does. Just curiosity. Going back to Prop 35 and the targeting of the money, the MCO tax. You know, based on who is in support, it seems to be very popular. It’s clearly polling very well. But there are some folks who maybe have issues, particularly with their kids, who are not going to be the beneficiaries of the MCO tax. And I guess the question is around the flexibility that you talked about. We were talking about from just from a budget perspective, but from a health perspective, who might be getting left out of the benefit of Prop 35 targeting that money? To specific areas.

BC: So the as I mentioned, the agreement reached between the governor and the legislature about the budget, invested in a number of things that the proposition does not. And that includes things like kids… continuous coverage for kids under age five, and adult day health. They had the flexibility to do something somewhat different than what the proponents of the measure had done. I think my suspicion is they did it in the hopes that the that that would be the agreement. It didn’t. It hasn’t at this moment the proposition proceeds.

Kristen Hwang, Calmatters; Jess Bartholow, SEIU California; Scott Graves, California Budget and Policy Center; Beth Capell, Health Access California; Michelle Cabrera, County Behavioral Health Directors Association of California. Photo by Joha Harrison, Capitol Weekly.

So I think that….There are people who feel very strongly on both sides about this. The Children’s Partnership, which is on our board would be one of them. The California Pan Ethnic Health Network,another consumer group representing communities of color, would be another. We have… and so there are people who feel very strongly that the agreement the governor and the legislature reached was a more appropriate approach.

There are others that feel very strongly, very strongly support the initiative and think it’s the right way to go. I will say it’s… Scott alluded to this…. It’s the investments that are being made are improvements. They’re not base funding in Medi-Cal. And so that’s something to keep in mind. They’re enhancements to specific rates. And this is true whether it’s the proposition or the budget deal. They’re not the base funding for Medi-Cal. To that, we look to the larger budget discussion, which is why this is such an important panel.

JB: And I would say for those for those listening in and here in the room today, if you haven’t seen it, there was an op ed by by Senate Budget Sub Chair Menjivar and the president and CEO of CPEHN… And it was in the East Bay Times. Take a look at it. It talks about who will be who will lose if this proposition passes.

Continuous eligibility refers to a policy to choose to keep low income kids who are enrolled in the program continuously enrolled until they’re five years old. For clear and obvious reasons, California was a leader in understanding the harm to children that can be caused by poverty and other traumas and how important those young years were.

We had our first understanding of the ACES, the Adverse Childhood Experiences. We know that if we provide health care continuously to this population of people, we’re going to be able to make a really big difference to long term health of our population. And just be more human… to the children in our state. So this this would be one of the sad parts, really sad parts of the of the proposition passing.

We had a little conversation preparing for this panel about whether or not we felt like it would go away, or whether or not we’d have to find other sources of funding for it. Right. And what’s what’s the conversation look like? I think we’d all I think everybody in this, this room would want to fight for those revenues. But then that also takes away from other important programs and efforts that we’re hoping to achieve in the health care space. There were vetoes on a lot of health care bills this year. And emerging needs being identified, opportunities, best practices, all of those things that we’d have to walk away from if this if this proposition passes and we have to secure those funds first.

KW: That takes us to time. So I will let Rich… your time to close this out.

RICH EHISEN: All right. Well, thank you all very much for attending, both online and in person. We very much appreciate you being here.

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