Senate Budget and Fiscal Review Committee – Budget Overview Hearing

On Monday, the Senate Budget and Fiscal Review Committee convened their first hearing on the Governor’s 2017-18 budget proposal. Members serving on the Committee include Senator Holly Mitchell (Chair)(D) – who previously served as chair of Senate Budget Subcommittee No. 3 on Health and Human Services –, Jim Nielsen (Vice Chair) (R), Joel Anderson (R), Jim Beall (D), Steven Glazer (D), Hannah-Beth Jackson (D), Mike McGuire (D), Tony Mendoza (D), Bill Monning (D), John Moorlach (R), Richard Pan (D), Anthony Portantino (D), Richard Roth (D), Nancy Skinner (D), Jeff Stone (R), Bob Wieckowski (D) and Scott Wilk (R).

Amy Costa, representing the Department of Finance, along with other key staff, provided the Committee with a general overview of the Governor’s budget proposal and emphasized the Governor’s prudent approach in light of a $1.6 billion deficit and slowing revenue growth. Mac Taylor, representing the Legislative Analyst’s Office, provided comments on the various proposals set forth by the Administration and remarked that the LAO projected the state would receive higher personal income tax revenues than the Governor, noting that the state could have considerably more General Fund revenue in the coming fiscal year.

Legislators questioned the Governor’s $1.6 billion deficit considering the $1.2 billion budgeted transfer to the State’s Rainy Day Fund. Additionally, members challenged the Governor’s savings proposals totaling roughly $3.5 million which exceeds the amount needed to avoid the deficit.

Members also voiced concerns regarding several items of particular interest to CHEAC members including:

Impacts of Repealing the Affordable Care Act. Though the Governor’s proposal continues to assume current federal policies and funding levels, members did inquire of the impact to California should the federal government move forward with a repeal of the Affordable Care Act, given that the Medi-Cal program draws down roughly $18 billion in federal funds for the optional expansion population alone.

The Usage of Proposition 56 (Tobacco Tax Initiative) Funds.  The Governor proposes to allocate Proposition 56 funds to address the growing cost of Medi-Cal; however, members inquired whether this would be consistent with the supplantation of funds versus funding new costs. According to the LAO, despite the perception that the Administration is supplanting costs, proving so is difficult to do. For example, the State could argue that absent the tobacco tax revenue, spending in the Medi-Cal program would be cut, in which case the State would not be supplanting funds.

Coordinated Care Initiative (CCI)/In-Home Supportive Services (IHSS). The Administration has determined the CCI to not be cost-effective for the State. Despite the Governor’s budget proposal continuing the Cal MediConnect program and the mandatory enrollment of dual-eligibles, it discontinues the county MOE, which capped the growth in costs to the county at 3.5 percent. The Committee expressed concern regarding shifting roughly $625 million in costs from the State to counties and encouraged the State to mitigate the impact to counties.

Throughout the next few months, Budget Subcommittees will convene hearings on department specific issues and stakeholder proposals.