Paul Ryan explains the American Health Care Act
California faces budget gap amid uncertainty over Obamacare
BY REID WILSON -
SACRAMENTO, Calif. — California Gov. Jerry Brown (D) on Tuesday proposed billions of dollars in cuts to state programs as falling revenue growth drives tax collections hundreds of millions of dollars under projections.
The cuts are aimed at eliminating a $2 billion budget gap. That's a far smaller deficit than the $27 billion hole Brown inherited when he took office in 2011, but it represents a reversal of fortune after years of revenue growth fueled by a booming stock market.
"California has the most progressive tax system in the United States. We do ask those who make the most money to pay the highest percentage of taxes. But as a corollary, we have one of the most unreliable revenue bases in the entire country," Brown said Tuesday. "It requires we keep a very close eye on the balance of our budget. And while we have sometimes the highs, they are followed always by the lows."
Personal and corporate income taxes and sales taxes have all fallen short of budget projections, said Michael Cohen, Brown's finance director. California relies disproportionately on capital gains tax revenue, meaning the state is unusually dependent on the performance of the stock market.
The budget proposal anticipates spending $122.5 billion over the next year, slightly below the $122.7 billion California spent last year.
California's revenue forecasts have fallen short of projections in five of the last seven months. At the same time, Brown said, state budget projections could be thrown into chaos if Republicans in Congress roll back the Affordable Care Act, which provides billions of dollars to California's Medicaid programs.
"I know the Republicans are on that track [to repeal the ACA], but the reality is going to be far more difficult and far more disruptive than they're expecting," Brown said. "If they do go down that road, it will be extremely painful for California."
Medi-Cal, the state's Medicaid program, anticipates spending $102 billion over the next year. The federal government covers most of those costs under Obamacare's Medicaid expansion program, money that could be at risk if Congress makes significant changes to existing law.
Some Republicans applauded Brown's cautious approach, but they warned that changes to the Affordable Care Act at the federal level were likely to cost California more than Brown's budget anticipates.
"If ObamaCare blows up, we're going to have real trouble," said state Sen. John Moorlach (R), who represents Orange County. "Maybe the play is, let's try to unwind this in a humane way."
Brown's budget proposal, which now goes to the Democratic-controlled legislature for months of negotiations, calls for cutting back projected growth of some state programs. It also adjusts money that would go to public schools under Proposition 98, a voter-passed measure in 1988.
Brown will ask legislators to implement some new taxes and fees, including a gas tax hike that would bring in $5 billion over a decade and a $65 fee on new vehicle purchases.
Voters in November approved other new revenues, including a $2 per pack increase in cigarette taxes and an extension of tax hikes on the wealthiest Californians first passed several years ago.
And Brown plans to ask the legislature to extend California's cap-and-trade program beyond its current 2020 sunset date. The program has raised billions of dollars in auction proceeds to reduce greenhouse gases, and Brown's budget anticipates another $2.2 billion in sales.
The proposal also plans to set aside more than $1.1 billion for California's rainy day fund. By the end of the budget cycle, Brown's budget anticipates having set aside $7.9 billion for the next economic downturn, about 6 percent of the entire state budget.
State budget analysts anticipate continued growth in coming years, though at a slower rate than in the best years of the current economic recovery.
"California is growing, but less than we expected," Brown said. But, he warned: "We're now in almost the third-longest recovery" in post-war history. "So a downturn is inevitable."
"We're on the cusp of a financial calamity, and the governor senses it," Moorlach said.
Brown said even a modest downturn could cost the state $18 billion in lower tax receipts.
Hours after taking the oath of office, President Donald Trump followed up on his campaign pledge to start chipping away at Obamacare and curb federal regulations.
Trump signed an executive order Friday evening in the Oval Office “to ease the burden of Obamacare as we transition to repeal and replace,” White House press secretary Sean Spicer told reporters.
White House Chief of Staff Reince Priebus also sent a memo titled “Regulatory Freeze Pending Review” to block all pending regulations under review but not yet in the Federal Register.
The new president’s goal is to repeal the Affordable Care Act, better known as Obamacare, which will require congressional actions.
“Potentially the biggest effect of this order could be widespread waivers from the individual mandate,” Larry Levitt, a senior vice president at the Kaiser Family Foundation, told The Washington Post.
Currently, individuals who do not have health insurance and do not qualify for an exemption must pay a $695 annual fee or up to 2.5 percent of annual household income.
“They’re very aware of the fact that the first job is to prevent the Affordable Care Act from doing more damage than it’s already done,” said Ed Haislmaier, senior research fellow in health care policy at The Heritage Foundation. “As we saw with the premium increases in the fall, people who are buying individual or small employer coverage without a subsidy are getting hammered.”
Haislmaier cautioned, however, that the executive order is “the beginning of the process.”
The order states that it is the goal of the Trump administration to repeal the law, but:
In the meantime, pending such repeal, it is imperative for the executive branch to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the act, and prepare to afford the states more flexibility and control to create a more free and open health care market.
The order uses one phrase–“To the maximum extent permitted by law”–several times and continues:
[T]he heads of all other executive departments and agencies … with authorities and responsibilities under the act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the act that would impose a fiscal burden on any state or a cost, fee, tax, penalty, or regulatory burden on individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health insurance, or makers of medical devices, products, or medications.
Democrats have argued that gutting the law that mandates individuals buy health insurance and employers provide it would leave millions uninsured. Republicans say the mandate has been overly burdensome.
Obamacare has seen an increase of about 14 million insured, based largely on Medicaid expansion.
However, the Obama administration admitted that health care premiums increased by an average of 25 percent across 39 states in October.
Further, 33 states have fewer insurers offering coverage on Obamacare in 2017 than in 2016. Only one state, Virginia, gained insurers. Five states have one insurer, while 13 have just two. One-third of all U.S. counties will have just one insurer.