Wednesday, April 6, 2011

A Funny Thing Happened on the Way to Cutting California's Budget

It's fashionable these days to think that the idea of cutting government is on everyone's mind in places like Sacramento and DC, and that drastic reductions in public spending are being seriously contemplated at the highest levels of power. Yet we continue to have the following nagging doubt: what if these slippery sleazebags don't mean what they say, and what look like spending cuts aren't nearly what they seem? It's depressing to harbor these doubts. It's even more depressing when it appears we're right.

This piece by Daniel Weintraub digs into Gov. Brown's proposal to balance the budget, and reaches this unfortunate conclusion: the spending reductions already passed aren't likely to yield the $11 billion in savings as touted, leading to a new shortfall that will exist even if the Governor succeeds in getting all the cuts and tax extensions he's pursuing. Here's why:

1. The Governor's budget assumes that its new contracts with state safety workers, engineers, and scientists will yield savings of 10% on these contracts. The non-partisan Legislative Analyst, however, suggests that the safety workers' contract will only save 3%, and the other contracts only 6%. The contracts will also replace the "3 furlough days per month" rule imposed by Schwarzenegger with a single unpaid vacation day each month, and give workers more paid days off, both of which are likely to increase the cost of these employees.

2. A new law requiring recipients of in-home care to get a doctor's authorization to continue these services is expected to save California $120 million next year. Yet it doesn't account for the administrative cost of monitoring this documentation, or for the possibility that doctors might bill Medi-Cal for this visit. It also assumes that everyone receiving these services receives the average quantity of them, when it's likely that those losing services through this requirement are less severely disabled than others.

3. The state expects to save $44 million by capping at 7 the number of doctor visits a Medi-Cal recipient can have each year. But it doesn't account for the fact that doctors have wide discretion to override the requirement.

4. Sacramento thinks it will save many, many millions by cutting Medi-Cal payment rates to doctors and facilities by up to 10%. Given the federal government's history of blocking such cuts, we're as skeptical as Weintraub that they'll ever take place.

So, consider yourself pwned if you thought the state only needed to come up with another $15 billion to have a budget that was balanced in any meaningful way.

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