Babies, bathwater and billions

February 14, 2010

By Wendy Lazarus

Gov. Arnold Schwarzenegger's budget could cost the state twice as much in federal funds for health care as it saves for California taxpayers. Figures from California Budget Project.

If someone handed Governor Schwarzenegger a check for a billion dollars, you probably wouldn’t expect him to tear it up or send it to Washington, D.C. to give to other states. But that’s exactly what he has proposed doing in his FY 2010/11 budget. And his budget would eliminate reliable health care for a million California children at the same time.

To be sure, the looming $25 billion-plus budget hole is a serious challenge that requires wrenching choices. But it is precisely in these tough fiscal times that it’s most vital for the state budget to reflect the priorities and wise budget choices Californians want our leaders to make.

Wendy Lazarus

Although nearly 70 percent of California voters think children not having health insurance is a serious problem, the Governor’s budget proposes to save $78 million in General Fund dollars by cutting back eligibility for kids who need California’s Healthy Families Program. This move would result in over 200,000 children losing their health coverage in one fell swoop in May. The governor also proposes a trigger that would save $126 million in General Fund spending by eliminating California’s Healthy Families program entirely—causing nearly one million children to join the ranks of the uninsured—if our state leaders can’t bring home $6.9 billion dollars in federal funds, a worthy goal but a feat virtually no one thinks is possible.

Dropping nearly a million children from health insurance, as the governor’s proposal contemplates, would result in taxpayers paying more in the long run. Uninsured children still need health care. They are just sicker and it becomes costlier to treat them when they finally get care.

The Governor is proposing to hand over to other states $800 million in federal matching funds per year for children’s health that would otherwise come to California.
But on top of that, the federal government pays California two dollars for every one dollar we put into Healthy Families from the General Fund. So the Governor, who has complained that California doesn’t get its fair share of federal funding compared to other states, is, in fact, proposing that California voluntarily hand over to other states $800 million in federal matching funds per year for children’s health that would otherwise come to California. The amount of federal funds lost to California would be well over $1 billion if we include the lost federal Medicaid matching funds from additional cuts that would be triggered.

There are multiple reasons why California doesn’t get its proportionate share of federal dollars, including funding formulas that need to be addressed. But much of the blame is our own: our leaders have chosen not to invest as aggressively as they could in drawing down available federal matches because of a preoccupation with saving state general fund dollars even when it sacrifices federal dollars equal to or greater than any state savings.

California has used this faulty fiscal logic decade after decade in both Democratic and Republican Administrations, while other states like New York and Illinois have maximized their federal “take home” by investing state dollars to bring down far more federal funds. But California’s policies have cost us much more than lost federal dollars in our budget—we’ve also undermined highly-effective programs like Healthy Families, and we’ve given up the jobs and economic stimulus that programs such as Medi-Cal have been proven to deliver to local communities.

Rather than voluntarily forfeit federal funds, California should build on last year’s success, when health plans, First 5 California, hospitals, and families using the Healthy Families Program all stepped up and found ingenious ways to lower costs and cobble together the General Fund match required to keep the program whole at this critical time. Succeeding again this year would protect our kids. It would also leverage state funds and federal funds for children to the maximum extent possible.

Wendy Lazarus is Founder & Co-President of The Children’s Partnership, a national child advocacy organization, with offices in Southern and Northern California and Washington, DC, working to ensure that all children—especially those at risk of being left behind—have the resources and the opportunities they need to grow up healthy and lead productive lives.

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