Los Angeles Times: Brown releases revised budget plan with $6.6-billion windfall


Increased revenue from taxes on the wealthy would be used for schools and business tax credits. Brown says some tax hikes are still needed to wipe out the state’s red ink, but GOP lawmakers disagree.

By Evan Halper and Anthony York

May 16, 2011

State revenue has rocketed to a projected $6.6 billion beyond expectations, a windfall that Gov. Jerry Brown wants to use to stabilize education spending and help repair California’s battered finances.

In the revised budget plan that Brown released Monday, schools would receive about $3 billion that would otherwise have been deferred, aiding districts’ ability to plan the academic year. The proposal also devotes some of the unanticipated money to business tax credits and to delaying a portion of the tax increases the governor had sought earlier this year.

But although the revenue surge erases a substantial chunk of what had been a $15-billion deficit, Brown said it was not enough to put the state in the black. His spending plan still relies partly on renewing tax increases that are due to expire this year or have already expired.

“The wall of debt must be brought down,” Brown said, alluding to the borrowing, accounting shifts and other maneuvers that have left California’s books perpetually unbalanced. “I don’t want to continue the games and gimmicks of the past.”

The governor’s continued push for more revenue, however, is complicated by the unexpected receipts: Republican lawmakers are already pointing to the revenue surge as one reason to block his plans.

“With $6.6 billion in new revenues, Republicans are right — we don’t need, and it’s ridiculous to ask voters for, five years of new taxes,” said a statement issued by GOP Senate leaders.

Brown is using some of that revenue to modify his tax plan, which he now hopes to achieve by persuading lawmakers to enact the income, sales and vehicle levies and then asking for voters’ blessing. The income tax rate increase he had previously proposed for this year would not be enacted until 2012 under his revised blueprint. The change would save taxpayers $2 billion.

“We modified it to give taxpayers a break,” the governor said.

The extra revenue would also be used to preserve a scaled-down “enterprise zone” program, which gives tax credits to businesses that hire workers from blighted neighborhoods.

Also in the governor’s plan are some reductions. He calls for the elimination of 43 boards and commissions, some of which pay six-figure salaries to their members and have been labeled patronage posts by their critics. And the administration announced last week that it plans to close 70 state parks to save money.

State finance officials attribute the revenue windfall — achieved despite the state’s high unemployment and stagnant wages — to a sharp increase in earnings of the wealthy, who pay tax rates much higher than those of average earners. California’s financial health has long been tied to the fortunes of high earners.

“It looks like the upper-income taxpayers are having a greater gain in their income than previously anticipated,” said Brown’s budget director, Ana Matosantos. Soaring investment profits played a role; capital gains tax collections are on track to rise 60% for 2010 and 45% for this year, according to the governor’s budget.

School officials welcomed the news that Brown wants to boost education payments, allowing them access to much-needed cash sooner than expected.

Kevin Gordon, an advisor to education groups in Sacramento, said funding delays like the one Brown initially proposed had thrown school finances into turmoil. The revised budget will provide “real, green money” that can be plunged into classrooms, Gordon said.

But administration officials cautioned that much of the money would disappear without the proposed tax increases and that the state could be hobbled by tens of billions of dollars in debt in the future, possibly unable to fund crucial government programs.

The governor’s latest plan comes after he and lawmakers pared $11 billion from an estimated $26-billion deficit by cutting programs and taking other measures. Brown declared the cuts “the most significant reductions in government probably in the last decade.”

Many of the cuts came from programs serving the poor, elderly and children. State-subsidized child care for 11- and 12-year-olds was eliminated, and one year was sliced from the duration of welfare aid for low-income families.

And welfare grants were cut, as were cash grants for the low-income elderly, blind and disabled. The reductions will make it more difficult for the poor to go to doctors and for the elderly, blind and disabled to receive subsidized care in their homes or institutions. State university funding plunged by $1 billion. Community college fees will grow from $26 to $36 per unit.

About $2 billion was also diverted from voter-approved mental health and early childhood programs. Advocates for the children’s services have sued, and Brown’s revised budget sets aside $1 billion to pay for the programs in case the state loses in court.

Brown did make some concessions to GOP lawmakers Monday — for example, maintaining a smaller version of the enterprise zone program they had fought hard to keep. But he is sticking to his plan to eliminate another form of government assistance to corporations: subsidies for firms that develop downtrodden neighborhoods.

He also is still pushing to end a tax break that can save companies money when moving operations out of state. He proposes using the $940 million the state would gain from such a change to create a new tax break for businesses to offset the cost of their manufacturing equipment.

Absent from the governor’s new plan are proposals to overhaul the state’s pension system or put stricter limits on state spending — both key GOP demands. But Brown, who needs some Republican votes to raise taxes and to put any increases before voters, said he was open to such changes.

Brown acknowledged that the spending plan lawmakers ultimately pass could be markedly different from his proposal.

“I’ve given you the blueprint,” he joked, “and now the other architects will start to screw it up.”

Kaiser Health News: High-Risk Health Coverage Pools Grow By 6,000 Enrollees


By Phil Galewitz

KHN Staff Writer

May 06, 2011

Since February, nearly 6,000 people have been added to the new federally funded health insurance program for uninsured people with pre-existing medical conditions, according to data released today.

But the numbers still remain far below initial estimates for the high-risk pools established in the 2010 health law. Among the reasons cited for the low enrollment are the high premiums and consumers’ lack of awareness about the program.

As of the end of March, 18,313 people have signed up for the Pre-Existing Condition Insurance Plan program — up from 12,437 on Feb. 1. The plans, which are run either by individual states or by the federal government if the states opted not to participate, became available to most people in September.

“We’re encouraged by the jump in enrollment and we’re excited to build and expand on our recent outreach efforts to reach even more people,” said Richard Popper, director of insurance programs at the federal Center for Consumer Information & Insurance Oversight.

The Congressional Budget Office has estimated that as many as 4 million uninsured Americans would be eligible for the program and that 200,000 would be enrolled by 2013. The Chief Actuary of Medicare and Medicaid estimated that 375,000 people would enroll in these high risk pools by the end of 2010.

Citing the low enrollment, some Republicans including Rep. Fred Upton, R-Mich, have criticized the administration’s handling of the program.

Michael Keough, executive director of Inclusive Health, which runs the plan in North Carolina, credits increased awareness and lower premiums for the enrollment increase.

His plan cut rates by 10 percent across the board in January and rates fell as much as 30 percent for people between ages 55 and 64. The average premium for a 50-year-old in the plan is $285 with a $3,500 deductible.

More than 1,500 people have signed up for the program in North Carolina as of April, doubling enrollment since February.

“The trend line is increasing and that is what you want and the program is starting to have the desired impact,” Keough said. “The plans still have the shadow of the original expectations to live with however accurate or not.”

Enrollment varies widely by state. Pennsylvania has the highest enrollment with 2,684 people while North Dakota has enrolled just six people.

The U.S. Department of Health and Human Services lowered premiums in the plans it runs by about 20 percent this year and asked the states running their own programs to consider lowering their rates as well. Despite the slow start, Obama administration officials have said they are pleased with the program.

The plans are intended to serve as a bridge until the insurance market reforms are implemented in 2014, when insurers will no longer be able to deny coverage or charge higher rates for people with pre-existing conditions.

To be eligible for the new program, patients must have been uninsured for at least six months and have a pre-existing condition. Most states require applicants to show proof that they’ve been rejected for coverage by a private insurer within the past six months or been denied coverage for certain benefits. At least a dozen states, including Pennsylvania, give applicants the option to provide a doctor’s note as proof they have a pre-existing condition such as cancer or rheumatoid arthritis.

HHS has hired a private contractor to administer the programs it runs in states but generally they have enrolled fewer people than states running their own program.