Public Health Services and the Governor’s Proposed 2015-16 Budget: State General Fund Support Remains Down, Other Funding Sources Are Up

In separate hearings next week, the Assembly and Senate budget subcommittees that focus on health services will take an initial look at the Governor’s 2015-16 proposals for the state’s Department of Public Health (DPH). DPH is responsible for a range of public health activities, such as controlling infectious diseases, improving health outcomes for pregnant women and children, and ensuring the safety of food, drugs, and medical devices. DPH also licenses, inspects, and responds to complaints regarding health care facilities in California.

Under the Governor’s 2015-16 proposal, state and federal funding for DPH ($2.66 billion) would nearly equal the inflation-adjusted spending level from 2007-08, the fiscal year during which the Great Recession began. (For purposes of comparison, our 2007-08 spending figure excludes bond funds spent through DPH as well as funding for the Drinking Water Program, which was transferred to the State Water Resources Control Board last year. In addition, DPH spending for both fiscal years excludes dollars that are provided as “reimbursements” from other departments.) However, while overall funding for DPH would be about the same as it was seven years ago, the mix of funds clearly has changed, as shown in the chart below.

DPH now relies more on federal funds and state special fund dollars than it did in 2007-08. The Governor’s proposal assumes the state will receive $1.8 billion in federal funding for public health activities in 2015-16, up from $1.6 billion in 2007-08, after adjusting for inflation. The Governor also proposes to spend about $780 million in state special fund dollars through the DPH budget in 2015-16, up from an inflation-adjusted level of nearly $650 million in 2007-08.

In contrast, DPH receives substantially less General Fund support than it did in 2007-08. That year, state policymakers provided approximately $410 million from the General Fund — after adjusting for inflation — for public health activities. As the recession worsened, policymakers cut General Fund support for DPH in order to help close large budget shortfalls. Those recession-era cuts largely remain in place under the Governor’s proposal, which would provide just $124 million from the General Fund to support public health services in 2015-16.

It’s not clear to what extent — if at all — DPH has been able to shift federal funds and/or state special fund dollars in order to mitigate the impact of General Fund cuts. What is clear, however, is that several state-level public health initiatives that were eliminated in the wake of the Great Recession have not been revived. This includes the California Children’s Dental Disease and Prevention Program, which ceased operating after it lost General Fund support — roughly $3 million — in 2009. This program provided school-based dental services, such as sealants and fluoride rinses, to more than 300,000 primarily low-income children each year. Yet, despite the demonstrated need to improve low-income children’s access to dental care, the Governor’s proposed budget fails to restore state General Fund support for school-based oral health prevention services in 2015-16.

For state lawmakers, the fate of this critical oral health program — and that of other public health services that were eliminated in recent years — shows the importance of examining not only what’s in the Governor’s proposed budget, but also what’s been left out.

— Scott Graves

State Revenues Continue to Bear the Mark of the Great Recession

The budget signed by Governor Brown last month assumes that state revenues will total $137.0 billion in 2013-14. This consists of $97.1 billion in General Fund revenues — the primary source of funding for state services — and $39.9 billion in special fund revenues — proceeds of taxes, licenses, and fees that are designated by law for specific purposes.

These estimates are remarkable for a couple of reasons. First, revenues as a percentage of the California economy in 2013-14 are projected to be roughly equal to the 40-year average, which is 7.5 percent. In other words, as a share of the state’s $1.8 trillion economy — as measured by state personal income — revenues in 2013-14 are expected to come in right around the historical trend line going back to 1974-75. This is notable because California voters approved two tax measures last November — Propositions 30 and 39 — that are projected to boost state revenues by about $7 billion in 2013-14. The fact that revenues are expected to be near the historical average in 2013-14 even with the new revenues approved by voters — rather than significantly above that average — highlights the deep hole that the Great Recession and years of tax cuts created in the state’s tax system, which Propositions 30 and 39 helped to fill.

The 2013-14 revenue estimates are also remarkable for a second reason: Total projected revenues — $137.0 billion — are more than $20 billion below the level they likely would have reached if the Great Recession had not occurred, as we explained in a blog post earlier this year. In other words, if California’s economy hadn’t hit a steep downward slide in 2008 and instead had increased to $2.2 trillion by 2013 (as state analysts expected back in 2007), total state revenues likely would exceed $160 billion in 2013-14, based on revenues comprising 7.5 percent of the state’s economy. Instead, California’s smaller-than-expected $1.8 trillion economy is projected to generate less than $140 billion to support state services during the current fiscal year. This $20 billion-plus revenue gap represents dollars that are not available to support state investments in education, child care for working families, transportation, and other public systems and services that promote economic growth and broadly shared prosperity.

Of course, it’s possible that revenues will surpass the level assumed in the 2013-14 budget. For one thing, lawmakers adopted the Governor’s relatively conservative General Fund revenue projection for 2013-14, which was $2.7 billion below the Legislative Analyst’s forecast. For another thing, the state finished 2012-13 — which ended on June 30 — with General Fund revenues running just over $2 billion (2.1 percent) ahead of the Governor’s May Revision forecast. Yet, even if total state revenues in 2013-14 come in a few billion dollars higher than anticipated, that larger amount would still be close to the historical average as a share of California’s economy (7.5 percent) and would remain far below the level that revenues likely would have reached but for the Great Recession.

— Scott Graves

New CBP Report Looks at State Corrections Spending After Realignment

In 2011, state policymakers transferred responsibility and funding for public safety and other services from the state to the counties. A major part of this “realignment” was that counties assumed responsibility for certain “low-level” offenders and parolees, all of whom previously would have served state prison sentences and been supervised by state parole agents upon release.

Yesterday, the CBP released a new report that examines state spending on corrections and assesses how it has changed since realignment. A Mixed Picture: State Corrections Spending After the 2011 Realignment shows that:

• While state corrections spending is below the pre-realignment level — with annual General Fund savings projected to be $1.3 billion in 2013-14 — these savings are largely offset by county corrections spending that is funded with dedicated special fund revenues provided through the state budget.

• Per capita costs for California’s prison and parole populations have continued to rise in recent years and are much higher than in the mid-1990s, even after adjusting for inflation.

• More than half (56.5 percent) of the state corrections budget goes toward prison security and operations, while nearly one-quarter (23.7 percent) of corrections dollars pay for adult inmate health care.

A Mixed Picture also includes a status report on the federal court order to reduce California’s state prison population.

— Steven Bliss

Wealthiest 1 Percent Would Provide Most of the New Revenues Raised by Proposition 30

A new CBP Budget Brief released today looks at Proposition 30, which was placed on the November 6 ballot by Governor Jerry Brown via the initiative process. Proposition 30 would increase personal income tax rates on very-high-income Californians for seven years and raise the state’s sales tax rate by one-quarter cent for four years. The CBP has endorsed this ballot measure.

Proposition 30 would take an important step toward addressing California’s budget gap over the next few years. The measure would provide much-needed new revenues – an estimated $6 billion per year on average when fully implemented, according to the Legislative Analyst’s Office – and would help shield public priorities, such as education and safety-net supports for families hard-hit by the recession, from further budget cuts.

State General Fund revenues are lower today as a share of the economy than in all but two of the past 40 years. The state’s budget challenges are partly the result of a steep drop in revenues brought about by the Great Recession, but the shortfalls also reflect years of tax cuts, including large, permanent corporate tax breaks enacted during the depths of the downturn. 

Lacking sufficient revenues, lawmakers bridged recent years’ budget gaps through deep spending cuts to virtually all areas of the budget. To take one example, the state reduced Proposition 98 spending for K-12 education by $7.4 billion between 2007-08 and 2011-12 – a drop of $1,271 per student.

Proposition 30 raises new revenues by asking those who have benefited most from the economic growth of recent decades to contribute the most to laying the groundwork for California’s future prosperity. As shown in our Budget Brief, the measure raises nearly 80 percent of its revenues from the wealthiest 1 percent of Californians, who have annual incomes over a half-million dollars and who experienced substantial income gains over the past two decades. The average inflation-adjusted income of the top 1 percent was 82.0 percent higher in 2010 than it was in 1987, while the average inflation-adjusted income for Californians in each of the bottom four fifths was substantially lower than in 1987.

Low- and middle-income Californians  – who bore the brunt of the Great Recession’s effects on the job market – would see very small tax increases under Proposition 30, on the order of $24 to $55 annually in sales and personal income tax increases combined. In contrast, those in the top 1 percent would pay an additional $21,883 in taxes on average.

Proposition 30 presents voters with the opportunity to begin reversing a decade of disinvestment in California. The measure looks to the state’s wealthiest to provide the bulk of the revenues that would help stabilize the state budget and begin to restore funding for education and other critical public services, so that all Californians can share in the state’s future prosperity.

­– Hope Richardson

State Spending Reflects Californians’ Priorities

Public opinion polling shows that Californians strongly support state spending for education and health and human services, but are less enthusiastic about spending on state prisons, also known as corrections. Solid majorities of the state’s residents, for example, say they are willing to pay higher taxes to support public schools, higher education, and health and human services in order to help close the budget gap, according to a survey conducted by the Public Policy Institute of California in May. In contrast, only about one out of six Californians (17 percent) said they would pay higher taxes to support prisons.

The 2012-13 spending plan signed into law by Governor Brown last month reflects – for the most part – these priorities. More than 50 cents out of every General Fund dollar supports public schools, colleges, and universities, and nearly 30 cents out of every dollar goes to health and human services, including health care and cash assistance for low-income children and seniors. In other words, well over three-quarters of the state budget, roughly 81 cents out of every state dollar, goes to areas that Californians say are their top priorities.

The share of state spending allocated to corrections – just under 10 cents out of every state dollar in 2012-13 – is down compared to 2010-11, but remains higher than many Californians might prefer. Prisons’ share of the state budget, however, is projected to drop further in the coming years, to less than 8 cents out of every state dollar. This decline is due to the recent transfer, or “”realignment,” of responsibility for low-level offenders from the state to the counties, which has begun to shrink the prison population and to move the state toward compliance with a US Supreme Court order to reduce prison overcrowding.

While rarely addressed in public opinion surveys, the remainder of the budget – roughly 9 cents out of every state dollar in 2012-13 – supports veterans services, wildland fire control, environmental protection, and other key public services. This part of the budget also funds the institutions that comprise the state’s system of governance, such as the courts, the Department of Justice, and the Governor’s Office.

Overall, state spending tracks closely with Californians’ priorities and supports the key public structures and services that are necessary for a strong economy and a high quality of life.

— Scott Graves