CMA Capitol Insight With Anthony York: June 23, 2015
CMA Capitol Insight is a biweekly column by veteran journalist Anthony York, reporting on the inner workings of the state Legislature.
Finding the Fix: Healthcare and Transportation
Democratic lawmakers and Governor Jerry Brown came to agreement on a $115.4 billion spending plan this week, which included billions more for schools, the California State University system, and child care, while agreeing to expand Medi-Cal coverage to thousand of undocumented children.
Despite some of the details of the landmark agreement, the budget may be more notable for what was not in the spending plan. Specifically, the governor has called two special sessions for the Legislature to deal with key issues that lawmakers could not figure out how to fix: transportation and healthcare.
Practically speaking, the special sessions are an opportunity for the governor and Democrats to separate out key sticking points that would require additional revenues, and therefore bipartisan support, to get to the two-thirds vote necessary to pass new taxes.
And it is no accident that the governor separated out two issues where there has actually been bipartisan agreement — at least rhetorically — that more funding may be needed to solve some very specific problems.
The special session on healthcare will include discussion of the managed care organization (MCO) tax — a concept that Gov. Brown has supported, and in the past has had the backing of a handful of key Republicans in the Legislature.
California stands to lose over $1 billion in federal healthcare funding through potential elimination of the current MCO tax. The governor proposed a revision of the tax in his January budget, which will be the starting point for discussions in the upcoming special session, which was officially gaveled down last week.
Another major issue in the healthcare session will be Medi-Cal reimbursement rates. California’s version of Medicaid is now the healthcare provider for more than one-third of all Californians, and yet more and more Medi-Cal recipients are finding it harder to find a doctor because fewer providers can afford to keep taking on new patients in the program.
California has the lowest reimbursement rates in the nation. In recent weeks, there have been signs of thaw in Governor Brown’s habitual refusal to increase rates, with indications that there may be some room for agreement if the administration can extract certain reforms to the Medi-Cal system.
On the issue of transportation, the Brown administration has identified a need of more than $50 billion to update, maintain, and build highways and roads. Ironically, some of those problems have been made worse by environmental progress.
A major source of money for roads is the state’s gasoline tax. The tax is an excise tax, meaning it is a flat tax of about 18 cents per gallon. Regardless of the price of gas, the tax remains the same per gallon.
In recent years, automobile fuel efficiency has increased tremendously, decreasing the amount of gas used by California drivers per capita. While that’s good news for the environment, it means the tax revenues used to maintain the roads have not kept pace with the need for maintenance and construction.
Brown said he would consider a per-mile tax that would ensure that hybrid and electric vehicle drivers are paying their fair share of road maintenance money.
The special sessions also mark a more important, fundamental shift in the governor. In recent days, he has indicated that his pledge that any new tax must be approved by voters expired after his first term. Brown’s willingness to consider new revenues for transportation and healthcare — tax hikes that would not be submitted for voter approval — may be a harbinger of things to come, as a host of advocates prepare a series of tax packages for next year.
Proposition 30, pushed by Brown and passed by voters in 2012, begins to expire in 2016. When it rolls off completely in 2018, it could mean about $9 billion less for state coffers. There are a number of proposals aimed at maintaining that revenue, and many ideas are being kicked around. They include some kind of extension of Proposition 30, which would keep income tax rates high on upper income earners. Other proposals include changes to commercial property tax rules or a potential sales tax on some services, though healthcare, education, and other key services would be exempt from the new levies.
The signals from Brown are turning from red to at least yellow when it comes to taxes, and what happens during the next few weeks may be telling for how the larger tax reform discussion will play out in 2016.