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Governor Signs State Budget

Today, Gov. Brown signed the 2015-16 state budget, along with a package of nearly 20 trailer bills. Last week, the Governor and legislative leaders announced a budget agreement one day after the Legislature passed its budget on June 15. The Administration had made it clear that it had concerns with much of the additional spending contained in the Legislature’s budget, and almost all of the additional spending was removed from the final budget plan. Unfortunately, the final budget compromise signed today eliminates the partial restoration of the Medi-Cal AB 97 payment cuts to hospital-based, distinct-part nursing facilities, as well as restorations for doctors and other providers. The final budget plan also eliminates the provision that would have restored optional Medi-Cal benefits that were done away with in 2009.

The final budget does include funding to extend Medi-Cal coverage to undocumented children beginning in May 2016. The expansion, assumed to cover 170,000 undocumented immigrant children under the age of 19, is projected to cost $40 million in the fiscal year and approximately $130 million annually once fully implemented. It also eliminates the 10 percent Medi-Cal payment reductions, pursuant to AB 97, for dental providers.

As part of the budget agreement announcement last week, the Governor also announced that he was calling two special sessions to address additional funding concerns. The special sessions, which formally began June 19, will focus on 1) fixing California roads, highways and other infrastructure; and 2) shoring up health care financing. The purpose of the session on health care is “to consider and act upon legislation necessary to enact permanent and sustainable funding from a new managed care organization tax and/or alternative fund sources.” The Governor proposes that the Legislature enact a new managed care organization tax to provide $1.1 billion annually to stabilize the state’s General Fund costs for Medi-Cal funding. That funding would be sufficient to continue the restoration of the 7 percent in-home supportive services hours and for additional rate increases for Medi-Cal providers. Increased taxes on tobacco products will also be considered during this special session.

The Legislature’s budget had estimated higher revenue figures than the Administration’s budget, and included approximately $750 million more in General Fund spending than the Governor’s revised budget in May. The partial restoration of provider rates related to AB 97 was $48.6 million of that additional spending. The final budget reflects the lower revenue estimates from the Department of Finance and contains just $61 million more in General Fund spending than the budget proposed in May by the Governor.