Reimagining the Healthy State: Experts weigh in on Calif.’s budget, health reform outlook amid coronavirus crisis

When California Gov. Gavin Newsom presented his state budget earlier this year, the economic future looked bright. Buoyed by billions in surplus, he proposed an ambitious plan to address homelessness and climate change, increase preschool slots and expand the state’s Medicaid program to undocumented seniors.

Now, with the coronavirus threatening hospital capacity, cities and counties sheltering in place, and businesses grinding to a halt, everything is upended, said Scott Graves, director of research at the California Budget & Policy Center, a liberal think tank that analyzes key policy issues facing the state. 

“We have not only a real public health threat, but this novel coronavirus is really affecting the economy, and this is going to have implications for state revenues,” he told reporters attending the 2020 California Fellowship online Tuesday. 

Graves joined Dan Schnur, former communications director for John McCain who now teaches at USC, Pepperdine University and UC Berkeley, and Ninez Ponce, the director of UCLA Center for Health Policy Research to discuss health reform efforts in California, a discussion that took on special relevance as the coronavirus forces sweeping changes across the state. 

An unprecedented health crisis

Amid that growing public health threat, officials are doing everything possible to slow the spread of the virus and shore up the healthcare system. But government intervention will also be needed to offset the widespread economic impact and support the millions of residents without sufficient resources to get through this, Graves said. 

A lot of workers will lose their jobs or have their hours cut. Others aren’t going to be able to work because schools or child care centers are closed and they’re unable to telework. The state will also have to consider the implications for undocumented immigrants or mixed immigrant families who might not have access to health care benefits. 

“We really need to be prioritizing folks who are going to be falling through the cracks and potentially left out of the federal responses that we see,” Graves said.

As these needs grow, expected revenues might not be there. That’s because so much of the projected general fund revenue comes from the personal income tax.  The recent stock market plunges means capital gains are decreasing, and those constitute a major source of the state’s personal income tax revenues. 

“So it’s kind of a danger, a warning signal of our state’s ability to support a robust level of public services in the coming year,” Graves said. 

There is a bright spot: the state’s vast “rainy day fund,” which has been growing substantially over the last few years. The state also created a “safety net reserve” several years ago. And there’s a stabilization account specifically designed for public schools.

“When you take those three into account, we're getting close to $20 billion that we have set aside that we could potentially access to help pay for the kinds of services and assistance that are really going to be needed to help Californians are make it through what could be a very rough period over the next several months,” he said. 

This week, the California Legislature passed bills that allow the governor to spend up to $1 billion to help address the public health crisis as well as allow full funding for public schools despite the closures. 

The road ahead is still uncertain with the depth and length of the state’s recession unclear. 

“This is sort of unprecedented at least for my generation and maybe a generation or two before,” Graves said. “It’s not clear how we’re going to get through this, what it’s going to look like.” 

Planning for a rainy day 

When former Gov. Jerry Brown built up an unprecedented level of budget reserves to guard against future recession, he received criticism from both sides of the aisle, said Dan Schnur.

Democrats thought his spending should be more ambitious while Republicans wanted to see more money returned to taxpayers. 

“Right now, as we head into very uncharted waters, not just terms of health, but economically and budgetary, Governor Brown is beginning to look somewhat prescient,” he said. “And as we attempt to navigate that very, very challenging time period that we're facing, one of the greatest assets that the state has are the reserves that he so insisted on over the course of his last two terms in office.”

Newsom added to those reserves, though he also increased spending in areas such as health care. But despite these significant expansions in health care, a move toward a single payer system had stalled.   

“Even before the coronavirus crisis and accompanying budget challenges it appeared that that was not something that's going to be happening,” he said. 

Now, with the state's economy threatened, there will likely be less health care spending on non-emergency related health care in the year or years ahead, he said. At the same time, the crisis could lead to renewed calls for a single payer system.  

For California, rushing toward a single-payer system on its own, particularly in the middle of a difficult recession, would be a tough sell, Schnur said. 

The benefits of health expansion

Still, the state’s aggressive steps in expanding health care are especially relevant in this moment of crisis, said Ninez Ponce, a professor in the UCLA Fielding School of Public Health’s Department of Health Policy and Management.

Amid a climate of increasing federal exclusions, Ponce pointed to California policies that expanded health care coverage such as the state’s expansion of Medicaid for all qualified adults, banning Medicaid work requirements, and maintaining a longer health insurance enrollment period.This year, the state expanded Medicaid to all income-eligible undocumented adults up until age 26. 

Increasing people’s access to health care can have a big impact in the current environment, she said.  Exclusionary policies can harm the overall population since coronavirus doesn’t care if you’re a citizen. 

“If one Californian is at risk, then all Californians are at risk,” she said. “We're witnessing that right now with the coronavirus pandemic.”