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$7 Billion Revenue Shortfall Drives Harsh HHS Cuts in May Revise

Governor Brown’s May Revise was released earlier today, and is much grimmer than the state’s proposed budget in January.  The deficit, which was projected to be $9 billion in January, jumped to $16 billion due to state’s slow economic recovery. In a video posted to YouTube, Brown elaborated that “tax receipts are coming in lower than expected, and the federal government and the courts have blocked us from making billions in necessary budget reductions.”

Weak tax revenue contributed $4.3 billion to the $6.5 billion budget shortfall, along with Proposition 98 spending increases for K-14 education ($2.4 billion) and blocked cuts by the federal government and courts ($1.7 billion); these increases were partially offset by $1.9 billion in net reduction, such as through lower-than-expected caseloads in state programs.

Unsurprisingly, the May Revision calls for severe cuts across all departments, including $450 million in Health and Human Services.  Proposed spending reductions include:

  • Reduction of supplemental Medi-Cal payments to private hospitals, elimination of public hospital grants and elimination of increases to managed care plans to designated public hospitals ($150 million in General Funds)
  • Splitting of unexpended §1115 Waiver funds between the state and designated public hospitals instead of being given exclusively to these hospitals ($100 million in General Funds)
  • Alignment of Medi-Cal payment for non-designated public hospitals to designated public hospital funding methodology for Medi-Cal FFS inpatient care ($75 million in General Funds)
  • Reduction in In-Home Supportive Services (IHSS) hours by 7% ($99.2 million in General Funds)
  • Elimination of domestic and related services for certain IHSS recipients ($125 million in General Funds)

The May Revise projects decreased caseloads in FY2012-13 for Medi-Cal and social services programs (CalWORKs, Supplemental Security Income/State Supplementary Payment, IHSS), which contribute to General Fund reductions of $700 million and $$180 million, respectively.  In addition, the state plans to go ahead with implementing Medi-Cal and Healthy Families provider payment reductions and copayments as outlined in the January budget proposal, despite federal challenges.

Full budget documents are available online.

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