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2015 Health Care Financing Report: Public Programs

Despite predictions otherwise, California continues to recover from the impacts of the Great Recession. The unemployment rate has decreased to 6.3%, reflecting an ongoing trend of job growth in the state. From April 2014 through April 2015, 457,300 jobs were created reflecting employment increases across eight employment categories (mining and lodging, construction, manufacturing, trade, transportation/utilities, information, professional and business services, educational and health services and government). A 13.4% growth in job creation levels outpaces the national 9.2% job recovery rate, and nearly all state regions have recovered all the jobs lost during the recession. Likewise, other growth measures remain solid, with housing markets remaining strong and stock prices high.

The economic recovery has boded well for State revenues, which have heavily benefited from capital gains and income taxes (Table 1 and 2). A $1.85 billion deposit will be made into the Budget Stabilization Account (BSA), which would provide emergency funding in case of a sudden shortfall, for a total of $3.5 billion. The State projects that it will finish the 2015-16 fiscal year with $4.5 billion in the reserve total. Although revenues are currently outpacing expenditures, there is still hesitancy to use funds for new projects, as an eventual downturn in the economy is inevitable.

Other challenges remain. Despite improving employment prospects, unemployment numbers vary widely across the state, from as low as 4.9% in the San Francisco Metro Area to 21.9% in El Centro. Additionally, California’s unemployment rate is still high (6.5%), relative to the national rate of 5.5%. The housing market remains strong, which may pose difficulties for consumers saving up for a down payment.

The 2015-16 state budget continues Governor Brown’s focus on reducing debt and preparing for future economic upsets. The May revise budget sets aside $3.7 billion to pay off budgetary debt ($1.85 billion) and to deposit into the state’s BSA ($1.85 billion). In addition, the budget makes necessary appropriations for the ongoing healthcare reform process and for the state’s new K-12 financing system. However, the budget fails to reinvest into many of the safety net programs that were scaled back or cut during the economic recession. The 10% reimbursement cut for Medi-Cal providers remain in effect, yet were restored for Denti-Cal providers. Cuts to childcare and preschool programs remain.

Read the full report here: 2015 Health Care Finance Report