San Francisco Business Times, December 26, 2008

As California teeters on insolvency, Republican state legislators have proposed a budget that transfers $5 billion from two health care programs that are in surplus.

The funds in question are for mental health and early childhood development. They are in “silos” because they were approved via propositions. To “break the bank,” the Republican proposal has to go back to voters this spring. This invites the question of whether taxing and spending for specific health programs should be done through the initiative process.

The surpluses arise from tax hikes which targeted unpopular minorities to exploit a “feel-good” strategy to fund health care goals. In 1998, Prop. 10 approved a tobacco tax-hike to fund health and education programs for kids up to 5 years old. In 2004, Prop. 63 approved a surtax on Californians who earn more than $1 million annually, to fund mental-health services.

Remarkably, Prop. 10 takes in about $9 million more annually than it can spend. Prop 63 takes in about $600 million more a year than it can spend. Republican legislators want $2.1 billion from Prop. 10’s surplus over the next two years, and $2.9 from Prop 63’s surplus.

Even if Republican legislators succeed in raiding the dual surpluses, however, it’s not enough to plug the deficit. They also propose funding cuts of $1.25 billion to health services, of which more than $700 million would come from Medi-Cal, the state’s Medicaid program for low-income residents.

Electoral history shows that Californians are not receptive to demands that any more of their money be diverted to fund the unaccountable health-care “Blob” of Medi-Cal and Healthy Families. Unfortunately, they are very susceptible to appeals that push their emotional buttons, especially if the money comes from smokers or those who earn more than $1 million a year. Although only slightly more than half of voters supported Prop. 10 in 1998, a ballot measure to repeal it lost by more than 70 percent in March 2000.

Prop. 10’s supporters report that “scientific evidence proves that the care a child receives from the prenatal through the first five years of life is critical to the child’s brain growth and development.” Last year, it raised more than $600 million from the tobacco tax. The First 5 California Commission allocates money to 58 county First 5 commissions, which fund grants to buy medical equipment, sponsor vans to bring health care to remote rural areas, hire resource development specialists to find funds for health services — taxpayer-funded lobbying for yet more tax dollars — and provide prenatal care services, subsidies for child health insurance, and breast-feeding promotion programs, among other things.

Whether any of these programs are developing kids’ gray matter is left to guesswork. The First 5 California Commission’s latest annual report makes no mention of brain development as a measured outcome. Voters are simply invited to assume that the way to bring the conclusions of scientific research into the community is to throw hundreds of millions of dollars at the effort.

Similarly, Prop. 63 will raise an estimated $1.6 billion in 2008-’09 and $1.7 billion in 2009-’10. This money disappears into the California Department of Mental Health, which will spend about $1 billion of Prop. 63 funds each year. These dollars are as much part of the unaccountable health-care “Blob” as general funding for Medi-Cal or Healthy Families.

The record suggests that California taxpayers should consider carefully whether a particular ballot measure limits the ability of government to tax and spend, or whether it exploits unpopular minorities to fund causes that may resonate emotionally, but fail to deliver the goods.

As we enter 2009, here’s the reality. The millions of Californians who voted for Prop. 10 in 1998, or Prop. 63 in 2004, have no idea how well they are helping early childhood development or mental health care.

John R. Graham is director of health care studies at the San Francisco-based Pacific Research Institute.