Gov. Newsom’s announcement of his 2020-21 State Budget plan on Friday was another whopper, his speech clocking in at roughly 2 hours and 47 minutes. Last year, reporters who were used to covering a 30 minute press conference where caught off guard by Newsom’s lengthy presentation. Los Angeles Times reporter Taryn Luna tweeted that she was prepared this year. “I brought snacks and tea this time,” she says.
For those who couldn’t possibly consume enough caffeine to get through his lengthy performance, here are a few highlights from the Governor’s spending proposals – both good and bad:
Another Budget Featuring Record State Spending Yet Expands Debt Repayment
Like his predecessor Jerry Brown, Gov. Newsom has made debt repayment and tackling the state’s unfunded liabilities a budget priority. His 2020-21 spending plan includes nearly $2 billion socked away in the state’s Rainy Day Fund, and an additional $1.4 billion over the next 3 budget years, for a total of $19.4 billion save by the 2023-24 fiscal year.
Newsom also commits to expanding payments to pay down the state’s unfunded public employee pension and retiree health care obligations. This year, he proposes an additional $1.1 billion payment to CalPERS in 2023-24, which would generate $2.3 billion in savings over 30 years. However, Newsom significantly underestimates the scope of the problem – estimate $250 billion in total unfunded public health care and retiree costs. By using a more honest accounting method, PRI’s Wayne Winegarden has estimated these outstanding costs to be nearly $1 trillion.
His commitment to debt repayment is tempered by the fact that Newsom is proposing another year of record state spending – $153 billion in General Fund spending and $222.2 billion in total state spending. Surely more of these funds should be dedicated to paying down the state’s unfunded obligations.
“A Terrible Idea That Will Really Hurt Californians’ Access to Our Medicines”
One very controversial proposal in Newsom’s budget, according to CalMatters, would make California “the first state in the nation to establish its own generic drug label, making those medications available at an affordable price to the state’s 40 million residents.”
On this week’s episode of Next Round with PRI, Winegarden calls the plan, “a completely counterproductive proposal.”
“What he’s trying to do is contract . . . with the generic manufacturers so he would put a California state generic label on things and get out those generic medicines. He also has some discussion about price controls. He says he’s going to be indexing the prices to other states and other countries, talking about a best price guarantee. Effectively what he’s trying to do is get the price controls from overseas and that leads to shortages of drugs that are approved and leads to a huge reduction in innovation in the amount that is approved. That, in and of itself, is a terrible idea that will really hurt Californians’ access to our medicines.”
Winegarden last week released a study making the case that drug price caps and increased regulation will not increase health care affordability. Instead, he argues that policymakers should focus on system-wide reforms to improve the complex drug supply chain and increase transparency to solve the problems with the current drug pricing system that overcharges patients.
“It’s Going to Be Very Expensive”
Last year, Newsom expanded Medi-Cal eligibility to undocumented immigrants to young adults through age 25. This year’s budget expand eligibility to the undocumented who are age 65 or older by January 2021. This would benefit an estimated 27,000 undocumented seniors in the first year, growing in cost from $80.5 million in 2020-21 to roughly $350 million annually starting in the 2022-23 budget year.
Commenting on this proposal to CalMatters last year, PRI President, CEO and Thomas W. Smith Fellow in Health Care Policy Sally Pipes said, “I don’t know why the people of California, the taxpayers, should be providing additional funding to people who are undocumented. It’s going to be very expensive.”
She also noted the negative impact this will have on legal residents who rely on Medi-Cal for care. “Doctors are reimbursed about 40 percent below what they get paid from private insurance. Doctors are not taking Medi-Cal, and that puts pressure on emergency rooms.”
Commits Significant New Funds to Combat Homelessness
One last budget provision of interest is $1.4 billion in new government spending to tackle California’s growing homeless crisis. According to the Associated Press, Newsom signed an executive order this week, “creating what he intends to be a $750 million fund that providers could tap to pay rents, fund affordable housing or aid boarding and care homes.” He also announced a plan to “use vacant state property to house homeless people.”
But as Winegarden and Kerry Jackson cautioned in their recent brief on San Francisco’s homeless crisis, it will be essential for state government to closely track how these dollars are spent. They wrote, “whenever public resources are used on the homeless, every dollar spent must be tracked so that its efficacy can be properly evaluated. Providers should be judged on the number of people that move on to become self-sufficient members of the community, rather than increasing the numbers of homeless they serve.”
Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.