A New Assault On the Little Three
California’s General Fund operates like a waterfall. Programs protected by constitution (principally K-12, community colleges, and debt service on General Obligation Bonds), statute (principally Medi-Cal, the state single-payer health insurer for low-income Californians) and contract (principally pensions and subsidies for retired employee health insurance) get first dibs on tax revenues. Only after those programs are satisfied do funds become available for unprotected programs such as UC, CSU and courts.
Principally because spending on Medi-Cal, pensions, and retiree subsidies (the “Big Three”) is growing faster than tax revenues, spending on UC, CSU and courts (the “Little Three”) is growing slower than tax revenues. As a result, the shares of the May Revised Budget for 2018–19 for UC, CSU and courts are already 19%, 13% and 36% lower than a decade ago. Looked at another way, General Fund spending on the Little Three is only 6% higher than a decade ago even though GF spending is up 34%.
Now a bill proposes to take even more money from the Little Three. SB-974 would expand Medi-Cal to cover undocumented seniors. Putting aside the failure of Medi-Cal to provide acceptable service to its existing enrollment of 13+ million Californians, the costs would fall on the Little Three and other discretionary programs. As Governor Brown has repeatedly pointed out, the consequences will be devastating during the next bear market.
California’s legislature should heed Governor Brown’s warning and focus on making Medi-Cal work for its existing population.