CHA News Article

Governor Releases May Budget Revise
Affects 340B, funding allocations for Propositions 55 & 56

This morning, Gov. Brown released his revision to the 2018-19 budget proposal, including $138 billion in general fund spending and reflecting a surplus of nearly $9 billion. The revision directs half of the surplus to the Rainy Day Fund and the other half for one-time expenditures.

 Presenting his final budget revision, the Governor’s tone was predictably cautious.

“We’re nearing the longest economic recovery in modern history, and as Isaac Newton observed: What goes up must come down,” the Governor said. “This is a time to save for our future, not to make pricey promises we can’t keep. I said it before and I’ll say it again: Let’s not blow it now.” 

The revision maintains the Administration’s proposal to prohibit the use of the 340B Drug Discount Program within the Medi-Cal program, but with a savings for the state. The Administration estimates $16.6 million in general fund savings in 2020-21. CHA is disappointed that the budget revision continues this proposal. The 340B program allows safety-net hospitals and clinics to purchase outpatient drugs at a discount from drug manufacturers and provide them to low-income patients at little to no cost. The discounts also are used to fund a variety of outpatient health care services in local communities across the state. CHA strongly opposes this proposal and will continue to urge the Legislature to reject it.

Another item of concern in the budget revision relates to the lack of funds from Proposition 55 being allocated to the Medi-Cal program. Passed by the voters in 2016, Proposition 55 was intended to provide additional funds for public schools and ensure adequate funding for essential health care services for children and families enrolled in Medi-Cal (see CHA’s Advocacy Alert below).

With a nearly $9 billion budget surplus for the coming year, the state has the resources to ensure that voters’ wishes are fulfilled. An estimated $1 billion in Proposition 55 funds should be available for Medi-Cal in the coming fiscal year, but the Administration’s formula for calculating the Proposition 55 monies means that the voters’ wishes are not being realized. CHA will continue to urge legislators to reject the Administration’s approach to allocating Proposition 55 funds.

CHA also remains concerned about the budget proposal to cut $40 million from the University of California’s base budget, an amount identical to the intended funding of graduate medical education (GME) from Proposition 56 tobacco tax revenues. Although Proposition 56 stipulates that UC administer the program, the funding is intended to help cover the costs for all accredited primary care and emergency medicine residency programs throughout the state, including those operated by non-UC hospitals. The proposed cut undermines a basic premise behind voters’ approval of Proposition 56. CHA will continue to advocate for restoration of these funds.