CHA News Article

Governor Releases Revised Budget Plan

Today, the Governor released his revisions to the 2017-18 state budget plan he proposed in January. He presented the revised budget — which is very similar to his January budget – with a cautious tone, explaining that California needs to plan for tougher times ahead. 

“Over the past four years, we have increased spending by billions of dollars for education, health care, child care and other anti-poverty programs. In the coming year, I don’t think even more spending will be possible,” said Gov. Brown. “We have ongoing pressures from Washington and an economic recovery that won’t last forever.”

There was some good news for hospitals in today’s revised budget. The Department of Health Care Services will propose changes to the 340B Drug Discount Program, but those changes will end the use of contract pharmacies in the Medi-Cal 340B program. This change is not as broad as expected in terms of the fiscal impact on hospitals. As CHA learns more details, we will share them with members.

Disappointingly, the revised budget makes no changes to the allocation of Proposition 56 funds, the increase in the tobacco tax approved last November. January’s budget allocated most of the new revenue from Proposition 56, over $1 billion, to support the growth in Medi-Cal spending. CHA and other health care organizations had advocated that these new dollars be used to increase reimbursement rates for physicians and other providers. Exactly how these new funds are to be allocated will remain a major point of discussion as the budget is finalized between now and June.

The January budget contained cuts to graduate medical education (GME) funding within the Song-Brown Program, which CHA and others opposed vigorously. These cuts, amounting to $33.3 million in the budget year, remain in the budget but will be a point of discussion as the budget moves through the last weeks to finalization. Last year’s budget allocated $100 million to the Song-Brown Program for GME funding, with $33.4 million to be distributed each year for the next three years. The January budget reversed that proposal entirely.    

However, in some areas, the plan contains some additional spending. In the January proposed budget, counties faced an increase in annual in-home supportive services costs of about $600 million annually. Today’s revised budget contributes $400 million from the General Fund to mitigate some of those costs, with smaller amounts in future years as realignment revenues grow.

The budget process now moves into high gear. The Legislature must complete its work on the budget by June 15, and the Governor must sign the budget by July 1, the beginning of the 2017-18 fiscal year.