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).
CHA learned late yesterday that the 2018-19 budget released by Gov. Brown contains an additional issue of great concern to many hospitals — a $40 million decrease in the University of California’s core budget. Under Proposition 56 — the Healthcare, Research and Prevention Tobacco Tax Act of 2016 — the University of California system was allocated $40 million specifically to fund graduate medical education; this reduction erases the additional funding.
Proposition 56 increased taxes on tobacco products, directing $40 million of new revenue annually to the University of California system to develop and implement a program to increase the number of primary care and emergency physicians trained in the state. All accredited residency programs in California that meet the guidelines set forth in Proposition 56 are eligible to receive funding. However, in last year’s state budget, this source of funding for graduate medical education was characterized as revenue for the University of California. As a result, the state budget reduced the University of California’s budget by the same amount. This year’s budget once again cuts the University of California budget by $40 million, compromising Proposition 56’s intent and provisions that the system serve as the public entity responsible for administering this new program. To achieve the public benefit intended by Proposition 56, it is critical that funding for the University of California be restored in this year’s budget. CHA is strongly opposed to this budget action and will work vigorously to oppose the reduction.
Today Gov. Brown, in his final year as Governor, released his state budget plan, totaling $190 billion for fiscal year 2018-19. As he has in the past, the Governor emphasized fiscal prudence even though the state is projected to have a healthy one-time surplus. He noted that California continues to face uncertain times, including ramifications of the recently enacted federal tax bill, which has not yet been factored into this year’s budget. Today’s budget continues to build the state’s Rainy Day Fund and keep spending in line with revenues.
Key issues of concern CHA has identified in the budget include:
A proposal by the Department of Health Care Services to restrict federal 340B Drug Pricing Program reimbursements within the Medi-Cal program, effective July 1, 2019. As described in the budget summary, the proposal allows the state to comply with existing federal requirements, helps protect program integrity, prevents unnecessary overpayments, collects additional drug rebates, and reduces the time and resources expended to resolve drug rebate disputes related to 340B claims. CHA will learn more details about this proposal and work closely with the Department of Health Care Services and other stakeholders to mitigate impact on hospitals that participate in the 340B program.