Looking Back: Our Nominees for the Five Worst Budget and Policy Choices of 2009

December 31, 2009

It is that time of the year when there are “10 best” and “10 worst” lists for everything from movies to politicians, followed quickly by the often much less publicized New Year’s resolutions. Today, we take a look at our nominees for the five worst budget and policy proposals made during 2009.  On Monday, we’ll list our five resolutions for moving California ahead in 2010.

A central principle of our work here at the California Budget Project is that budgets are about values and choices – the choices that we, through our elected representatives – make about how to allocate our collective resources for the common good. Tough budget years – and 2009 will go down in history as one of the toughest ever – make for tough choices. However, several policies stand out in our minds as particularly bad decisions that, in some cases, will make future budget years even tougher. And some will contribute little or nothing toward closing the immediate budget gap, while compromising the well-being of Californians and/or the services they depend on. Our nominees for the five worst are:

  1. The massive corporate tax cuts included in the February budget agreement. The Legislature’s decision to include billions of dollars of tax cuts in the February budget agreement brings to mind all sorts of trite homilies, such as “when you’re in a hole, stop digging.” We don’t think that a spending plan that cut wages for homecare workers (see below) and cut funding for schools, while providing some of the state’s largest and most profitable companies with tax breaks of tens of millions of dollars per year, reflects the values of most Californians. The loss of badly needed revenues will prolong the state’s budget crisis and likely result in even deeper cuts in programs from health care to education.
  2. The recommendations of the Commission on the 21st Century Economy (COTCE). The COTCE proposals would cut taxes for the wealthiest Californians, while increasing taxes for low- to middle-income families and small businesses. They would also place more than half of the state budget in the hands of a risky, untested tax that has been roundly criticized by a number of the nation’s leading tax policy experts. We hope that the Legislature and the Governor will leave the Commission’s report on the shelf and move forward with common-sense proposals that do respond to a 21st century economy, such as collecting sales taxes owed on internet sales, imposing an oil severance tax, and extending the sales tax to selected services.
  3. Eliminating so-called “statutory” cost-of-living adjustments for cash assistance grants, higher education, and other state services. We’ve previously documented the impact of the state’s failure to fund cost-of-living adjustments (COLAs) for county-administered human services programs. The fact is that a dollar today doesn’t buy what it did a year or more ago. The state has repeatedly suspended COLAs for cash assistance grants and human services programs. Eliminating future COLAs removes the Legislature’s obligation to consider the impact of inflation on the families, seniors, and programs that are affected by “flat funding.” It will, over time, result in a ratcheting down of the standard of living for millions of state residents and cuts to the programs and services, including higher education, that they rely on.
  4. Cutting the wages of In-Home Supportive Services (IHSS) workers. The February budget agreement cut the state’s payment toward the wages of some of California’s lowest-paid and hardest-working individuals, the homecare workers who assist the frail elderly and people with disabilities through the IHSS Program. The courts have blocked enactment of the reduction, but the fact that this cut was even contemplated brings us back to our opening comment that budgets are about values and choices. Cutting the pay of low-wage workers runs counter to the values that we believe most Californians hold.
  5. Shortening the time limit for cash assistance through the CalWORKs Program below the federal cap and simultaneously reducing funding for programs aimed at moving families from welfare to work. The July budget agreement limits adults to 48 cumulative months of cash assistance in any 60-month period (adults would be allowed to go back on aid for up to a year after a one year break in assistance). The same agreement reduced funding for employment services aimed at helping individuals overcome barriers to work and gain the skills they need to succeed in the workforce. The 1996 federal welfare act – and the state’s subsequent enactment of the CalWORKs program – limited cash assistance. It also understood that many families would need help to move from welfare to work and that providing that help was a good investment for the long term. Changes to the state’s time limits provide no savings in the short run to help balance the budget, but represent a step backward for thousands of the state’s most vulnerable families.

Narrowing down the list to five was tough. Runners-up include funding cuts for the University of California and California State University systems that resulted in enrollment caps at a time when California needs more, not fewer, college educated workers; deep cuts to foster care and child welfare programs that are already under added pressures as a weak economy increases stress on fragile families; diverting funds from public transit at a time when the need to address climate change and congestion will require more, not less, resources; and the deep cuts to California’s public schools at a time when demographic and economic challenges are placing more challenges than ever on the state’s classrooms.

We’re hoping 2010 ushers in some better policy and budget choices. Best wishes to all our supporters and readers for a happy new year.

– Jean Ross

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Keep Our Sights on Affordability

December 29, 2009

Now that both the House and Senate have passed a version of health care reform, Congress must navigate one final step before any bill lands on President Obama’s desk.

A conference committee next month will combine the two plans into one bill. One element that will certainly loom large: Subsidies to help low- and middle-income families purchase health coverage.

Both the House and Senate plans establish a new insurance “exchange’’ that would offer a range of plans with different levels of premiums, benefits, and cost-sharing. Subsidies would be available for certain individuals and families to purchase coverage through that exchange. The amount of the subsidy would be tied to either the second-least-expensive plan or an average of the three lowest-cost plans available through the exchange. Those who opt for more expensive coverage would pay for the additional costs themselves.

Congressional Budget Office analyses of the two plans show that the House version would offer more assistance to lower-income families than the Senate version. In fact, while the Senate version does more to reduce costs for those with moderate incomes, it does so at the expense of those with lower incomes, as these two tables show.

Even without a public option – a government-run health insurance plan that would compete with private plans to keep premiums affordable – other aspects of the House bill also help to make the new requirement to have coverage more manageable for individuals and families. They include:

  • A more robust Medicaid expansion: Everyone, including nonelderly adults without children, would generally qualify for Medicaid – Medi-Cal in California – with incomes up to 150 percent of the poverty line, or an annual income of up to $16,245 in 2009. In the Senate version, the cut-off for Medicaid is 133 percent of the poverty line, or an annual income of up to $14,404. In California, 123,000 more people would be newly eligible under the House version than the Senate version of the bill.
  • A stronger employer mandate: The House version requires businesses to provide “qualifying insurance” coverage to employees and pay a substantial share toward premiums or pay a penalty equal to 8 percent of payroll. The Senate version encourages employers with more than 50 employees to purchase coverage, but the requirement is less prescriptive and the penalty far less severe, equal to $750 for each full-time worker if any of the firm’s employees obtain subsidized coverage through the exchange. To the extent that individuals can buy coverage through a “group,’’ such as an employer, it spreads the risk and cost of insurance and thus lowers premiums. The one caveat in the House version is that employees who are offered qualifying coverage through their employer must take that option, even if the coverage is inferior and costs are higher than the health plans available with subsidies. Workers who would have to pay more than 12 percent of their income toward their employer’s insurance, however, could receive subsidies to purchase coverage through the exchange.

The success of health reform – particularly a plan that requires everyone to have health insurance – hinges on the ability of families to pay for the health care they need without significant financial strain. Health care reform that proves unaffordable to families with low incomes could hinder health reform’s success.

As we have said and shown before, even without health expenses, a single adult in California would need to earn at least $24,760 to pay for basic needs such as housing, transportation, and food, not including health care. With or without a public option, any health reform that emerges from conference committee needs to contain adequate subsidies that will keep coverage affordable for millions of individuals and families.

– Hanh Kim Quach

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Boosting Participation in the Food Stamp Program

December 22, 2009

Getting more eligible Californians into the Food Stamp Program (FSP) is a win-win scenario for California: Food stamp benefits not only help struggling families, but they also help struggling local economies.

A new CBP report released today shows that although FSP enrollment has increased rapidly during the economic downturn, California historically has had a low participation rate, and the state still has many policies in place that impede access. We think the downturn makes it more important than ever for the state and counties to implement strategies to boost participation in the program.

– Scott Graves

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President and Congress Act Again to Help Unemployed Workers

December 22, 2009

While unemployment hovers above 12 percent in California, President Obama signed into law a bill to offer much-needed relief to working families by extending unemployment insurance (UI) benefits and continuing health insurance subsidies for the unemployed.

The bill, H.R. 3326, moves the deadline for qualifying for a series of federally funded UI benefit extensions from the end of December to the end of February and continues a $25 per week supplement of UI benefits through February. Nationally, 2.3 million unemployed workers are expected to benefit from this extension of benefit eligibility. In California, jobless workers who qualify for all the extended UI programs receive 73 weeks of benefits after their 26 weeks of state UI benefits run out.

H.R. 3326 also extends health insurance subsidies, known as COBRA, from nine months to 15 months and allows workers to qualify for the program through February 28, 2010. Like UI benefits, COBRA was scheduled to end by the new year. We have previously written about COBRA, the federal program that allows workers who lose their jobs to pay the full cost to continue health coverage through their former employer. The American Recovery and Reinvestment Act of 2009 subsidized 65 percent of jobless workers’ health coverage premiums for nine months. These subsidies began expiring this month for workers who signed up for the program when it first became available. Without this assistance, individuals who are unemployed in California and elected to continue their job-based coverage would see their premiums increase from an average of about $150 a month to $428, according to the 2009 California Employer Health Benefits Survey.

This two-month extension of unemployment and health insurance benefits will help thousands of Californians, but it’s a stop-gap measure. One-third of the state’s jobless workers have been out of work at least half a year, and jobs are still very hard to come by. Many of the unemployed will continue to need extended UI benefits and the COBRA subsidy, but will not qualify for them unless Congress acts again and pushes the February 28, 2010 qualifying deadline later into the year.

– Hanh Kim Quach and Vicky Lovell

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The Jobless Rate Appears To Have Stabilized, But the Odds of Finding Work Remain Slim

December 18, 2009

California’s unemployment rate appears to have stabilized in November, in line with economists’ projections that the recession would bottom out in California by the end of this year. The state’s jobless rate stood at 12.3 percent in November – a figure that the Bureau of Labor Statistics (BLS) reported was not statistically different from October’s 12.5 percent rate.

While it’s good news that the state’s economy could be at a turning point, it’s not yet time to celebrate because jobs remain extremely hard to come by. A BLS dataset that tracks groups of jobless Americans over time shows that:

  • Very few jobless found work in November, and the odds of finding a job have steadily dropped. Only about one out of six Americans (16.4 percent) who were jobless in October found employment in November. Two years earlier, the unemployed had a much better chance of finding work: In a given month, more than one out of four jobless found work.
  • The majority of America’s jobless stay unemployed from one month to the next. Nearly two out of three Americans who were unemployed in October (65.5 percent) remained jobless in November. Two years ago, the jobless had a 50-50 chance of staying unemployed in a given month. The remaining 18.1 percent of Americans who were unemployed in October stopped looking for work and “dropped out” of the labor force in November.
  • Women are less likely to find work and more likely to leave the labor force than men. Just 14.1 percent of women who were jobless in October found work in November, compared to 17.7 percent of unemployed men. This difference reflects the fact that a larger share of women gave up their job search and dropped out of the labor force in November: 22.0 percent of women stopped looking for work, compared to 15.0 percent of men.

Although the end of the recession may be in sight, these statistics make clear that the suffering is far from over for the unemployed. That’s why it’s important that the US Senate act quickly to extend unemployment insurance (UI) benefits and continue health insurance subsidies for the unemployed.

– Alissa Anderson

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