Federal Economic Stimulus
and Trigger Cuts in Question
By Paul McIntosh, Executive Director
pmcintosh@counties.org
The state Department of Finance (DOF) released its preliminary estimate of the amount of federal economic stimulus funds California will receive that can offset state General Fund spending. DOF is initially estimating that California will receive $8 billion, which is $2 billion short of what would be necessary to avoid the “trigger” cuts in the budget package enacted last month.
When the budget package passed, many – including the Legislature – were optimistic that the $10 billion in federal funds would materialize and DOF’s first estimate, which was released March 4, is widely viewed as conservative. However, the budget agreement requires State Treasurer Bill Lockyer and DOF Director Mike Genest to determine by April 1 whether California will receive at least $10 billion from the federal stimulus package or other federal legislation. If they find that the $10 billion threshold has been met, it will trigger two budget adjustments: $967.5 million in spending reductions effective July 1, 2009, and reduction of the personal income tax rate increase by $1.8 billion.
DOF and the Treasurer’s Office have set a public hearing for March 17 in Sacramento to solicit public comment on joint decision of how much federal economic stimulus California will receive. The Treasurer has also launched a Web site to solicit public comment at http://www.treasurer.ca.gov/10B_BudgetTrigger/index.asp.
A number of areas are impacted by the cuts, including health and human services, the judicial branch and higher education. Please recall that the health and human services programs impacted by the trigger cuts include:
- Medi-Cal: Eliminate optional benefits and redirect 10% of federal Safety Net Care Pool funding away from public hospitals. Estimated savings of $183.6 million General Fund in 2009-10.
- CalWORKs: Reduce grants to recipients by four percent. Estimated savings of $146.9 million General Fund in 2009-10.
- SSI/SSP: Reduce grants by 2.3%. Estimated savings of $267.8 million in 2009-10.
- In Home Supportive Services (IHSS): Cap the state share of wages at $9.50 per hour (it is currently $11.50 per hour) and keep the state’s share of individual health benefits at $.60 cents. Additionally, increase the share of cost for new IHSS recipients based on their functionality index. Estimated savings of $78.0 million General Fund in 2009-10, with increasing annual savings thereafter.
CSAC, along with other stakeholders impacted by the trigger cuts, is concerned by DOF’s initial estimate and is working with other affected stakeholders to diligently analyze the DOF estimate and to better understand how the state is anticipating the federal funds will impact state General Fund revenue.
Cuts to these health and human services programs will have a number of additional impacts, including the loss of new federal funds for CalWORKs and cost shifts to county health services. CSAC will continue to apprise counties of the developments as the federal economic stimulus estimates are refined. In the meantime, we encourage you to review the materials available on the Treasurer’s Web site and offer your comments.
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