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The Uninsured and the Safety Net

Open enrollment in California has ended, and preliminary tallies indicate that more than 3 million Californians will be enrolled in health plans through Covered California or will become new members of the Medi-Cal program. While it is still too soon to tell how many uninsured people have gained coverage, projections suggest about 4 million Californians will still lack health insurance. About 30 percent of these uninsured residents are estimated to be eligible for Medi-Cal and can enroll at any time during the year.

Uninsured residents who are not eligible for ACA coverage because they are undocumented immigrants—and those who did not purchase coverage through Covered California during the open enrollment period—will continue to rely on county programs and safety net providers, such as health clinics and emergency departments (EDs).

Access to these resources varies considerably across the state. Eligibility for indigent programs differs across counties, as there are no state standards for services provided or populations served. For example, most county indigent programs do not cover undocumented immigrants; these residents rely on clinics and EDs, particularly in counties that do not operate public hospital systems. Also, many counties set relatively low income thresholds for their indigent programs, limiting the number of uninsured residents who qualify for services.

Because the Medi-Cal expansion will cover many of the people currently served by county indigent care programs, the state is shifting funds previously allocated to county health programs. This fiscal year, state funding for county health programs was reduced by $300 million (under AB 85); there will be deeper cuts in subsequent years, as more Californians gain insurance coverage. The state will determine future funding reductions in consultation with the counties. In most cases, counties have selected a formula-based approach that accounts for the actual costs and revenues associated with indigent care programs to determine how much funding will be shifted back to the state.

Over the next several years, it will be important to monitor how these and other changes affect both safety net providers—including counties and public hospital systems—and the communities that continue to rely on them for health care.

Drought Watch: Funding Sustainable Groundwater Management

This is part of a continuing series on the impact of the drought.

Although droughts have many downsides, they can also spur lasting improvements in water management. Unsustainable groundwater use has long plagued California’s rural areas, and the current drought is providing much needed impetus to pursue reform.

California is one of the only western states that does not regulate groundwater use under state law. Except for a few dozen basins where local agencies have special oversight authority (mainly in urban Southern California and the Bay Area), local groundwater management remains largely voluntary and somewhat precarious. Despite some recent advances in basin monitoring and replenishment programs, these agencies have been unable to prevent damaging declines of groundwater supply and quality. As recent headlines on water scarcity point out, overtaxed basins are unable to effectively serve one of groundwater’s most important roles: as a buffer against drought.

In late March, the Governor’s Office held a workshop to seek input from local managers and other experts on a proposal that would empower local agencies to better manage groundwater—and commit the state to step in as an emergency backstop if locals fail to come through. Today’s post on the California Water blog, coauthored by an interdisciplinary team from PPIC, UC Davis, UC Hastings, Stanford, and elsewhere, walks through important funding considerations for this reform.

To be effective, local entities must have sufficient authority and flexibility to raise the money they need to track water levels and make key investments—both in infrastructure and in new water supplies for replenishing their basins. In addition, these agencies should have the ability to enact special surcharges to prevent excessive pumping. Right now, that power is only granted to a handful of agencies.

Extending and strengthening the funding and oversight authorities available to local agencies across the state will better prepare us for the next time we need to look to the ground, instead of the sky, for our water needs.

California’s Taxing Dilemma

As the April 15 deadline for filing taxes looms, we asked Californians in the latest PPIC Statewide Survey how they view their state and local tax burden. Their responses point to a disconnect between public opinion and the views of many fiscal reformers.

A record-high 60 percent say that they pay more than they feel they should in state and local taxes. Just two years ago, 46 percent held this view. Today, six in 10 Californians also have the perception that California currently ranks above average or near the top in state and local tax burden per capita. And they are correct: A Tax Policy Center report recently ranked California’s 2011 state and local tax burden as the 11th highest in the nation.

Further, a record-low 50 percent of Californians say that the present state and local tax system is very or moderately fair. In contrast, 57 percent said it was at least moderately fair two years ago. Across income categories today, perceptions of the fairness hover around 50 percent.

What changed in the last two years? For one thing, voters passed Proposition 30, temporarily raising the state sales tax, as well as state income taxes on wealthy residents.

Today, eight in 10 Californians say that major or minor changes are needed in our state and local tax system. But their views of change don’t necessarily match those of fiscal reformers, who have argued for years that our state budget is too dependent on wealthy individuals with volatile income tax payments. Some reformers have argued that broadening the sales tax base to include services would be an effective way to avoid the extreme ups and downs in state revenues that play havoc with state and local government budgets.

But Californians appear to have little interest in changing the tax system in ways that may impact their pocketbooks. Among four types of state taxes that we asked about in our March 2014 survey, six in 10 oppose extending the sales tax to services that are not currently taxed, and fewer than half favor extending the sales tax to services even if it means lowering the overall state sales tax rate. However, six in 10 would support raising income taxes on the wealthy, while about half favor raising state taxes paid by California corporations.

Voter opposition to extending the sales taxes to services is higher among those who feel that they are already paying more than they should in taxes. Even the more popular proposals—raising corporate taxes and income taxes on the wealthy—are favored by fewer than half of the voters who feel they are paying more taxes than they should.

Meanwhile, voters are saying that they want more state funding for education and health and human services. Some state and local elected officials would also like to raise more state revenues to restore funding for services that were cut during the Great Recession, or pay for new state and local programs. Others are thinking about how to maintain revenues after the sunset of Proposition 30’s temporary taxes.

If tax reform proponents ask voters to raise taxes or to make changes to the state and local tax system any time soon, they will need to be mindful of voters’ current views on these issues.

Video Highlights New Survey’s Key Findings

The March PPIC Statewide Survey examines several major issues in California, including water, high-speed rail, marijuana legalization, and taxes. The survey also finds that three months before the primary, Governor Jerry Brown remains a strong favorite for re-election this year.

The wide-ranging survey also looks at Californians’ views on national issues—such as immigration and health care reform, and abortion —and provides approval ratings on federal elected officials.

PPIC research associate Jui Shrestha presented the results of the survey at a luncheon briefing in Sacramento.

Testimony: Funding to Promote Drought Resilience

The Assembly Budget Subcommittee for Resources and Transportation–which oversees budget allocations for water-related state agencies–convened a group of experts on Wednesday to provide an update on the current drought. PPIC senior fellow Ellen Hanak gave the members an overview of state and federal emergency drought funding for California and suggested other fiscal measures that the legislature should consider to make California more drought resilient. Here are her prepared remarks.

Good morning and thank you for the invitation to address the committee. I’d like to focus my remarks on how the legislature can help California become more drought-resilient, both in the near term and over the longer term. And since your committee is tasked in particular with considering budget measures, I will highlight the question of funding.

As you all know, several weeks ago the legislature passed, and the governor signed, emergency drought legislation. These bills made $687 million available for a variety of programs. This state funding package came on the heels of an announcement of $222 million in federal drought funding for California—bringing the total to $909 million. In the state’s case, most of the funds (80%) come from previously authorized state general obligation (GO) bonds, with the remainder from the general fund (11%), new cap and trade auction revenues (6%), and a variety of other funds (3%). A large portion of the federal funds comes from the 2014 Farm Bill.

The table provides an overview of the allocation of these funds. About a quarter ($239 million) is for near-term emergency assistance to communities facing special hardship because of the drought. A small share (0.3%, or $2.3 million) is directed to emergency ecosystem support. And nearly three-quarters of the total ($668 million) is directed toward improving water use efficiency and reliability. Although some of the investments in this last category may help in the near term, most should be viewed as efforts to make the state more drought-resilient over the longer term.

This breakdown between near- and longer-term impacts of drought spending reflects the realities of drought response: In the very near term, cash can provide helpful support to affected communities, but it can’t fundamentally change the water supply situation. One of the very interesting lessons from the current drought is that two decades of investments by California’s major urban utilities—in areas such as water use efficiency, above- and below-ground storage, and non-traditional supplies like recycled wastewater and stormwater—has made these communities much more capable of getting through droughts. The new spending earmarked for improving efficiency and water supply reliability should help California continue to build its resilience to future droughts.

The drought has also renewed legislative attention on putting a new GO bond on the November 2014 ballot to fund water management in California. As we show in a new PPIC study on water finance, Paying for Water in California, state bonds approved since 2000 have helped fund a range of important water management activities. However, bonds can at best be just a part of the overall solution to meeting California’s critical water funding needs. The legislature can and should pursue other actions to give California a sustainable and reliable funding system for water. Some examples include:

  1. Adopting new state fees and special taxes to fill critical gaps. For instance, a small surcharge on water use could support integrated water management and protect our threatened aquatic ecosystems, and a small surcharge on chemicals could help fund pollution prevention and safe drinking water in affected communities.
  2. Passing enabling legislation to make it easier for local agencies—the front-line managers of water resources—to raise the funds they need. One example would be extending the authority to assess fees for groundwater pumping and basin replenishment—now available to just a handful of communities—to groundwater management agencies across the state.
  3. Providing guidance to the courts on how to interpret California’s Constitution so that local water agencies can improve water supply reliability. In particular, agencies should have the flexibility to adopt tiered, conservation-oriented rate structures and fund activities such as recycled wastewater and stormwater capture. In some cases, narrow judicial interpretations of Proposition 218—a voter-approved amendment passed in 1996—have created uncertainty about the ability of local agencies to use fee revenues to carry out such programs, which are essential for drought resilience.

In closing, it’s worth recognizing that droughts are a recurring feature of California’s climate. The current crisis presents an opportunity to continue improving our water system’s ability to cope with water scarcity in the face of population growth and a changing climate. By supporting the emergency funding package, the legislature has already taken some important steps to help alleviate the worst effects of this drought and to build future drought resilience. With additional steps, the legislature can help ensure that our water system can support a healthy economy, society, and environment over the longer term.

Table sources: California Senate Bills 103 and 104 (chaptered March 1, 2014); White House Fact Sheet on drought response (February 14, 2014).

Should Marijuana Be Legal?

As advocates of marijuana legalization consider another ballot measure in California, how do residents view the issue today?

Currently, our new PPIC Statewide Survey shows that Californians are split: 49 percent favor legalization and 47 percent want to keep it illegal. Last September for the first time a slim majority of residents—52 percent—said they were in favor of making marijuana legal.

Likely voters are more supportive of legalization, as they have been since we first asked about legalization in 2010. Today, 53 percent are in favor and 44 percent are opposed.

There are stark differences across parties and demographic groups on this issue. Majorities of Democrats, independents, whites, blacks, residents with at least some college education, Californians age 18–34, men, and residents in the San Francisco Bay Area and Inland Empire favor legalization. Opponents include majorities of Republicans, Latinos, residents with a high school degree or less, women, and those age 35–54, parents with children age 18 or younger, and Californians living in Los Angeles and Orange/San Diego Counties.

There are divisions, too, among the state’s leaders. Governor Brown and Senator Feinstein have recently expressed reservations about legalization, while fellow Democrat Lt. Governor Gavin Newsom disagrees.

Nearly four years ago Proposition 19—which would have legalized marijuana and allowed it to be regulated and taxed—failed in California by 6 points (47% yes, 53% no). Today, other states are considering following the lead of Colorado and Washington to legalize. It’s clear that the issue is not going away in California—the first state to legalize medicinal marijuana nearly 20 years ago.

Looking at the demographic divisions in California, it will be interesting to see what strategies proponents and opponents use the next time the issue makes the ballot.

Chart sources: PPIC Statewide Surveys: March 2014, September 2013, May 2010.

Boosting Transfers From Community College to CSU

To increase the number of college graduates in California, state policymakers are working to make it easier for community college students to transfer to four-year institutions, particularly the California State University (CSU) system. Legislation in 2010 required state community colleges to create a special degree that would ease the transition to CSU campuses.

Researchers Colleen Moore and Nancy Shulock provided a progress report on the implementation of this new degree at a PPIC briefing on Friday. These two researchers are from the Institute for Higher Education Leadership and Policy at CSU Sacramento and are the authors of a new report for PPIC, From Community College to University: Expectations for California’s New Transfer Degrees.

They found that the new degrees have improved pathways for community college students. But many community colleges still offer transfer degrees in only a few majors, and some CSU campuses accommodate the degree in only some of their degree programs. In other words, the program still has a long way to go before it is fully implemented.

UC President Napolitano on Tuition, Online Learning, and the Role of the University

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Janet Napolitano, the new president of the University of California and the former U.S. secretary for Homeland Security, said Monday that she told President Obama that the United States cannot thrive unless California thrives—and California cannot thrive unless the University of California thrives. Napolitano was responding to a question about why Californians should care about the public university system. Her comments were part of PPIC’s 2014 Speaker Series on California’s Future, which drew an online and in-person audience of nearly 500 to a conversation with PPIC President Mark Baldassare at the Sheraton Hotel in Sacramento. The wide-ranging discussion opened with a presentation from Hans Johnson, PPIC senior and Bren fellow, who provided context about the state’s need for educated workers.

The UC president, who also served as governor of Arizona, talked about tuition and budget issues, as well as online education, access for low-income students, and the lessons she’s learned since starting this job about six months ago. Napolitano said there was much the university is doing well: 42 percent of UC students are eligible for grants to low income students, 46 percent are the first generation in their families to go to college, and more than one-third are from families where English is not the primary language. She also said no public research university in the country is more efficient at helping students graduate within four years.

Still, she talked at length about the changes underway in funding for higher education and the need for new models. She emphasized that tuition will not increase for the 2014-15 school year and said that the university is dedicated to a tuition rate that is “as low and predictable as possible.” She also said she hoped to increase the university’s financial connection to philanthropy and the private sector. She said the state could do more and it should do more to support higher education.

Speaking about the future of higher education, Napolitano said online learning “is a tool in the tool box,” not a silver bullet. She said it is not necessarily cheaper than traditional classroom instruction and—despite some claims—no more effective at remedial education. She said, however, that it could get students access to classes not available on their campus.

How Does Access to Care Affect Health?

Enrolling eligible, low-income Californians—including the 1.7 million uninsured projected to be eligible for Medi-Cal—is the focus of Affordable Care Act implementation right now. But in the longer term, there is a bigger question: How will the expansion of Medi-Cal under the Affordable Care Act impact the medical care and health of those who gain coverage?

It may come as a surprise, but the effect of insurance on health care use and outcomes is not well understood. The best recent evidence we have comes from the Oregon Health Insurance Experiment, a collaborative effort among academic researchers and state health department officials to evaluate how access to public insurance affects the health of low-income residents.

Early results from this rigorous study, which began in 2008, indicate that people who gain Medicaid coverage use more health care services—both inpatient and outpatient. The study found improvements in primary care access and significant increases in the use of preventive care such as mammograms and cholesterol screening. Medicaid coverage also reduced observed rates of depression and greatly reduced financial hardships and medical debt. But these positive results were not accompanied by signs of improved physical health outcomes, such as changes in blood pressure or cholesterol levels, and the study found evidence of increased use of emergency rooms among those who gained Medicaid coverage.

Of course, these results are from a short period of time: the first one to two years of coverage. If people are able to maintain coverage and consistent contact with providers, we could see improvements in health outcomes and decreased use of high-cost care settings such as ERs over time.

The good news is that these improvements may have gotten a head start in California.Before this year’s Medi-Cal expansion under the Affordable Care Act, the state expanded access to more services and better coordinated care through county-based programs under a federal waiver designed to prepare California for health care reform. This means that more than 600,000 uninsured residents, who will comprise a large share of new Medi-Cal enrollees this year, were brought into systems of care and already had the opportunity to receive needed services. This could mean that utilization in California will not increase as much as it did in the Oregon experiment. Evaluations of these county-based programs suggest that hospitalizations and ER visits could be reduced, but this will probably take longer than one or two years.

So while there is promising evidence of the benefits expanded Medicaid coverage can offer, including financial protection and increased use of preventive and primary care, it will probably take some time to bring about other desired changes.

Reforming Proposition 13

In the current legislative session there has been a movement toward making changes in the Proposition 13 tax limits that voters approved in 1978. Democratic legislators have been emboldened to take on some key elements of the so-called “third rail of California politics” after the surprisingly easy passage of the Proposition 30 tax initiative in November 2012.

Voters have already been making changes to the laws that govern the state. Recently, they changed their legislators’ term limits and the legislative redistricting process, lowered the threshold for state budget passage from a two-thirds vote to a simple majority, and changed the partisan primary to a top-two primary. Surprisingly, they also voted to change the once highly popular Three Strikes Law. So, will reforming Proposition 13 be the next big thing?

One Proposition 13 tweak that is a perennial favorite among tax reformers is lowering the two-thirds vote that is needed to pass local special taxes. Proponents argue that this change would allow local governments to more easily raise needed revenues for schools, public safety, transportation, and water projects.

However, the backers of this particular Proposition 13 reform would face substantial opposition among the electorate today. In our January PPIC Statewide Survey, just 44 percent of voters were in favor of lowering the vote threshold from two-thirds to 55 percent, while 51 percent were opposed. These findings are consistent with most of our polling over time.

Looking more closely at the January survey findings, 50 percent of Democrats want to lower the vote threshold to pass local special taxes to 55 percent, but fewer than half of independents and Republicans favor it. Voter support falls below a majority among men and women, renters and homeowners, across age, education, and income groups and the state’s major regions. In other words, proponents of this change would start with less than majority support and need to run an expensive campaign to convince some “no” voters to vote yes. This would be an uphill battle, given that efforts to change Proposition 13 have always faced a well-organized anti-tax coalition in the past.

But there is a Proposition 13 change that has substantial voter support: creation of a “split roll” property tax. Under this proposal, commercial property would be taxed according to current market value and Proposition 13’s strict limits on property tax assessments and annual property tax increases would apply only to residential property. Advocates for this idea argue that business interests have reaped tax benefits that were supposed to be directed at homeowners and that a split roll would generate billions in new revenues for state and local programs.

This proposal has support among 60 percent of voters in our January PPIC Statewide Survey, with majority support among men and women, homeowners and renters, and across age, education, income, race/ethnic groups and the state’s regions. This reform has solid majority support among Democrats and independents, and 43 percent of Republicans also favor it. What gives the proponents pause for mounting an initiative campaign for a split-roll property tax? The likelihood that a campaign against it by well-funded business and commercial interests would succeed. Also, six in 10 voters say that Proposition 13 has been mostly a good thing for the state in our May 2013 PPIC Statewide Survey, making it easy for split-roll opponents to cast doubts about making changes to this popular initiative.

California voters started a national tax revolt when they approved Proposition 13 during Jerry Brown’s first term as governor—and he does not mention taking aim at Proposition 13 as a priority as he seeks a record fourth term. So what may be in store for change-minded voters? In our January poll, voters liked the governor’s plans for a rainy day fund and paying down the debt. We can expect to see legislation and ballot measures reflecting a desire to get the state’s fiscal house in order. In this election year, it seems unlikely that the state’s politicians will challenge the voters’ longstanding love affair with Proposition 13.