State budget preserves Marin funding

Marin County programs escaped relatively unscathed when legislators approved this year’s state budget, a county official said this week.

In May when Gov. Gavin Newsom released his revised budget proposal, Talia Smith, the county’s legislative director, estimated that the governor’s proposed cuts could cost Marin County a minimum of $5 million if enacted.

“The Legislature’s budget restored funding to a lot of those programs that we were concerned about,” Smith told county supervisors on Tuesday.

Newsom’s proposed cuts came in response to burgeoning estimates of the state’s budget deficit.

The Legislative Analyst’s Office (LAO) estimated the shortfall to be $68 billion in December. The governor cited a different figure, $38 billion, when he submitted his initial budget in January. In February, the LAO revised its estimate to $73 billion. The governor and Legislature have most recently pegged the shortfall at $46.8 billion.

“California is facing a very major deficit,” Smith said, “its first major deficit since the Great Recession.”

Nevertheless, the final budget preserved many programs important to counties that the governor proposed to cut without increasing taxes or use of reserves.

“Make no mistake: This is a tough budget year, but it also isn’t the budget situation we were originally fearing,” Marin’s representative in the state Senate, President Pro Tem Mike McGuire, D-Geyserville, said announcing the state budget agreement. “Thanks to hard work, tough decisions, and early actions, we’ve been able to shrink the shortfall, protect our progress, and maintain responsible reserves.”

Smith, however, said that the final budget relies on some “risky assumptions.” One of those assumptions is that the state’s revenue will grow by 5% in the coming year, higher than the pre-pandemic level in 2018-19.

“Forecasting a typical revenue year after two major deficit-defining years entails risk,” Smith stated in her written report to supervisors.

The Legislature is also substituting $5.2 billion from the state’s Greenhouse Gas Reduction Fund for general fund revenue to maintain funding for programs from food security to fire resiliency, Smith said.

She said the Legislature asserts there will be plenty of money in the Greenhouse Gas Reduction Fund because it recently adopted a more optimistic formula for projecting the fund’s revenue over the next five years. Money from cap-and-trade auctions is deposited in the fund.

“We’re going to see if those revenues are actually realized,” Smith said. “We could just be delaying the decision around cutting those programs by shifting them out of the general fund.”

Smith said the final budget also assumes the federal government will approve the state’s newly re-instituted managed care organization tax. Smith said the state has started taxing managed care organizations such as Kaiser Permanente for Medi-Cal patients.

Smith said the managed care organizations pass the cost of the tax on to the federal government, “so that additional revenue comes into the state.” Lawmakers initially said they would use the federal revenue to increase reimbursement rates that health care providers are paid under Medi-Cal. More recently, however, Newsom has proposed using the money to cover other Medi-Cal program costs. In January, undocumented residents who are 20 to 49 years old became eligible for Medi-Cal for the first time.

Smith said the managed care tax stratagem could be derailed if Proposition 35, which will be on the ballot in November, passes. Proposition 35 would mandate that the bulk of the money be spent to boost provider reimbursement rates, as initially intended.

“The state would essentially have to find another source for what they’re using to plug a hole in general fund revenues,” Smith said. “That could mean large cuts elsewhere to programs for counties.”

For the time being, however, the outlook is rosy. Cuts to several state homelessness programs proposed by the governor that could have cost Marin an estimated $2 million are off the table for now.

A proposal by Newsom to make charter schools eligible for Educational Resource Augmentation Fund (ERAF) money, which would have cost Marin $1.1 million in ongoing funding, has also not moved forward. Marin is one of five counties that has been accused of receiving extra ERAF funding because of the way they factor in charter schools.

And a proposed $1.2 million cut to public health that threatened the jobs of six people recently hired to serve on Marin County’s outbreak prevention and infection control team has been avoided. The team, which assists nursing homes and residential care centers, was created during the height of the COVID-19 epidemic when nursing homes were ground zero for coronavirus deaths.

Dr. Matt Willis, the county’s public health officer, said, “Those people are relieved they’re going to keep their jobs.”