MOORLACH UPDATE — Single-Payer — June 2, 2017

The big news is that my Democratic colleagues in the Senate voted for a "work in progress," having an estimated $400 billion annual price tag, to implement universal health care in the state of California. I spoke against the single-payer proposal, SB 562, on the Floor (see https://youtu.be/WW_ibJjAKkU). Alternet picks up some of my remarks in the first piece below.

The Legislature also focused on housing related bills during yesterday’s Session. I stood up and opposed every bill that would place a bond measure on the November 2018 ballot. California’s General Fund cannot afford anymore fixed costs for principal and interest. Not with ever increasing pension and retiree medical payments to address the largest unfunded liabilities in the nation. KQED News provides the details in the second piece below.

The Governor’s CalPERS additional payment was discussed today in the Budget Conference Committee. It is still receiving attention, and the third piece in R Street and CalWatchdog, continues the debate. Expect to hear more from me on this in the coming weeks.

In Historic Vote, California Senate Passes Single-Payer Bill to Provide Comprehensive Health Care to All Residents

A work-in-progress? A model for the nation? Or a step off the fiscal cliff?

By Steven Rosenfeld / AlterNet

http://www.alternet.org/economy/california-senate-passes-single-payer-healthcare-bill

The California Senate voted Thursday to approved a statewide single-payer health care system. The 23-14 vote, mostly following party lines, came after a lengthy debate in which Democratic backers admitted the bill’s details were far from finalized, while Republicans bemoaned creating a government-run system they predicted would leave the state in ruins.

“SB-652 will establish a state-based universal care system and provide comprehensive care coverage to every single Californian. This bill, I know, is a work-in-progress—Sen. Atkins and I know there is a lot more work to do,” said Sen. Ricardo Lara, D-Bell Gardens, the bill’s co-sponsor, primarily referring to its lack of a financing mechanism.

“This legislature believes it can fund a $400 billion bureaucracy—it seems glib to me that it’s ‘a work-in-progress,’” said Sen. John Moorlach, R-Costa Mesa. “I don’t know how we complain about Washington, D.C. making changes to health care and saying they’re vague, when we’re vague… I see this is as being on the wrong road heading straight for a fiscal cliff.”

The bill passed the Senate, where Democrats hold a 27-13 majority, though did not say how the estimated $400 billion cost in providing comprehensive health care to every resident would be paid for. Currently, the combined state and federal government health care subsidies add up to $225 billion annually. The rest, if it replaces private insurance premiums for individuals and businesses, would need to come from some combination of revenue-raising measures.

What’s been proposed so far are two vastly different approaches. The Senate Appropriations Committee staff said it could come from a 15 percent hike in the state payroll tax, essentially doubling it. The bill’s sponsors and the largest institutional supporter, the California Nurses Association, released an analysis Wednesday that said single-payer would cut statewide coverage costs by $60 billion from the current system, and could be paid by raising two taxes by 2.3 percent each: the gross receipts tax paid by businesses after their first $2 million in income, and a similar-sized increase in the sales tax.

The Senate floor debate did not discuss these details, but mostly focused on whether the state legislature needed to keep working on the bill or not. Everyone agreed that Friday’s crossover deadline—when bills have to pass from one body to another to possibly become law—was unfortunate. However, most Democrats said that the issue was too important to stop.

“I see a zillion holes in it, but I am going to vote for it today because I think at the end of the day the question is worth debating,” said Sen. Bob Hertzberg, D-Van Nuys. “At the end of the day we are a legislative branch of government and our job is to deliberate. Our job is to ask hard questions. Our job is to take a look at what is coming at us and try to figure it out. And the message to those people who say we’re irresponsible, I tell you do not judge us based upon a vote in a day; judge us based upon our work at the end of the day.”

Republicans took the opposite position, saying single payer would be a disaster and repeating the health care industry’s talking points.

“This bill, as written, will force people out of their current health care system and embracing a purely governmental-run system, run by government bureaucrats who have failed us too often,” said Sen. Jeff Stone, R-Indio. “For those of my constituents that have Kaiser, if this law gets passed, Kaiser said at the committee hearing they will close their doors here in California. Aetna will leave. HealthNet will leave. Blue Cross, Blue Shield, non-profit hospitals. So much for freedom of choice.”

Some Democrats, however, said the bill is premature.

“As its supporters said, it is a work-in-progress,” said Sen. Steven Glazer, D-Orinda. “And for me, rather than rushing to pass it before it’s complete, we should keep it here and finish the work. The voters will ultimately have to have a final say on any plan of this scope because it conflicts with existing provisions in the [state’s] constitution. My view is we should finish the policy work, pair it with real sustainable funding sources, and then we should put it on the ballot in 2018.”

Senate president Kevin De Leon, D-Los Angeles, closed the debate by saying the process was at a midway point and it did not have a funding mechanism—which would require a super-majority to pass—to keep the proposal moving through the legislative process.

“But I’m not sure if we had this fully cooked, if in fact, everyone would actually vote for this measure. That’s another issue unto itself,” he said. “We are at a halfway point with this measure. If we move this measure, we will engage still with our colleagues, our friends on the Assembly side. And I invite my Republican friends and colleagues to be part of this discussion.”

The California Nurses Association was quick to praise the Senate’s vote.

“This is a banner day for California, and a moral model for the nation,” said RoseAnn DeMoro, executive director of the California Nurses Association and National Nurses United, lead sponsor of SB 562, the Healthy California Act. “California senators have sent an unmistakable message today to every Californian and people across the nation. We can act to end the nightmare of families who live in fear of getting sick and unable to get the care they need due to the enormous cost. We’ve shown that health care is not only a humanitarian imperative for the nation, it is politically feasible, and it is even the fiscally responsible step to take.”

Steven Rosenfeld covers national political issues for AlterNet, including America’s

democracy and voting rights. He is the author of several books on elections and the

co-author of Who Controls Our Schools: How Billionaire-Sponsored Privatization Is

Destroying Democracy and the Charter School Industry (AlterNet eBook, 2016).

Legislature Approves Bills to

Address California’s Housing

Crisis

By Guy Marzorati

https://ww2.kqed.org/news/2017/06/01/legislature-approves-bills-to-address-californias-housing-crisis/

Responding to a severe shortage of housing in the state, California lawmakers passed legislation Thursday to boost the production and ease the approval of housing at the local level.

In a series of bipartisan votes, the Senate and Assembly approved legislation that would streamline the permitting of some housing developments, present voters with a $3 billion bond to fund affordable housing, and build supportive housing for the state’s homeless population.

The legislation addressed two sides of the housing policy coin: Funding to increase housing development and access, and reforms to make it harder to block new projects.

“California’s expensive housing market has a disproportionate impact on the middle-class and working poor,” said Senator Jim Beall (D-San Jose), the author of Senate Bill 3, the housing bond.

If approved by the Assembly and signed by the Governor, the bond measure would go before voters in the November 2018 election. The billions would be invested in existing state housing programs, with the hope of offsetting the costs that typically dissuade builders from constructing below market rate units.

The measure received multiple Republican votes, though some GOP Senators worried about adding to the state’s ‘wall of debt.’ Voters in November approved a $9 billion bond for school construction, and lawmakers have advanced a number of bond proposals so far this year.

“Can California afford yet another general obligation bond?” askedSenator John Moorlach (R-Irvine). “I would suggest we cannot.”

The Assembly approved a measure by David Chiu (D-San Francisco) to give rental assistance to chronically homeless Californians. Proponents say that housing the homeless will drive down other public costs.

“Today we spent countless dollars after someone is on the street on emergency rooms and other very expensive health care services,” Chiu said.

The fate of that measure, Assemby Bill 74, could be decided in the budget process through negotiations between the governor and lawmakers . An identical measure was vetoed by Governor Jerry Brown last year, who argued the program should come with a new funding source. Assembly Democrats set aside $90 million of general fund money in their budget proposal for the program, but it’s unclear if the Senate and governor will go along with that idea.

Rule Changes to Encourage Housing Production

Legislators carrying the housing funding bills acknowledged that new money must be paired with major revisions to the approval process of local developments.

“This bond on its own will not solve our deep housing crisis,” said Senator Beall. “We must continue to work on the reforms.”

Those reforms include making it more difficult for housing projects to be blocked at the local level.

Senate Bill 35, from Senator Scott Wiener (D-San Francisco) would allow housing developments to be approved without public hearings and reviews under the California Environmental Quality Act. The developments must be located in areas that have failed to meet statewide housing goals and still would require local oversight.

“Local control is about how you meet your housing goals, not whether you meet your housing goals,” said Wiener.

Asssemblyman Chiu had his own streamlining legislation pass the Assembly. Assembly Bill 73 would allow cities or counties to create special ‘districts’ where developments could be more easily approved.

“This opt-in incentive approach would encourage localities to do the right thing and build the housing that our state desperately needs,” Chiu said.

Gov. Brown’s pension plan gets mixed reviews from reformers

California Governor Edmund G. Brown Jr. explains his budget proposal doing a press conference at the California State Capitol in Sacramento on Thursday, January 10, 2013. Gov. Jerry Brown unveiled his proposed state budget for the year that begins July 1.

BY STEVEN GREENHUT.

http://www.rstreet.org/op-ed/gov-browns-pension-plan-gets-mixed-reviews-from-reformers/

Gov. Jerry Brown and the Legislature mostly have avoided tackling the state’s unfunded pension liabilities, even though these taxpayer-backed debts to pay for pension promises to state and local employees have soared by 22 percent in the last year alone. Earlier this month, however, the governor introduced a plan to help pay down the liabilities, but recent analyses from prominent pension reformers have been mixed.

The governor’s plan is similar to the idea of pension-obligation bonds. That’s when a government borrows money to pay down escalating pension debts, in the hopes “that the bond proceeds, when invested with pension assets in higher-yielding asset classes, will be able to achieve a rate of return that is greater than the interest rate owed over the term of the bonds,” according to an explanation from the Government Finance Officers Association.

The governor’s plan, by contrast, would borrow money from the Surplus Money Investment Fund, a low-interest (around 1 percent) account where the state holds money to pay for short-term expenses. It would then make a supplemental $6 billion payment to the California Public Employees’ Retirement System (CalPERS), which currently predicts a rate of return of 7 percent (even though last fiscal year it received only 0.61 percent). If the CalPERS fund performs as predicted, it will allow the state to save $11 billion in pension liabilities over two decades.

“Absent additional action to address these growing liabilities, paying off retirement liabilities will require an increasing percentage of the state budget. For example, the state’s contributions to CalPERS are on track to nearly double from $5.8 billion ($3.4 billion General Fund) in 2017‑18 to $9.2 billion ($5.3 billion General Fund) in 2023‑24,” according to the May budget revision’s summary. This is purportedly a painless way to pay down growing pension debts.

The idea got a boost from one of California’s best-known pension reformers, Sen. John Moorlach, an Orange County Republican who recently introduced a package of pension reform bills in the Senate. They were all killed by majority Democrats. Nevertheless, Moorlach wrote, in a column for Fox & Hounds that he wishes the governor’s prepayment plan had “a little more sizzle to make it an even more interesting opportunity.”

“Governor Brown should ask the board of CalPERS what type of incentive they will give the state for the prepayment,” he wrote. “CalPERS will benefit from the large influx and should provide at least a 3.75 percent reduction on the actuarially calculated required contribution.” That’s unlikely to happen, of course, but Moorlach wrote that he likes the Brown proposal and thinks the governor should move forward with it.

The idea follows the lead of the Orange County city of Newport Beach, explained Ed Mendel, in his May 29 Calpensions article. The city is paying down its pension debt to CalPERS as quickly as possible, helping it avoid the possible fate of other cities. Mendel quotes Modesto’s acting city manager, who told the Modesto Bee “he is hearing that many cities are facing bankruptcy over rising pension costs.” In the case of looming fiscal trouble, most say slashing at debt is a good idea.

But not everyone is so favorably disposed toward the governor’s plan. David Crane, a Stanford University lecturer and president of Govern for California, argues in a column that the plan is terrible precedent that transfers more pension costs from the beneficiaries of the pension system to the state’s taxpayers. When the state makes pension promises to employees, he wrote, both the state and the employees make contributions into the system, which he refers to as “normal costs.”

By contrast, when agencies increase benefit levels or stock-market earnings go down, the pension funds face those “unfunded liabilities,” which are the unfunded promises they’ve already made to current retirees and employees. CalPERS currently is 74 percent funded, which means that 26 percent of those promises are unfunded. “In contrast to joint sharing of normal cost, employees don’t share in the cost of unfunded liabilities,” he wrote. “One hundred percent of that cost falls on citizens, whose services get crowded out and taxes get raised to pay off the liabilities.”

Borrowing these taxpayer funds to pay off the pension debt, he explains, would just let CalPERS continue to set these shared “normal costs” at an unfairly low rate. Furthermore, Crane notes that this special fund is funded entirely by taxpayers, so he fears the state will borrow from other special funds. The state could claim that these monies are going to pay for public services, when in reality they are being siphoned off for pensions.

As Gov. Arnold Schwarzenegger’s pension adviser, Crane wrote that he helped the former governor “engineer ‘Deficit Reduction Bonds’ as a way to address the deficit he acquired upon taking office.” But he now regrets the move: “Those borrowings didn’t solve anything. They just covered up the problem, with interest to boost.”

State and local governments are understandably in a bind. They have “few ways to slow the rapidly climbing cost, among them: cut staff and services, lower pensions for new hires, get unionized employees to pay more for their pensions or cut salaries,” explained Mendel. He noted the key obstacle limiting the ability of governments to cut pension accruals in the future is something called the “California Rule,” which is making its way to the state Supreme Court.

For some, then, shuffling funds around to prepay a little pension debt seems like a cost-free no-brainer to likely limit the growth of the debts. But to others, it’s just a shell game that evades the more politically dangerous course of tackling the size of those benefits head on – and running into powerful resistance from the state’s public-employee unions.

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