ArnoldCare: On the Brink of Termination?

Ron Bailey warned us last January about some of the problems with California Gov. Arnold Schwarzenegger's proposed health-care reforms, which instead of empowering consumers of health insurance to make their own choices, makes those who can't afford to buy the health insurance the plan will mandate that all Californians own into wards of the state by enrolling them in expensive state programs such as MediCal.

Now the LA Times tells us, despite passage by the state Assembly, that the plan seems set to die in the charnel fields of the state's Senate. Why?

A report by the nonpartisan legislative analyst's office released Tuesday evening questioned some of the Schwarzenegger-Nuñez plan's fiscal assumptions as too optimistic and estimated that by the fifth year of operation, the plan would be spending $300 million more than it was raising.

Even before the report's release, many Senate Democrats expressed concerns about a grand expansion of healthcare at a time when the state is facing a $14.5-billion budget shortfall that may require large cuts in existing healthcare.

Schwarzenegger and [Assembly Speaker Fabian] Nuñez have insisted that their plan will have no effect on the state budget. But the legislative analyst noted that the state's general fund "would be the ultimate backstop," and if the healthcare plan gets out of balance "it could create pressure on the general fund."

……….Even if the bill passed the Senate, it would not go into effect unless a companion ballot measure is approved in the November election. That measure contains the financing for the plan: $2.5 billion in hospital taxes, an increase in tobacco taxes of $1.75 a pack and a requirement that employers spend the equivalent of up to 6.5% of their payroll costs on healthcare or pay into a state fund that would provide those workers with coverage.

George Passantino of the Reason Foundation has more on what's wrong with ArnoldCare. The key: the real problem with health care is cost, not insurance coverage, and Arnold's plan is apt to exacerbate the cost problem.

The headline is, I believe, my very first cutesy reference to the fact that the governor of California is a former actor who starred in a series of action flicks called The Terminator. I hope that will be noted as a mitigating circumstance in any eventual blog-headline show trial come the revolution.

Comments

[Andrew]

The Assembly Speaker's first name is Fabian? How strangely appropriate.

[Phillip]

Charnel. With an "e". Is that the word of the day or something? First in the surge article and now on hit-n-run?

Tommorrow's word will be: misanthrope.

[CFisher]

many Senate Democrats expressed concerns about a grand expansion of healthcare at a time when the state is facing a $14.5-billion budget shortfall that may require large cuts in existing healthcare

Wow... I knew things were bad here in California, but if Democrats are actually against something because it'll cost too much, we must be seriously screwed.

[drawnasunder]

Wha? First paragraph me confuse.

[DavidS]

Wha? First paragraph me confuse.

Looks like it confused Brian too.

[Episiarch]

Maybe Skynet can send Arnold back in time to kill this proposal before it can become dangerous.

[Geotpf]

The California state budget is FUCKED with a capital FUCKED. Basically, taxes have been lowered so much that it's not possible to fund the schools, police, jails, roads, etc., properly. During exceptionally good years when rich people make a lot of money (the dot com years, for example), it almost gets balanced, but long term, it's FUCKED.

Now, I know there's a lot of people here who are happy that taxes are so low that our roads and schools and whatnot are shit, but that's just wrong.

[BakedPenguin]

I think the first pp is missing some parentheses, or would at least be helped by them:

Ron Bailey warned us last January about some of the problems with California Gov. Arnold Schwarzenegger's proposed health-care reforms, which instead of empowering consumers of health insurance to make their own choices, makes those who can't afford to buy the health insurance (the plan will mandate that all Californians own) into wards of the state by enrolling them in expensive state programs such as MediCal.

[sage]

The headline is, I believe, my very first cutesy reference

Boy, you're late to that party. Let me help you:

"Headline explained here."

[The Wine Commonsewer]

Geotpf, you, good man, are nuts. Taxes have not been lowered in California.

You are correct though, we are SCREWED.

For the record the Scwarzzengroper spending is up about 45% since he took office.

Now, listen carefully, if you spend 40 billion dollars more this year than you spent five years ago, the money has to come from some where.

California spends close to ALL of it's money on social welfare, schools, and medical care. When you're done doing that it doesn't leave much for roads or bridges.

[just another lurker]

So one of the proposed funding sources is...
an increase in tobacco taxes of $1.75 a pack

WTF? How much does a pack of smokes cost now in California?

[The Wine Commonsewer]

1996-97 California State Spending was approx 61 Billion

2007-08 California State Spending is 140 billion

Something really wrong with that picture.

Never could have imagined longing for the days of Moonbeam.

[Geotpf]

The Wine Commonsewer-First thing Arnie did was when he took office was lower taxes on car registration by six billion dollars a year. And, do you have a link for spending going up by 45% a year? Are you counting inflation and population increases? I'll bet if you factor those in spending is flat or has gone down. (That is, per citizen of the state, in 2008 dollars, spending is down.)

But the real problem stems from Prop. 13 in the 1970's, which lowered property taxes across the board. The budget has been balanced by gimmicks and borrowing and short term fixes since then.

[The Wine Commonsewer]

WTF? How much does a pack of smokes cost now in California?

Forty bucks a carton of which about 1/3 is sales and cigarette taxes.

[Windypundit]

$2.5 billion in hospital taxes? They're trying to improve healthcare by taking $2.5 billion dollars away from hospitals?

[The Wine Commonsewer]

Geo, yep, he lowered car registration taxes so that now, they're only 10 times as much as any other state. Just kidding.

So, you are suggesting that it is reasonable for me to pay $380.00 to register my 7 year old truck this year? Sorry, my mom's brand new car in Md is $30.00 (or so) for two years. I'll Door # Two for $139.00 instead.

Here's your link, scroll down to the chart. And, BTW, inflation during the last ten years cannot account for this massive increase in tax expenditures.

http://www.lao.ca.gov/2006/cal_facts/2006_calfacts_budget.htm

[Geotpf]

The Wine Commonsewer-

Spending in 96-97 was $65.5 billion.

http://www.lao.ca.gov/1996/100796_spend_plan/96spendplan_ch2.html

Spending in 07-08 is $131.5 billion.

http://www.lao.ca.gov/laoapp/PubDetails.aspx?id=1674

Factor in inflation and population increases over that time period, and that's probably status quo, especially if you consider additional requirements by the feds over that period (No Child Left Behind, additional security due to terrorism, etc.).

[JW]

TWC--The last I checked car registration is $70/year here in MD. It's probably higher now, but not by much. We pay every 2 years.

But $380/car for one year? Holy crap. You're taking it in somewhere not pleasant, my friend.

[The Wine Commonsewer]

Kind of loses the drama when you don't use preview. S/B:

I'll TAKE Door # Two for $139.00 instead.

To elaborate. My fee (without the tax) reduction to register a seven year old car (one year only) would be approximately $380.00 Geo likes that. I don't.

I get absolutely nothing for any tax I pay to California. It is a zero sum game. I pay tax, they spend it on someone or something else.

[Joel]

The Wine Commonsewer-First thing Arnie did was when he took office was lower taxes on car registration by six billion dollars a year.

As I recall, that was to counteract some of the astronomical increase in registration fees that Davis imposed, a major reason the recall succeeded. That increase was in place such a short time I don't know if it ever had any effect.

[Cesar]

Too bad you can't amend the state Constitution to limit new spending to the rate of population growth+inflation.

[JW]

Geotpf--A more than double increase in spending in 10 years far outstrips inflation as to be not funny.

And as to your your problem with lower taxes impacting the roads and such, it's never a taxing problem when there is a budget issue, it's always an over-spending issue. The money is there, they just spent it somewhere else.

If the legiscritters could just *try* and learn a bit about fiscal restraint and not spend every dime they take in and then some, there would be less bitching and moaning around budget season.

Just have them try and say it: "No, you can't have a subsidy for your Emu farm." They'll stutter.

[Geotpf]

Looking at your 12:40pm link, it looks like the increase has been in "Health and Social Services" and "Criminal Justice". The second means locking up more drug users. The first probably means more poor people (especially immigrants, especially illegal immigrants). I hate to say "them brown people busted the budget", but that's probably the case-lots of Mexicans in California.

[The Wine Commonsewer]

JW, thanks, maybe my Ma meant $30.00 per year and I misunderstood that because she then said and we pay every two years. It's been a couple years since we talked about it.

California has a really high tax on cars and the one thing that Arnie did promise was to roll back the car tax. He did that.

We know how much we would have paid without the tax reduction because the state did not take the tax away. It was suspended. So, when you get your registration it shows what you would have paid and what you actually pay.

My 2001 Montero (bought in 2000) cost me $139.00 in July of 2007. It would have cost me $380.00 without the car tax reduction.

[Geotpf]

"Joel | January 24, 2008, 12:46pm | #

The Wine Commonsewer-First thing Arnie did was when he took office was lower taxes on car registration by six billion dollars a year.

As I recall, that was to counteract some of the astronomical increase in registration fees that Davis imposed, a major reason the recall succeeded. That increase was in place such a short time I don't know if it ever had any effect."

What happened was fees were lowered during the dot com boom. There was a provision in the law lowering the fees stating if the budget ever fell out of balance again, they would be automatically raised back to their old levels. After the dot com crashed, the budget got fucked, and the fees were automatically hiked. Davis could have stopped this, but he didn't because the budget was fucked and this was the understanding that was put in place when they were lowered in the first place. That is, Davis only raised them back to the level they were in the late 1990's. Arnie lowered them back to the dot com level.

[eldritch daemon]

Charnel. With an "e". Is that the word of the day or something? First in the surge article and now on hit-n-run?

HP Lovecraft must be the new editor.

[The Wine Commonsewer]

Geo, this is not an old Temptations song. More taxes will not solve everything.

California spends 140 times as much money as it did the year I was born. There are not 140 times as many people in this state. Inflation has not gone up 140 times. In the 1960's California was looked to as the world leader in roads. The finest, most advanced system was right here. Now it's like driving from Ensenada to Cabo San Lucas. We are spending 140 billion dollars and you cannot drive on the roads and it takes five hours to get from LA to San Diego in rush hour in the rain.

It isn't dope or illegals or criminals. It is a cancerous pathology that infects Sacramento that is abetted by well-meaning people like yourself who do not realize that the problem isn't connected to revenue.

We have LOTS OF INCOME. Almost half again as much as we did when Gumbi was recalled. Yet we have a fiscal crises.

Good grief.

[Geotpf]

Well, to determine exactly what is going on, one would have to read the entire budget line by line and see if, and where, wasteful spending is occuring. Nobody here has the capacity to do that. It would be interesting to do, but I don't think that's practical for the purposes of this discussion.

[Pinette]

I live downtown in the state capitol, Sacramento. Almost everyone i meet, most of my friends, my neighbors, etc, work for the state. It's amazing how many state workers there are in this city. I'm sure it's similar in any capital but this is the first one I've lived in.
It's so easy to waste money on useless bureaucracy. The state workers i know make very decent wages, have fantastic benefits, and do basically nothing.

[sage]

The state workers i know make very decent wages, have fantastic benefits, and do basically nothing.

Well, we should take a point away for using anecdotal evidence. But since the first two points are entirely provable, and the third highly probable, you get two points for that. 😉

[The Wine Commonsewer]

Sage, 🙂

[The Wine Commonsewer]

one would have to read the entire budget line by line

45% goes to education.

Now, we only have to read half the budget.

[The Wine Commonsewer]

The state workers i know make very decent wages, have fantastic benefits, and do basically nothing.

One of my pet peeves is that the Board of Equalization will not provide a downloadable .PDF sales tax form that does the math. I could create one in about five hours yet nobody in the entire government workforce can or will do so.

Sure, you can download a .PDF sales tax form but you have to type it, block by block, just like the old days of the IBM Selectric.

One would think that a fill-in form that did the math for all the little guys who do their own returns would eliminate almost all of the math errors that BOE has to deal with.

Instead, BOE employees continue to check the returns that, although they look very pretty, are essentially still done by hand and then when errors are discovered BOE sends out notices, by hand, just like it was still 1963.

[Mad Scientist]

How about we simply double the taxes paid by any CA state employee? Double them all: sales tax, property tax, car registration, gas tax, fishing license, etc., etc. This plan has several advantages such as 1) will raise revenues short term, 2) will reduce the number of state employees, 3) will reduce revenues long term, 4) will piss off a bunch state-employed leechs, 5) will make me feel gooooood about raising taxes for once. Fuck it, let's triple the taxes on all government employees.

[Colin]

This is wonderful news. I don't know what Arnold was thinking on this one.

Strange that the Democrats are the voices of fiscal restraint.

[Brandybuck]

The key: the real problem with health care is cost, not insurance coverage, and Arnold's plan is apt to exacerbate the cost problem.

No, that's NOT the real problem! It's only the perceived problem. For a group that's been in the libertarian movement for decades, Reason Foundation is awfully ignorant of economics.

The real problem is that we do not have a free market in healthcare. Hell, it barely resembles a market at all, free or otherwise. Consumers do not purchase healthcare, they buy "plans" from "insurance" companies, who then negotiate payment schedules with hospitals. Government regulation and tax policy impose this structure on the healthcare industry.

[Morat20]

You should bear in mind that one reason California charges (or was wanting to charge) 400 bucks to register a car is because they can't raise money the way most states do (through property taxes).

Their property tax system is insane. I mean, I'd LOVE it if it were that way here in Texas (I'd be paying a fraction of the rate I pay now, and my house's value would be assesed a LOT lower than it is now), but I suspect that if it was....I'd be paying 400 bucks to register my car.

[Dr. K.]

Geotpf,

1996 expenditures = 65.5 B 1996 dollars = ~ 85 B 2007 dollars
1996 population > 30 M
1996 per capita spending = not more than $2800 (2007 dollars) per person

2007 expenditures = 131.5 B 2007 dollars
2007 population < 38 M
2007 per capita spending = not less than $3500 (2007 dollars) per person.

That's a 25%+ increase in real, per capita spending in about a decade.

California does not have a revenue problem.

[Nick]

Yeah, I'm definitely not moving to CA now! After reading all that everyone here is writing, I don't know why anyone stays.

NH is looking better every day. No sales tax or income tax. I live in Upstate NY so the weather is about the same and so's the scenery.

That's it honey, we're moving to where they talk funny!

[The Wine Commonsewer]

Morat, Texas has insanely high property taxes. But no personal income tax and education spending has gone through the ceiling.

It is a myth that California property taxes are universally low.

Property is assessed at market value when purchased. The property tax is 1% and increases by 1% every year.

But, assessment districts and newer developments where infrastructure was financed with mello roos bonds are not subject to prop 13 restrictions and effectively triple the property taxes in many areas.

In many cases the cost of streets, sewers, etc has been completely shifted from local government to the homeowners by using assessment districts and bonds.

If you live in an older home and you don't move prop 13 is beneficial. But since people in Ca move around all the time (every 3-5 years) real estate is constantly being re-assessed to market value.

Even though I have lived in my house for ten years and I am protected by prop 13, my property taxes have gone up 20% since we bought our house. Not 20% a year. 20% total.

[Nick]

Morat20, why can't they raise property taxes?

[The Wine Commonsewer]

Oh yeah, and the tax bite is even worse because real estate in Ca is so dam expensive.

You can buy a 6,000 square foot mansion on Lake Austin for the price of tract house in Orange County Ca.

[The Wine Commonsewer]

I don't know why anyone stays.

The weather.

[Nick]

Maybe we'll move to TJ and just visit CA whenever we feel like it.

Anyone know why CA doesn't have tolls on their highways? It would be an effective way to finance the roads and everyone would likely get an EZ pass so it's not like the toll booths would back things up much worse than they are now, considering traffic will forever suck in CA. As a geographer looking at an LA map the other day, I said the planners should be shot. Horrible, absolutely horrible.

[Nick]

Nice weather is apparently highly over rated.

[Nick]

TWC, ever try any NY wines? Liberty Red is a good one.

[Dr. K.]

Texas property tax RATES are pretty high. However, since land here is plentiful and cheap, that helps keep values low. Thus, property tax actually paid in Texas is throughly middle-of-the pack.

[shecky]

I'm just getting accquainted with CA's wierd property tax rules. I recently bought a second house for my mother. Apparently, it's been assessed, for tax purposes, at almost twice what I paid for it! I'm not sure how a house, in the crappiest part of L.A. county (wasn't my idea to buy the house there, but that's where Mom wants to live), somehow doubles in value less than six months after I buy it. In a market where property values are actually dropping.

Of course, getting an explanation led down the bureaucratic rabbit hole.

[shecky]

Nice weather is apparently highly over rated.

Not when you can't have it.

[The Wine Commonsewer]

Nick, we do have toll toads. They're pretty high tech and use electronics to read a little card in your car and then assess the toll while you tool on by at 65 mph.

First one was privately owned and Reason's Beloved Founder, Bob Poole was intimately involved in putting the project together. It featured congestion pricing and was pretty effective. However, local government hated the idea that it had private owners and eventually the owners gave in and sold.

[The Wine Commonsewer]

Nick, haven't tried NY wines. I didn't know they had any red but had heard that a lot of the whites were pretty good, espc up around the Finger Lakes area.

I avoid white wine so now that i know about NY reds, I'll have to find some.

On weather, there is something to be said for nice weather, but I can assure you that today's California is nothing like the California I grew up in.

I'm loath to uproot my family but if it were just me? I'd be long gone.

Yes, there's money here. Great food. Good weather in the winter. That isn't enough to get past all the drawbacks.

[The Wine Commonsewer]

Shecky, I've seen that a couple of times. There is a technicality in a law enacted a few years ago that allows the county to base the assessment on the so-called market value.

It usually only affects people who got a super good deal on the house and actually did pay less than market value.

Secondly, the same law allows a homeowner to ask the county to reduce the assessment based on current market when the value has fallen from the purchase price.

However, it might be that screwy second assessment that's getting you. There is almost always a double assessment the first year you own a home because you pay the prop tax based upon the OLD value. Then the county sends you another bill that makes up the diff between the OLD value and what you paid at purchase. That is very confusing and very misunderstood.

[Geotpf]

"The Wine Commonsewer | January 24, 2008, 2:57pm | #

Nick, we do have toll toads. They're pretty high tech and use electronics to read a little card in your car and then assess the toll while you tool on by at 65 mph.

First one was privately owned and Reason's Beloved Founder, Bob Poole was intimately involved in putting the project together. It featured congestion pricing and was pretty effective. However, local government hated the idea that it had private owners and eventually the owners gave in and sold."

If you are talking about the 91 Express Lanes, the main problem was a non-compete clause that prevented the state from improving the main freeway (the Express Lanes run through the middle of the existing freeway). That pissed lots of people off, especially those in Riverside County (the lanes are in Orange County are were sold by Orange County to the private developer, who insisted on the non-compete clause, but most of the users were people who lived in Riverside County who commuted to jobs in Orange County).

[Nick]

One thing I've noticed in looking at CA is that no one seems to work near home, hence the absurd amount of traffic during rush hour. I was watching a show a few months ago where people were buying nice apartments in downtown LA rather than making long commutes and I thought that made a lot of sense. I don't think enough people are doing that to make too much of a difference but it's better than nothing, I suppose. It's also an interesting area, SoCal, in it's geography.

[Nick]

"eventually the owners gave in and sold."

That's unfortunate.

[Morat20]

Nick: It's a combination of problems. First off, tax assesments are only made when the house is sold -- it's a giant boon for businesses since many lease their properties (and thus the property never changes hands, and the value is never adjusted) and because if you buy the business as a whole, I believe it doesn't count as "changing hands".

So California's tax assesments are astronomically off actual market value.

Secondly, to raise taxes requires a super-majority of the Legislature. I can see that being a good thing, but NOT when coupled with an ballot initiative process that mandates certain spending levels.

California is basically screwed every which way from Sunday. They're mandated to spend certain percentages and amounts by law (ballot initiatives), but enough Congressman are utterly unwilling to raise or address taxes in ANY sense to pay for it, so they borrow. A LOT. They can't really cut spending (like everyone else, Arnold learned there generally isn't tens of billions of dollars of waste, and a public that mandated certain programs is generally unwilling to see them cut), they can't raise taxes, they're not even actually GETTING the taxes they should be (I have a relative whose house assess for something like 6 times the amount he's taxed on. Good for him, shitty for the state).

All they really have room to do is raise fees, since IIRC, that doesn't require a super-majority.

Not to put to fine a point on it, but it's mostly the California GOP that's blocking any action.

From a more libertarian perspective -- the people have mandated certain things, but are sheltered from the costs of it. The state GOP won't allow a proper assesment of costs to the people -- perhaps they'd change their minds (they do seem to have soured on the ballot initiative prospects). It's nice for the GOP -- they don't get much, if any, blowback from it and it's all blamed on the Governor anyways -- but it's not terribly responsible. Either show the people the true costs of their choices, or push to negate their choices (overriding the ballot initiatives, etc).

[Nick]

Thanks everyone for the education. I think I'll just visit 🙂

[The Wine Commonsewer]

First off, tax assesments are only made when the house is sold which is on average every 3-5 years and is correctly tied to the exact market value. ie, what the property sold for.

Remember the hot real estate market of the last five years? Well every house that sold was reassessed to market value.

Think of the guy who bought his place for 350k in 2001 and sold it for 700k in 2006. The new buyer is assessed tax at 700k purchase price. The seller either buys another house at market, and is also assessed on the current value. Or he moves to Texas and buys a cheaper home and pays three times the property tax. 🙂

Plus, assessments predictably rise 1% per year, as I said up thread, my property taxes have increased over the last decade by 20%.

[The Wine Commonsewer]

Nick, I have a pretty long commute. 13 steps. 🙂

Mrs TWC has to get to her laptop in the dining room. I win.

[Joel]

I moved to Socal in the late '90's chasing a corporate job, and almost immediately began pining to move away. Finally did in '06 (Daughter didn't want to move, so I waited till she was on her own) and don't plan to return. Ever. But I do remember joking about two things: First, when I leave I'm tying a traffic light to my bumper and driving east until somebody asks me what that funny yellow thing is. Second, wherever I end up, I'm sure I will never stop bitching about the weather for the rest of my life.

Socal doesn't really have weather as such...just the occasional natural disaster.

[R C Dean]

Or he moves to Texas and buys a cheaper home and pays three times the property tax. 🙂

But no income tax.

[The Wine Commonsewer]

Joel, we actually have weather here at the Casa. Not harsh, but I love days like today. Chilly, breezy, storm blowing through. Rain. Scudding clouds, blue sky. more rain.

Now where I grew up, it never got hotter than 86 or colder than 56.