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Last updateTue, 18 Sep 2018 1pm

Despite speculation about bold moves—in a far-left direction, even for this blue state—Gov. Gavin Newsom and legislative Democrats actually landed a budget Thursday that’s surgical about new taxing and spending while still keeping promises to help poor Californians and working families.

Under the $214.8 billion spending plan, the state inched closer to universal health coverage, expanding Medi-Cal to all low-income young adults regardless of immigration status. State lawmakers also charted a course to increase tax credits to the working poor and boost subsidies to middle-income Californians to buy health coverage. There were significant investments in early education and housing, while a portion of the surplus was diverted to pay down pension liabilities.

While Democrats began the year with a surplus of ideas for taxing Californians, only a few strategic levies survived the negotiation process, specifically a fine on individuals who don’t have health insurance under a state mandate. There’s even a little tax relief: Parents, for instance, will get a temporary tax exemption on diapers.

One hitch? The devil is in the details, some which have yet to be worked out. Though Democrats met their deadline for a balanced spending plan, most of the underlying policy to enact the budget wasn’t hashed out—and may not be for weeks. Call it a learning curve: This was the new governor’s first time negotiating with seasoned legislative leaders who know how to count votes. Look for more action in coming trailer bills.

Here’s what you need to know about California’s new budget—including maybe, just maybe, the first steps toward the establishment of a four-year college in the Coachella Valley.

Yes to Health Care for Undocumented Young Adults

The Legislature agreed to the governor’s plan to expand Medi-Cal, the state’s Medicaid program for low-income people, to young adults ages 19-25. It’s a step toward offering free health care to all undocumented adults since the state already makes Medi-Cal available to children regardless of immigration status.

The Senate had proposed going further by offering Medi-Cal to undocumented seniors 65 and older. However, none of the leaders backed offering health care to all low-income immigrants.

The state expects an estimated 90,000 young adults could gain coverage when the benefit begins next year. Already, 76,000 have registered for a limited version of Medi-Cal that covers emergency services and prenatal care available to low-income people regardless of immigration status. The price tag for this expansion? About $98 million a year.

It’s worth noting the state also affirmed its commitment to restoring optional Medi-Cal benefits. During the recession, coverage for audiology, optical, podiatry, speech therapy and incontinence creams had been taken away.

Obamacare Lives: A $695 State Mandate to Carry Health Coverage

Starting next year, California will join New Jersey, Vermont and the District of Columbia in requiring residents carry health coverage or face a $695 state penalty—a fine that will go up each year with inflation.

The state individual mandate aims to replace the federal one that Republicans repealed in their effort to dismantle the Affordable Care Act. The administration says California needs to act, because without a mandate, the number of Californians without coverage—10.4 percent in 2016—will go back up. Separately, a study conducted by the University of California estimated the uninsurance rate will rise to 12.9% by 2023, or 4.4 million people, without state action.

Money raised from the penalties, about $450 million over three years, will be used to give bigger subsidies to those who purchase private insurance through the state’s health coverage exchange, Covered California.

Newsom and lawmakers hope to expand assistance to 190,000 middle-income Californians making between $48,000 to $72,000 a year, according to Health Access California, a health advocacy group.

Fear of Recall = Not Many New Taxes

The budget includes a plan to impose a fee—that still needs to be voted on—of no more than 80 cents a month on each telephone line to help digitize the state’s 911 system, which is still analog. The next-generation system would improve call delivery, better location data and incoming text capability.

Other than that and the health-care mandate, lawmakers opted against most of the new taxes proposed early in the session. In fact, California parents and women will get a sales tax exemption on diapers and menstrual products (though only for two years).

Notably rejected, given the state’s current $21.5 billion surplus, was Newsom’s push for a 95-cent tax on most residential water bills to fund-clean-drinking water initiatives in the Central Valley. Instead, the Legislature worked out a deal to clean up toxic water by diverting money generated from big polluters under the state’s cap-and-trade program.

Some environmental groups questioned using clean air money to pay for drinking water, but supporters reasoned that water is being contaminated with arsenic and other toxic chemicals from the heavy use of fertilizers, so it makes sense to draw the $100 million for cleanup from the agriculture industry’s portion of the greenhouse gas fund.

One issue that won’t be resolved this week is whether California will conform its tax code to match federal changes made by Republicans in 2017. Newsom is relying on the projected $1.7 billion increase in net revenue from that to expand the state’s earned income tax credit, the centerpiece of his anti-poverty agenda.

Assembly Democrats in swing districts are skittish about limiting deductions and losses that can be claimed by some businesses. They know the fate of former Sen. Josh Newman, who was recalled from his Orange County seat after voting to raise California’s gas tax. Tax conformity requires a two-thirds vote in the Legislature to pass, so the pressure is on.

Paying Debt and Rainy-Day Saving

Lawmakers embraced the governor’s proposal to use some of the surplus to make extra pension payments, a step Newsom says is necessary to tame the state’s $256 billion retirement liability for state workers and teachers.

The Legislature approved supplemental payments of $3 billion to the California Public Employees’ Retirement System and $1.1 billion to the California State Teachers’ Retirement System for the state’s portion of unfunded liability.

To relieve school districts across the state, the Legislature will contribute a total of $3.15 billion toward paying down their liabilities and reducing their payroll contribution rates. One difference is where it will go.

Previously, Newsom had all the extra payments going to the teachers' pension fund—a reaction, in part, to teachers strikes that erupted as he took office. Now a portion of that money will be doled out to CalPERS. The change was made in recognition that while teachers are members of CalSTRS, many other school employees from janitors to bus drivers belong in the state’s other public-employee pension fund.

Besides paying down California’s “wall of debt,” as former Gov. Jerry Brown called it, the state is shoring up for a downturn—or in Newsom-speak, “building budget resiliency.” The new budget carries a roughly $20 billion reserve from several rainy-day funds. This amount, while hefty, would be easily wiped away in a downturn. According to the Legislative Analyst’s Office, the state would need as much as $40 billion to cover the budget in a moderate recession.

Big Spending on Housing

With new commitments topping $2 billion, the budget represents the most important action the governor has taken so far on housing and homelessness. The lion’s share will target the state’s homeless population, including $650 million in grants for cities and counties to build and maintain emergency shelters, and $100 million for wrap-around care for the state’s most vulnerable residents. Another $500 million will go toward quintupling the size of the state’s affordable housing financing fund, plus hundreds of millions earmarked for cities to update their often outdated housing plans.

While lawmakers and Newsom have agreed to cut big checks, it’s not clear who’ll get the money, and with what strings attached. Big-city mayors and lawmakers want homelessness grants directed towards the state’s largest 13 cities, while Newsom wants to spread out the money to include counties.

Newsom also wants to deny transportation funds to cities not building enough housing. As of Thursday, lawmakers were still negotiating a scaled-back version of the proposal. Another Newsom proposal that speeds construction of homeless shelters by sidestepping environmental laws also remains unresolved.

Lending a Hand to Working Families

Expanding California’s earned income tax credit has quickly become one of Newsom’s signature anti-poverty programs, because it gives a cost-of-living refund to low-income working families. Lawmakers are poised to triple the program from $400 million to $1.2 billion to provide a $1,000 refund for families with children under 6 and expand income eligibility from $24,950 to $30,000.

Anti-poverty advocates had wanted Newsom to include undocumented workers who file with individual taxpayer identification numbers instead of Social Security numbers. That proposal did not make the final version of the budget. Still, the administration estimates the current expansion will increase the number of beneficiaries from 2 million to 3 million households.

The budget also will make it easier for low-income families with children to qualify for assistance, increasing the CalWORKs asset limit to $10,000 and the motor vehicle exemption to $25,000—changes that will allow people to save and hang on to cars that can get them to work.

And parents of all incomes will get a longer paid family leave to care for new babies—eight weeks, up from the current six weeks, starting in July of next year. The goal will be to boost the benefit to 90 percent of most wages, up from the current maximum of 70 percent.

The K-14 Kids Did All Right

As required by law, the lion’s share of the budget goes to public schools, with nearly $102 billion in state money to be pumped into California classrooms and community colleges, plus another $389 million in a special reserve fund for schools. Though the figure is an all-time high, California is still viewed as lagging in per-pupil spending, in part because of the high cost of living.

Democrats are also demanding more stringent oversight of charter schools, which can operate like private schools, tend to be non-union and have proliferated in big cities such as Oakland and Los Angeles. Newsom proposed prohibiting charter schools from blocking or disenrolling special-education students who require more support for disabilities. Lawmakers readily embraced that change.

The budget includes $300 million to build more kindergarten classrooms in an effort to boost full-day kindergarten programs. Newsom had initially proposed $750 million but that was reduced after a study found most part-day kindergarten programs are in wealthier communities.

After-school programs will get a $50 million boost over the $600 million or so the state is currently spending. The money will help cover the cost of minimum wage increases enacted during Brown’s tenure.

So Did the Little Ones

In emphasizing early education, Newsom and lawmakers agreed to expand day care and preschool slots by the thousands while investing in training for child care providers.

Newsom gets $50 million in seed money to start child savings accounts for college and post-secondary education. He initially asked that all of it go toward pilot projects with First 5 California and local governments, but the Legislature is designating $25 million to that. The other $25 million will create a state program with the Scholarshare program in the Treasurer’s Office.

More Free College and Help for Student Parents

Newsom and legislators delivered on a $45 million promise to fund a second year of tuition-free community college for first-time, full-time students at campuses participating in the state’s College Promise program.

Other big winners include students with children, who will be eligible to receive grants of up to $6,000 to help cover their families’ living expenses. The budget boosts by about 15,000 the number of competitive Cal Grants—a significant jump, but far less than the 400,000 qualified students who applied for the state scholarships last year and didn’t receive them.

The University of California and California State University systems will receive money to increase enrollment, and waive tuition during the summer to help low-income students graduate faster. Lawmakers also set aside funds for campuses to combat hunger and homelessness, strengthen veterans resource centers, and provide more mental health counseling. A center at the University of California San Francisco is getting a $3.5 million earmark for dyslexia screening and early intervention.

Backers of the state’s controversial new online community college fended off an effort to slash the college’s funding, clearing the way to enroll its first class this fall. And CSU will get $4 million to study five possible locations for a new campus: Stockton, Chula Vista, San Mateo, Concord and Palm Desert.

Lots for Police Training; a Little for Police Records

Reflecting the Legislature’s focus this year on reducing police shootings, the budget includes $20 million to train police officers on de-escalation tactics, and how and when to use force. Outside the budget, bills to set a tougher standard for police to use deadly force and require more officer training are advancing through the Legislature, reflecting a compromise between civil rights advocates and law enforcement groups.

Attorney General Xavier Becerra’s office will get $155,000 to implement the new state law he’d been resisting: making law-enforcement misconduct records public. Becerra will also have to report to the Legislature on how many requests his office processes, and how much time is spent on that. A judge ruled in May that Becerra must produce the records; previously he had said he would not release them until the courts clarified whether he had to.

Powering Down to Cope With Wildfires

Besides beefing up the state’s firefighting capability and disaster preparedness, California will add powering down to its to-do list for coping with climate change-driven wildfires.

The budget doles out $75 million to state and local agencies whenever investor-owned utilities decide to shut off electricity during red flag weather warnings. One note: The Assembly added language to track how the money is used.

CALmatters reporters Matt Levin, Felicia Mello and Laurel Rosenhall contributed to this report. CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

House of Lucidity Opens in Cathedral City

The House of Lucidity, Cathedral City’s newest dispensary, officially opened with a ribbon-cutting—complements of the Greater Coachella Valley Chamber of Commerce—on May 1.

The 10,000 square foot facility is located at 36399 Cathedral Canyon Drive. In addition to the gorgeous dispensary—which features black-and-white photos of celebrities including Frank Sinatra—House of Lucidity also has a cultivation facility and an extraction lab.

House of Lucidity is open from 4 to 9 p.m. daily. For more information, call www.houseoflucidity.com.


City of Coachella to Host Cannabis Summit

The city of Coachella is bringing in a lot of big names for its SoCal Cannabis Summit, taking place at the Fantasy Springs Resort Casino on Monday and Tuesday, June 24 and 25.

The summit will begin with a cultivation and dispensary bus tour, followed by a reception on Monday. On Tuesday, the summit will feature speakers including Riverside County District Attorney Michael Hestrin, California Bureau of Cannabis Control Chief Lori Ajax, California Treasurer Fiona Ma, and many other political leaders and marijuana experts. An exhibit hall will also be open to the public with free admission on Tuesday.

Tickets for the bus tour are $50, while summit tickets are $75. For tickets or more information, visit coachellacannabissummit.com.


Marijuana Revenues Disappoint Gov. Newsom

Revenues from marijuana growth and sales are bringing millions of dollars into state coffers—but not nearly as much as the state anticipated.

According to a May 23 news release, the cannabis industry—via the state’s cannabis excise tax, cultivation tax and sales tax—paid $116.6 million to the state in the first three months of 2019, according to first-quarter tax returns, due April 30, which had been submitted so far. That’s up slightly from the $111.9 million paid during last quarter of 2018.

Earlier in May, Gov. Gavin Newsom had to scale back cannabis-tax revenue projections significantly—cutting $223 million from the amount expected to be collected by June 2020.

According to the Associated Press, the reasons for the disappointing sales included the thriving illegal market, as well as the state’s struggles with licensing and regulation.

Newsom also blamed some states and counties for not welcoming legal cannabis into their communities.

“We knew (some counties and cities) would be stubborn in providing access and providing retail locations and that would take even longer than some other states, and that’s exactly what’s happening,” he said, according to the Associated Press.

Published in Cannabis in the CV

They don’t call it the Golden State for nothing, at least not lately: California’s fiscal health is in extraordinary shape.

Income-tax receipts surpassed expectations for the pivotal month of April. Projections of a $21 billion-plus surplus are not out of the question. Nearly 3 million jobs have been added since the depths of the Great Recession, yielding record low unemployment. And having already met a 10 percent rainy-day fund requirement, the state is socking away billions in additional reserves to buffer against the next downturn. Impending Silicon Valley IPOs could provide an even bigger windfall.

Yet California isn’t as prepared as it may seem for the next recession—and, economists say, there will be a next one. Because voters have willingly taxed the rich, California’s $209 billion budget is more volatile than ever, overly reliant on top earners whose fortunes are tied to Wall Street.

And what’s different this time—and perhaps more worrisome—is that when the next pullback hits, California may have to fight off red ink without a historically crucial ally: Washington, D.C.

It’s not just that there’s no love lost between President Donald Trump and California leaders, or that Congress is gridlocked in its political divisions. Fiscal choices that have been made in the past couple of years may make it tough for the federal government to help states much in the next recession, even if Congress and the Trump administration want to.

Fiscal analysts warn, for example, that the federal deficit is soaring just as historically low interest rates are limiting the Federal Reserve’s monetary firepower.

“Whether it’s because of a worsening fiscal picture at the federal level or just the politics, I wouldn’t be counting on them coming to some agreement about helping out states,” said Gabriel Petek, the Legislature’s nonpartisan budget analyst.

“If you go from that premise, then the state has to be thinking about contingency planning for the next recession and getting through it on its own.”


The Macro View

During the economic downturn that followed the Sept. 11, 2001, terrorist attack and the financial crisis that struck in late 2008, the federal government poured billions of dollars into state coffers by enhancing support for anti-poverty programs, health care and infrastructure.

But Petek and other analysts warn that with U.S. government coffers drawn down by Trump’s tax cuts—and without an extraordinary and unifying cause like a terrorist attack or near-depression—California and other states may not be able to count on the federal government again to backfill fiscally.

Given political priorities, casualties could easily include services that impact millions of Californians: anti-poverty programs such as CalWORKS for working parents, in-home supportive services for low-income seniors, or the state’s Medicaid program known as Medi-Cal, which serves one in three residents.

“Gabe is not alone in having those thoughts,” said John Hicks, executive director of the National Association of State Budget Officers in Washington, D.C. “States did get assistance in the Great Recession and a smaller version of that in the early 2000s. That prevented them from having to make more significant cuts in education or other priority areas or have to raise revenues more.”

Petek, who was appointed in February after two decades at S&P Global Ratings, estimated the state will need $25 billion just to weather a moderate recession. That would wipe out everything the state has been able to save.

According to the Department of Finance, for instance, the state’s general-fund spending on Medi-Cal alone is $22 billion, and trimming that line item in a recession would threaten the $100 billion a year in matching federal money that underpins health care for the poor in California.

“It’s a huge part of how we fund our health-care system,” said Gov. Gavin Newsom’s finance director, Keely Bosler. And that’s just one need among many that would be competing for the state’s surplus should the economy turn.

In addition to the unpredictable economy, Bosler worries about the federal support that hinges on the fate of the Affordable Care Act, which is facing a legal challenge, and the next Census, which would be dramatically impacted if California residents are spooked by a proposed citizenship question.


Recalling the Recession

So as California strides toward the longest economic expansion in state history this July, Newsom and his fiscal advisers are keenly aware of what could happen. Many of them, longtime government staffers, were tasked with making cuts during the last recession and are steering the governor to limit his commitment to ongoing spending.

Bosler, who was a staff consultant in the Senate in 2010, recalls emotional, daylong committee hearings a decade ago when developmentally disabled children, working mothers and destitute patients suffering from chronic illnesses lined up, pleading with state lawmakers to spare them from cuts.

“I remember it so clearly, because it was really, really hard,” said Bosler, who later joined former Gov. Jerry Brown’s finance team.

On the brink of becoming a failed state, California drastically reduced spending on the poor then—with particularly long-lasting impacts on women. From cutting programs that provide child-care assistance to preschool subsidies for mothers holding low-income jobs, the pullback made the dream of self-sufficiency that much harder. For older women and women with disabilities, the state reduced safety-net programs intended to help them stay in their own homes by paying someone to help with housework, shopping and cooking.

In health, California slashed payments to doctors, dentists and clinics seeing patients covered by Medi-Cal, a move that discouraged providers from seeing them. The developmentally disabled were told to take generic drugs and prevented from participating in experimental treatments. And podiatry and optometry were no longer covered, because they were deemed optional.

Those cuts have lasting impacts. “No program was spared,” recalled Bosler. “Significant damage was done to core state services.” Welfare advocates are still fighting today to restore medical benefits slashed during the recession.

So the Democratic governor and the Democratic-controlled Legislature are making a conscious choice to build reserves now.


Building Resiliency

When Newsom updates his spending plan in mid-May, he is expected to maintain his three-pronged approach for savings, paying down debt and making targeted investments in affordable housing and early education.

One bucket of about $3 billion would be used to expand ongoing services for the poor, particularly in-home supportive services program and CalWORKs. A portion would be used to boost higher education to stave off a tuition hike in the University of California and California State University systems, as well as fund a second year of free community college.

The second bucket would be targeted for affordable housing and to confront California’s homeless epidemic; lay the ground groundwork for extending full-day kindergarten to all Californians; and provide an extra $3 billion toward districts’ teacher pension payments.

The last and largest bucket would be used to help the state weather a potential economic downturn for what Newsom has termed “budget resiliency.” He would finish paying off the state’s Wall of Debt that had accumulated from years of internal borrowing and undo a 9-year-old accounting trick that pushed the June state payroll into July so it looked like the state was spending less.


A Safety Net

Last year, the state put $200 million toward seeding a new account intended to protect anti-poverty programs in a downturn. Newsom has embraced the safety-net reserve by proposing to increase the fund to $900 million.

Senate President Pro Tem Toni Atkins, a Democrat from San Diego, told a crowd of policy advocates in Sacramento in March that even though Newsom’s style is much different from his predecessor Brown’s, their underlying strategy is similar.

“If you look at what Gov. Newsom has done in terms of the rainy-day fund, paying down debt, and those kinds of issues, and if you extrapolate that, then what you see is a fairly conservative approach to resources to make sure that we are trying to keep a sustainable, resilient foundation of a budget going forward,” Atkins said.

Atkins credits that extra safety-net reserve to the Senate’s budget committee chair, Sen. Holly Mitchell. Both lawmakers indicated they would like to go beyond $900 million, because the money would protect just a fraction of those in need.

If the state were to set aside $900 million, it would protect roughly 435,000 Medi-Cal recipients or 132,000 CalWORKS families for a year based on the state’s average spending on those programs. Currently, about 13 million people are on Medi-Cal, and nearly 400,000 families rely on CalWORKS—with demand growing when people fall on hard times.

Lawmakers haven’t said how much they will try to set aside. “It’s a technical term: A whole lot of money,” Atkins quipped.


The Course Ahead

Petek, the Legislature’s budget analyst, suggests lawmakers could do even more. He notes, for example, that while paying off California’s so-called Wall of Debt sounds nice, lawmakers may not want to undo that payroll accounting trick, because it’s administratively burdensome to do it again if the state needs to free up cash.

All this prevention is ironic, says Jeffrey Michael, director of the Center for Business and Policy Research at the University of the Pacific in Stockton. If the state is overly reactive to economic cycles, Californians have no one to blame but themselves.

It’s voters, he notes, who have decided again and again to tax the rich, a choice that has made the system more reliant on the investment income of high earners and therefore more volatile.

And for the record, he doubts that California will have any more or less to worry about than any state should a recession hit during the Trump administration.

“While California is acting to oppose or counteract the president’s policies in many areas, I don’t believe the federal fiscal response to a downturn is an area where California needs to take special precautions against the actions of Congress or the president,” he said.

But polls show the state is generally in sync with Newsom’s mix of priorities for the current surplus. A recent survey by the Public Policy Institute of California found majorities support additional funding for working poor tax credits, wildfire preparedness and developing more housing. Only 47 percent approved of one-time spending to pay down unfunded pension liabilities.

And, like the governor, a lot of taxpayers remember the last two recessions, and remain cautious.

“If they’re not going to give (the surplus) back in a refund,” said Charles McLaughlin, a board member of the Ventura County Taxpayers' Association, “then they should save it for a rainy day.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

Gov. Gavin Newsom signed an executive order on Wednesday, March 13, putting a moratorium on the death penalty in California and shuttering the execution chamber at San Quentin—a move that overrides a decision the state’s voters made in 2016 to maintain capital punishment.

While campaigning for governor last year, Newsom said he was fervently opposed to the death penalty but didn’t “want to get ahead of the will of the voters” and wanted to “give the voters a chance to reconsider.”

On Wednesday, he said he changed his mind because his decision whether to permit executions had become more urgent. The state’s lethal-injection protocol was getting closer to being finalized, and two dozen death row inmates had exhausted their appeals.

“I’ve had to process this in a way that I didn’t frankly anticipate a few months ago. It was an abstract question. (It became) a very real question,” Newsom said at a press conference in the Capitol.

“I cannot sign off on executing hundreds and hundreds of human beings.”

Under the governor’s reprieve, all 737 people on death row will remain in prison and, on paper, sentenced to death. But executions will be halted as long as Newsom remains governor. A future governor would have the power to change their fate.

Newsom’s executive order argues that the death penalty is unfair, applied disproportionately to people of color and people with mental disabilities. It says innocent people have been sentenced to die, including five Californians since 1973 who were found to have been wrongfully convicted.

His move is part of a larger swing away from tough-on-crime policies in California. In the last decade, Democrats who control state government and the state’s largely liberal voters have embraced policies to eliminate the use of money bail, reduce some non-violent felonies to misdemeanors and legalize marijuana.

But the death penalty so far has been politically untouchable—repeatedly favored by voters despite their progressive tendencies on other issues. In 2016, California voters passed a ballot measure to expedite executions and defeated a measure to end the death penalty. Voters also defeated a 2012 measure to end the death penalty.

A leading supporter of the death penalty said Newsom’s action is legal but “contrary to basic democratic principles.”

“The decision of whether we will have the death penalty or not is one the people have made over and over again through the initiative process,” said Kent Scheidegger, legal director of the Criminal Justice Legal Foundation, which advocates for capital punishment. “It’s improper for an executive to use the reprieve power to frustrate the people’s position.”

GOP Assemblyman Tom Lackey said Republicans were looking for a way to reverse Newsom’s action but hadn’t yet figured out how. He criticized Newsom for changing his position from the campaign but ruled out an effort to launch a recall.

“He’s said conflicting statements. That’s how you lose trust,” said Lackey, of Palmdale.

It appears Californians may yet have another chance to weigh in. Democratic Assemblyman Marc Levine has introduced a measure that would, if approved by two-thirds of the Legislature, put the question on the ballot in 2020. He said having a governor campaign against the death penalty could make the difference in convincing voters to repeal it.

“We’ve never before had that type of leadership on one of these initiatives,” said Levine, of San Rafael. “We are going to learn from those failures. … How do we do this right? How do we administer justice properly?”

Death-penalty opponents urged Jerry Brown to grant a reprieve when he was governor, but he never did, despite his personal opposition to capital punishment. They have been lobbying Newsom to do the same since he was sworn-in in January.

Now they have their sights set on the next goal, said longtime anti-death penalty advocate Natasha Minsker: “The next step would be to go further and convert death sentences to life without parole.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

On March 10, 1997, Rodney Patrick McNeal went home during his lunch break, around 12:30 p.m., to take his wife, Debra, to a doctor’s appointment.

Instead, the San Bernardino County probation officer found Debra, who was six months pregnant, dead in their bathtub. Submerged in water, she’d been beaten and stabbed before being strangled to death. The words “Nigger Lover” were written on the mirror (Debra McNeal was a Native American), and the house had been ransacked, with several firearms stolen.

Patrick and Debra’s marriage had been rocky at times, and police visited their home following domestic disputes at least twice in the months leading up to Debra’s death. According to a 2009 court document, a San Bernardino County deputy sheriff went to their residence in December 1996 after a domestic-disturbance call. Patrick and Debra appeared upset at each other, but no arrest was made, although two handguns were taken for safekeeping. In January 1997, a deputy responded to another domestic disturbance, after Patrick reportedly took Debra’s purse to prevent her from leaving.

Tension was high on the day of the murder, too. According to Debra’s son, Marcus Frison, the day before, Debra got upset with Patrick regarding some leftover pizza, and she took a knife to the family’s sofa. On March 10, Debra decided it was time to seek some professional help and called Kaiser Permanente to schedule a counseling appointment. On that day, she and Patrick spoke on the phone three times. They discussed the appointment, and apparently had an argument over money, although Patrick’s co-workers never heard him with a loud or hostile tone of voice.

The last known person to see Debra McNeal alive was a friend, Terrylyn Walker, who went to visit Debra around 9:15 a.m. At 10 a.m., while Debra was on the phone with Kaiser, someone she apparently knew entered the home, according to the Kaiser clerk.

Patrick McNeal got to his office somewhere between 7:30 and 8 a.m. that morning, and from 10 a.m. to noon, he met with clients. Patrick’s computer records show him working on a report shortly before noon; records also show he made a phone call to Debra around that time to find out the location of her appointment. The call was not answered.

Two of Patrick’s co-workers rode in an elevator with him at approximately 12:10 to 12:15 p.m. He then made the 2 1/2-minute walk through the parking lot to his car, and the eight-minute drive to their home.

Police arrived on the scene, after Patrick McNeal called 911, at 12:32 p.m.

There was no forced entry into the McNeal residence. There was a blood trail leading from the master living room through an entryway, into the kitchen and then into the master bedroom. The waterbed was punctured and leaking water, and there was an odor of bleach and/or other cleaning products in the master bedroom and bathroom. A bloody footprint on the carpet came from a dress shoe that did not match any of Patrick McNeal’s shoes. Hairs and fibers on Debra’s body also did not match anything from Patrick.

Yet in 2000, Rodney Patrick McNeal was convicted of two counts of second-degree murder. He’s been in prison ever since—and his case has captured the attention of the California Innocence Project.


Since it was founded in 1999, the California Innocence Project, a clinical program at California Western School of Law in San Diego, has helped free 30 wrongfully convicted inmates, and it currently is working on the cases of 13 people who remain behind bars, including that of Patrick McNeal.

“(Debra McNeal) was strangled, beaten, stabbed and thrown in the tub,” said Raquel Cohen (pictured right), an attorney representing McNeal with the California Innocence Project. “For years, all the evidence has shown the timeline doesn’t add up giving Patrick enough time to commit this crime. He still got convicted.”

Cohen said the domestic disputes between the McNeals helped the prosecution make their case against Patrick.

“They had some marital problems and some domestic-disturbance calls, but nothing that was too serious,” Cohen said. “They had arguments resulting in the police saying, ‘Hey, you guys need to calm down.’ Juries are unpredictable; Kim Long’s case was also very similar, where they attack the character of the defendant and say, ‘They are a very violent person, and there’s only one person who could have committed the crime,’ and (prosecutors) don’t have any other suspects.”

Kimberly Long is a California Innocence Project success story. The Independent first covered her case back in 2015; she was convicted of the 2003 murder of her boyfriend, Oswaldo “Ozzy” Conde, in Corona. In 2016, a Riverside County Superior Court judge reversed her conviction—which, like McNeal’s conviction, was largely based on the couple’s history of domestic strife.

“That’s really the evidence they had against him during his trial,” Cohen said about the McNeal case. “There was a bad relationship, and he found the body. But there’s a timeline issue, and it becomes, ‘Where were you at what time?’ Patrick had a lot of hard evidence—the last time he modified a document on a computer, and co-workers riding down (with him) in an elevator. The worst-case scenario has a neighbor placing him at home at 12:15 p.m.—and that is the worst case for him and best case for the prosecution. That’s not enough time for him to commit the crime, clean up—and (Patrick McNeal) had no blood or bleach on him—and then call the police.

“It just doesn’t add up.”

The California Innocence Project has put forward another suspect in the murder of Debra McNeal—Patrick McNeal’s half-brother, Jeffrey Todd West.

“A few people have come forward saying that (West) confessed to the crime,” Cohen said. “He was a very bad person. He had killed other people and served time for it in Nevada; I believe he might be locked up somewhere right now. He has a history of choking people. He poured gas on his ex-wife, and there are chemicals involved in this case. … He told people that he killed Debra after it happened, because he was worried about Patrick’s future. We presented that to the court … and unfortunately, they found the witnesses were unreliable for a number of reasons.”

In 2005, West pleaded guilty to a double-homicide in Nevada. Both West’s ex-wife, Janice Williams, and Charlotte Lazzie, an ex-girlfriend, testified regarding West’s violent nature. Ebony Grant, the half-sister of both Patrick McNeal and West, also talked about violent attacks by West, including an incident during which she was choked. Grant said West told her a week before the murders of Debra McNeal and her unborn child that he believed Debra was destroying all of his stuff, and that he would “kill the bitch”; according to the California Innocence Project’s website, West also confessed to Grant after the murder. Cary McGill, a co-worker of West, said that West confessed the murder to him, stating that Debra was ruining Patrick’s future and that he had to “handle the bitch.”

However, the court denied all of this new evidence—and Patrick McNeal remains behind bars.

“We are kind of at a roadblock, but we’re still investigating whether or not West told other people who might be more credible, or whether or not West will confess—which would be ideal, but I don’t know if that will ever happen,” Cohen said.

“There were a lot of issues at the evidentiary hearing with the witnesses who said West confessed, (whom) the judge found not to be credible. For instance, Cary McGill, who came forward saying that West had confessed to him, failed to appear on the first day; he had some issues with work and didn’t appear. When he showed up to testify, the court threw him in jail. When he got on the stand, he was in custody and was pissed—he tried to help somebody and ended up with a failure to appear (charge). The court found him not credible because his demeanor was just irritated.

“There were a lot of bad things that happened at that hearing that turned the case to deny the petition and keep Patrick in prison.”


The Independent was given about 10 minutes to talk via phone to Patrick McNeal, who is currently serving his sentence of 30 years to life at the California Correctional Institution in Tehachapi. During the phone call, he expressed extreme frustration with his conviction.

“It’s so hard for me to believe at times,” McNeal said. “I told them during the interview that I made phone calls that day that were on the phone record, and I walked out with other probation officers from my job. I can’t make all that stuff up. … My phone-call records make it impossible for me to be at the murder, along with the probation officer I walked out with. They were ignored, or there were excuses made for phone records.”

McNeal said his attorney failed to adequately defend him during his original trial.

“He told me that he was going to question them on the timeline and do all of this and that. He didn’t do anything that he told me that he was going to do and just said, ‘The defense rests,’” McNeal said. “When I asked him about that, he said, ‘Oh, well, that’s just how I like to do my cases, and there’s no need for me to do it. The prosecution didn’t present their case.’ I was completely blown away.

“By that time, it was too late.”

Cohen said that even though McNeal’s case is currently at a standstill, they remain hopeful that he could be freed one day soon.

“He’s very optimistic; he checks in on his case regularly, and he knows that we’re sort of at a dead end,” Cohen said about McNeal. “We have a clemency petition pending with the governor, where we’re hoping (Gov. Gavin Newsom) sees this evidence and commutes his sentence or grants him a pardon. That’s one big hope he has going forward. Obviously, we talk about other ways we can break this case open. But … we all know West is very dangerous, so we’re all very cautious about it, and we’re hoping there are other people who will come forward. All of our (main) hope right now is with our governor’s office, and we’re hoping the new governor will take action on this and see there’s no way for (McNeal) to have committed this crime.”

Patrick McNeal said he wants more than just his release from prison.

“Getting out is, of course, the No. 1 goal, but I wouldn’t be satisfied just by getting out,” he said. “I can’t believe that a reasonable person would look at the case with all of the phone calls and the blood evidence (and think I did it). If you put everything together along with the fact no one ever said that I was the one who did this, along with where I worked as a probation officer—I would have to have had a co-conspirator in the Probation Department for someone to make phone calls from my office to my home and not tell the police about it—it’s like nothing makes any sense. Would I really tell a fellow probation officer, ‘Hey, I’m going to go kill my wife. Just in case the police come after me, can you make these phone calls from my office?’”

For more information, visit californiainnocenceproject.org.

Published in Features

A month after being inaugurated, Gov. Gavin Newsom used his State of the State speech on Tuesday, Feb. 12, to make his strongest showing yet that Jerry Brown is no longer in charge.

He proposed scaling back two of Brown’s legacy projects—a high-speed train and a pair of tunnels to move water from north to south. He rescinded Brown’s deployment of California National Guard troops to the Mexican border. He voiced support for education and housing policies from which Brown stayed away.

All leaders want to distinguish themselves, so it’s no shock that Newsom is carving his own path. California’s last several governors took office vowing to right the perceived wrongs of their predecessors. Brown himself, in his first term, was a change agent.

But they were Democrats replacing Republicans, or vice versa. Newsom is the first Democrat to follow a Democrat into the California governor’s office in more than a century—and the friendship between the Brown and Newsom families goes back generations. That creates a challenge that other recent governors have not faced: Newsom must pay homage to the legacy of his predecessor while also establishing his own vision.

It’s not an easy needle to thread—as evidenced by Newsom’s response when asked if he is breaking away from Brown’s course:

“We’re building on a lot of the work that’s been done,” he said in a brief interview after the speech. “We’re just being more sober about it, more deliberative about it, more focused and more transparent.”

At this early stage in his governorship, here are five key ways Newsom is differentiating himself:

Border Patrol: Early last year, President Donald Trump asked border-state governors to beef up their National Guard troops along the Mexican border. Brown responded by saying California troops wouldn’t enforce immigration laws or “build a new wall.” But he agreed to add 400 troops, saying they would focus on combating transnational crime.

Newsom rolled back Brown’s order this week, reassigning most of the troops from the border to areas threatened by wildfire and illegal marijuana grows. Those remaining at the border “will focus on stopping criminals smuggling drugs and guns through existing border checkpoints,” Newsom said in his speech. “This is our answer to the White House: No more division, no more xenophobia and no more nativism.”

High-speed rail: Since his first stint as governor in the 1970s, Brown has advocated for a new high-speed train to connect northern and southern California. He took steps more recently to support the project by negotiating funding for it from California’s signature climate change program. “I make no bones about it,” Brown said last year. “I like trains, and I like high-speed trains even better.”

Newsom said Tuesday that he has “nothing but respect for Gov. Brown’s and Gov. Schwarzenegger’s ambitious vision.” But he derided the current plan for a train from San Francisco to Los Angeles, saying it “would cost too much and take too long.”

Instead, Newsom embraced a more limited rail line, from Merced to Bakersfield. He also announced a new chairman for the rail authority, Lenny Mendonca, and a plan to post rail spending publicly online, a step meant to hold the administration accountable for cost overruns.

Republicans, long opposed to the new train, welcomed Newsom’s tack. State Sen. Shannon Grove of Bakersfield, who will soon take over as the Senate Republican leader, thanked Newsom for scaling back the project and making spending on it more transparent. “That was very responsible,” she said. “I’m pleasantly surprised.”

Water: Newsom also wants to scale back Brown’s controversial plan to carve two massive tunnels through the Sacramento-San Joaquin Delta to move water to Southern California. Instead, as he said during the campaign and reiterated in his speech, he wants to build one tunnel.

The idea was quickly embraced by Assembly Speaker Anthony Rendon, who said he’s “been skeptical of the two tunnel approach for a while. Rethinking it and retooling it makes a lot of sense.”

To help carry out Newsom’s vision, the governor appointed a new chair for the state water board, replacing Brown’s pick, Felicia Marcus, with his own: Joaquin Esquivel.

Education: When it comes to keeping track of how students are performing at California public schools, Newsom and Brown have very different views. Brown repeatedly rejected the idea of developing a database to track student performance over time, saying he disagreed with a focus on test scores and feared the data could be abused to support prejudice. Newsom is embracing a long-term student database as a way to measure which programs advance student learning.

“We need clear and achievable standards of transparency, more information sharing, and accountability for all public schools,” he said.

Newsom used the speech to announce his pick to lead the state Board of Education, naming Linda Darling-Hammond to the post. A former Stanford professor, she is an expert in teacher training and has chaired the state’s Commission on Teacher Credentialing for the last eight years.

Housing and homelessness: Tackling California’s extraordinarily high cost of housing—and the related epidemic of homelessness—was never a top priority for Brown. Even as he left office, he said he didn’t think there was much the state could do make homes more affordable.

Newsom wants to change that by holding cities accountable for building affordable housing. He already sued the city of Huntington Beach for not building enough, and said in his speech that he wants to meet with 47 other cities that aren’t meeting their housing requirements.

Newsom also announced that he is establishing a new commission on homelessness, to be led by Sacramento Mayor Darrell Steinberg.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

California already has 109 laws on the books that regulate the use of firearms—more gun-control rules than any other state.

More, it seems, are on the way.

On Feb. 4, a Democratic contingent of lawmakers announced plans to send a raft of new gun-related bills to the governor before the end of the legislative session. The 16 lawmakers were joined by former Arizona Congresswoman Gabrielle Giffords, a gun-control advocate and mass-shooting survivor, along with representatives of the Giffords Law Center to Prevent Gun Violence.

With Democrats now wielding unprecedented political power in Sacramento, including the recent election of Gov. Gavin Newsom, who embraces his role as public enemy of the National Rifle Association, the time seems ripe for a new legislative push.

“We have expanded Democratic majorities in both houses; we have a bright and ambitious new governor with a real track record on this issue,” said Assemblyman Jesse Gabriel of Encino, who helped form the “gun violence working group” with Berkeley Assemblywoman Buffy Wicks. “We have a special opportunity here in California to draft some forward-thinking, meaningful, evidence-based legislation that is going to help end mass shootings and end gun violence.”

Among the legislative proposals introduced:

AB 165, by Gabriel, which would call for standards to be developed to teach police officers how to temporarily remove guns from people a court has decided pose a threat to themselves or others. That may include those charged with domestic violence. After a man shot and killed 12 people at a Thousand Oaks bar last November, it was reported that police had paid a home visit to the shooter prior to the incident, but decided not to seek a “gun violence restraining order” against him.

• A proposal by Wicks (yet to be formally introduced) to boost funding to the California Violence Intervention and Prevention grant program, which funds local programs that strive to reduce gun violence.

• A proposal by Assemblyman Mike Gipson from Carson (yet to be formally introduced) that would regulate certain metal components that can be assembled into firearms. A similar bill of his was vetoed by Gov. Jerry Brown last year.

“America’s love affair with firearms has got to end,” said Sen. Hannah-Beth Jackson from Santa Barbara. “I am hopeful that we are going to take our country back.”

But as lawmakers ramp up gun control legislation in California, the judicial winds seem to be blowing against them.

Last month, the U.S. Supreme Court agreed to hear a challenge to a New York City law that strictly limits where gun owners can carry their firearms. That decision was widely taken as a sign that the current court may take a more expansive view of the Second Amendment—perhaps at the expense of California’s strict gun control laws.

“We, as a state, have the right to protect our citizens, to protect our kids and to protect our schools and so we think we can accomplish both of those things while being consistent with the second amendment and also doing big things to prevent gun violence,” said Gabriel.

To learn more about gun policy in California, explore CALmatters' in-depth explainer.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

Emelyn Jerónimo is only 12 years old, but she already has $3,000 saved toward college. Socked away by her mother in chunks of $100 or less since Jerónimo was in kindergarten, the money may not seem like much, but it’s helped fuel the San Francisco sixth-grader’s dreams of becoming a pediatrician.

Jerónimo’s nest egg is part of a first-of-its-kind program that automatically sets up college savings accounts for every kindergartner in San Francisco’s public schools, each seeded with $50 from the city treasury. If Gov. Gavin Newsom gets his way, the model could soon roll out to other cities across California.

Newsom launched Kindergarten to College as mayor of San Francisco in 2010, and recently proposed spending $50 million on similar pilot projects around the state as part of what he’s calling a cradle-to-career education strategy.

“You want to address the stresses, the costs of education?” Newsom said at a press conference unveiling his 2019-20 budget. “Let’s start funding those costs when people enter into kindergarten.”

Fans of so-called child savings accounts say they help children envision themselves attending college from a young age. Families of San Francisco public-school students, many of whom are low-income, have saved a total of $3.4 million of their own money in the Kindergarten to College accounts, according to city Treasurer José Cisneros.

Only about one in five students have contributed money beyond what the city supplies. That still outpaces the percentage of U.S. families contributing to 529 plans, tax-deferred accounts that provide another option for college savings—as Cisneros is quick to point out.

“To me, when you have millions of dollars saved for college, and it’s coming in part from the poorest families in the city, that’s a huge win,” argues Cisneros, who said Newsom has told him he wants to model the California program on San Francisco’s approach. “This is sending a signal to thousands of kids in our city that college is something that’s going to be part of your future.”

While individual 529 accounts can require savers to fill out complex paperwork, pay fees or navigate online management tools, parents learn about the Kindergarten to College accounts through a letter from their children’s school. They can make deposits in cash at bank branches or school campuses, and because the program is universal, they don’t need to provide proof of income or citizenship status to participate.

A number of other states and cities have also established child savings accounts, funded with either public or philanthropic dollars. It’s a relatively new idea, so most accounts haven’t been around long enough for researchers to study long-term outcomes.

Still, there are some signs the programs may be working. Researchers in Oklahoma studied 2,700 families with children born in 2007, randomly selecting half of them to receive $1,000 in a college savings account at the child’s birth. They found that children with accounts scored higher on measures of social and emotional development than those in the control group. Their mothers were more likely to report higher educational expectations for their children, the researchers found, and even exhibited less depression than those in the control group.

One reason the accounts may appeal to policymakers: They’re relatively simple to supply when compared with addressing systemic inequities that affect educational success, such as access to social networks and family wealth.

“Social capital is really important for people but hard to give to them,” said William Elliott, director of the Center on Assets, Education and Inclusion at the University of Michigan. “But we can give them money in their account.”

Getting parents to trust the process can pose a challenge. Jerónimo’s mother, Erika Sierra—an immigrant from Oaxaca, Mexico—was unnerved when a bank teller in her Mission District neighborhood asked for her Social Security number in order to deposit money in her daughter’s account. For months, she stopped saving, only resuming when an outreach worker from a local nonprofit, Mission Graduates, explained that she could use a different form of identification.

Now, she and her two daughters gather up cash from birthday presents and bring it to the bank—her daughters filling up the envelopes themselves.

“It’s a good option for teaching them the habit of saving,” she said. But many parents at her daughters’ school opt out of using the accounts, she said, either out of fear or because they don’t understand how. The city tries to combat those doubts by taking kindergartners and their parents on field trips to local bank branches.

Cost is another hurdle, especially in cities less flush with tech industry cash than San Francisco. In Lansing, Mich., city leaders decided to offer child savings accounts—modeled on San Francisco’s—with just a $5 initial deposit.

A state investment in college savings accounts could support places like Oakland and Long Beach that are developing their own programs. But those dollars could also be spent shoring up California’s financial aid system. More than 200,000 eligible students applied for the state’s Cal Grant scholarships last year and didn’t receive one. Newsom has called for a modest increase in the number of those grants, along with boosting the amounts awarded to student parents.

Advocates for the savings accounts, however, argue that investments in financial aid are better made earlier in a child’s educational career. Some even say that federal Pell Grants—need-based scholarships for higher education—should be divided into two chunks, with one given out during childhood.

“Financial aid is, in many ways, kind of too late,” said Cisneros, the city treasurer in San Francisco. “It’s not there early enough to send a message to 5-, 6- or 7-year-olds that college is something you have every right to have access to.”

Researchers are also studying whether rewards cards could help parents who are living paycheck to paycheck save for college by giving them cash back on grocery purchases, and whether universal child savings accounts counteract implicit bias among teachers by encouraging them to see all students as college-bound. California could become a laboratory to test those ideas if the legislature signs off on Newsom’s plan later this spring.

Meanwhile, Sierra, a stay-at-home mom who never went to college herself, says her daughters’ savings accounts have given her an excuse to talk to them about higher education.

“I tell them, ‘Don’t worry about what we have or what we don’t have,’” she said. “'Just keep studying, and you’ll get to college.'”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Local Issues

What would you do with a $21.4 billion windfall?

That’s essentially the question California is confronting amid record surplus projections during Gov. Gavin Newsom’s first year in office.

On one hand, the former San Francisco mayor showcased his progressive agenda by setting ambitious goals for universal preschool, expanding health coverage for undocumented immigrants, and proposing the nation’s most-generous paid family leave program.

On the other, Newsom made the case that he’s still being fiscally conservative by projecting a modest growth rate of 3.2 percent, socking billions more into the state’s rainy day fund, and paying down debt and public-employee retirement liabilities.

“I think, arguably, it’s even more conservative in that respect than previous administrations,” Newsom said of his overall $209 billion state budget.

The governor’s finance department broke the $21.4 billion surplus into three buckets: roughly $3 billion for ongoing spending, $8.5 billion in one-time spending, and $10 billion to build what Newsom is calling “budget resiliency.”

The initial $3 billion bucket would be used to expand ongoing services for the poor, particularly the in-home supportive services program and CalWORKS for working parents. A portion of that would be used to boost higher education to stave off a tuition hike in the state's university systems, and fund a second year of free community college.

The second bucket of $8.5 billion would be targeted toward Newsom’s ambitious push for affordable housing and to confront California’s homeless epidemic; to lay the groundwork for extending full-day kindergarten to all Californians by providing money to build or retrofit classrooms; and to provide school districts much-needed relief by contributing an extra $3 billion toward the districts’ teacher pension payments.

With the remaining $10 billion surplus, Newsom wants to pay off debts, which he says would help the state weather a potential economic downturn. Specifically, he would finish paying off Brown’s so-called $28 billion Wall of Debt that had accumulated from years of internal borrowing; undo a 9-year-old accounting trick that pushed the June state payroll into July so it looked like the state was spending less; set aside $2.3 billion for operating reserves; and most significantly, make an extra $3 billion contribution to the state’s main pension fund.

So how did California wind up with an extra surplus? Essentially, the sales and income taxes passed during Gov. Jerry Brown’s tenure coincided with an economic recovery. One week after Newsom won the election, the Legislative Analyst’s Office announced that state finances were in remarkably good shape, with a $14.8 billion expected surplus for the fiscal year that begins July 1.

Newsom and his finance director, Keely Bosler, say there are two reasons the surplus grew by $6.6 billion. One comes from positive balances state accounts carried over from past years, and the other is that the Newsom administration is choosing to project less growth in Medi-Cal, the state’s Medicaid program for the poor.

“We’re projecting more modest growth in the Medi-Cal budget, which makes sense, because we’ve seen this big ramp-up on the expansion of the (Affordable Care Act), and it’s beginning to level off,” Newsom said. “That affords us the opportunity to make these historic investments, and pay down debt and unfunded liabilities.”

Bosley, who also served under the Brown administration, said she was hesitant to modify assumptions about Medi-Cal caseloads and costs, but ultimately felt it remains adequate. That’s because the state has seen the number of uninsured Californians drop as the state aggressively signed people up for private insurance plans offered through Covered California while also expanding Medi-Cal coverage for the poor.

On Monday, the legislative analyst weighed in with its assessment of Newsom’s budget and commended him for paying down debt, a move it called prudent. The analyst, however, now projects the state will have a $20.6 billion surplus, nearly $1 billion less than the governor’s figure, and included a word of caution.

“The governor’s budget proposal reflects a budget situation that is even better than our estimates,” the analyst wrote. “Largely as a result of lower-than-expected spending in health and human services programs, we estimate the administration had nearly $20.6 billion in available discretionary resources to allocate. That said, recent financial market volatility poses some downside risk for revenues.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

In one of his first official actions, Gov. Gavin Newsom has directed state agencies, including the one that oversees Medi-Cal, to negotiate as a block to demand prescription drug-makers lower their prices.

The move will make California the nation’s largest negotiator with pharmaceutical companies, and could become a model for other states—if it works.

“Right now, with all the gridlock in Congress, we are seeing quite a bit of state action on prescription-drug pricing—and we hope that advances as much as it can until we can see some change in Congress,” said Peter Maybarduk, who specializes in medicine access at Public Citizen, a consumer advocacy group based in Washington, D.C.

“California government has power,” he continued. “It is a large enough economy and large enough state to influence pharma behavior and dictate terms.”

It’s such an attractive idea that it seems to have united the progressive Newsom with his political nemesis, President Donald Trump. Both have espoused the wisdom of the government consolidating its massive purchasing power so it can bargain hard with drug companies and cut the best deal for taxpayers.

Trump campaigned on the notion of harnessing the federal government’s bargaining power to reduce drug prices for programs like Medicare, but the idea went nowhere, because it’s prohibited by federal law: Congress specifically barred the federal government from negotiating Medicare drug prices—a restriction defenders describe as free-market protection and critics deride as a giant pacifier to Big Pharma.

Still it remains a simple and appealing idea in a nation confronted by rapidly rising prescription drug costs. A recent Harvard/Politico poll found the No. 1 priority voters have for the new Congress is reducing the cost of prescription drugs.

There’s a reason it’s top of mind. A study released this month in the Journal of Health Affairs found that the cost of brand-name drugs rose each year between 2008 and 2016—by more than 9 percent per year for oral medicine, and more than 15 percent for injectable medicine. Specialty drug prices soared even higher each year.

In his executive order, Newsom said California has seen prescription drug prices rise 20 percent annually since 2000—and that the 25 most expensive drugs account for half of the state’s spending on pharmacy costs. So far, Newsom’s office has not released any estimates of how much it expects the new bargaining plan to save.

“We will use both our market power and our moral power to demand fairer prices for prescription drugs,” Newsom said during his inauguration speech Monday.

That same day, he told the state’s Department of Health Care Services to begin negotiating the purchasing of prescription drugs for all 13 million recipients of Medi-Cal, the state’s health-care system for low-income patients. Currently, the state only represents 2 million of them, while the rest are on managed health plans that negotiate their own drug rates.

“The governor is the only one that can do this; he is the only one that can force everybody to the table,” said Democratic Assemblyman Jim Wood of Healdsburg, who heads the state Assembly’s health committee.

He said the consolidated bargaining power is vital to address skyrocketing drug prices. With nearly one in three Californians on Medi-Cal, and its budget of $250 billion, even small savings could be significant.

“The savings we’ll be able to enjoy from less spending on prescription drugs,” Wood said, “will help offset some of the additional costs that we’re going to be incurring to expand coverage for other people in California.”

Massachusetts was the first state to enact a “bulk Rx buying plan” in 1999. States eventually started joining forces, and now there are five bulk-buying programs that include multiple states, with some reporting significant savings. Three of those are focused on buying drugs for Medicaid recipients, according to the National Conference of State Legislatures.

The oldest one, focused on Medicaid pooling, was created in 2003 with four states and has now grown to 10, including Michigan, Minnesota, Montana, New York and North Carolina. It represents 3.8 million Medicaid recipients—still less than a quarter of the Medi-Cal recipients California will be bargaining on behalf of.

In its last session, the California Assembly approved a bill that would have created a prescription drug bulk-purchasing program for the state, but it was then held by its sponsor, San Francisco Democratic Assemblyman David Chiu. His office cited a lack of support from then-Gov. Jerry Brown. And nearly two decades ago—in another effort to decrease drug expenses—the state authorized the Department of General Services to buy prescription drugs for state or local agencies through a bulk purchasing program, but the program hasn’t been used much.

The governor’s plan also calls for eventually giving private employers the option to join the consolidated purchasing block, although how that would work is still vague.

As for the expected drug-industry opposition, the Pharmaceutical Research and Manufacturers of America said it’s reviewing the proposal.

“We welcome the opportunity to work with the governor and his administration on comprehensive solutions to the problems patients are facing accessing and affording their medicines,” said spokeswoman Priscilla VanderVeer.

Gerald Kominski, senior fellow at the UCLA Center for Health Policy, lauded the idea of using market power to obtain the lowest prices possible, but predicted that drug-makers would unleash a campaign against it inside and outside of California.

“They will start running ads that are going to scare people—that if you are on Medi-Cal, you are no longer going to get this drug or this drug,” he said. “There will be dark music and maybe a doctor in the scene shaking their head 'no' saying you are no longer eligible for this or for that.”

For the health plans that currently serve the majority of Medi-Cal patients, efforts to get better prices are welcome, said John Baackes, CEO of L.A. Care Health Plan. With 2.5 million Medi-Cal patients, it is the largest Medi-Cal managed plan in the state.

“We are supportive of investigating the idea, because logically it says if the state is negotiating for 13.5 million people, they can do a lot, maybe more than what we can do for 2 million people,” he said. “It’s worth it to see if it will produce better pricing.”

But the details are going to matter, Baackes said. There has been no information yet on how it will be administered or how the state would handle customer service.

Even California, with super-sized buying power, can only bargain so far. Larry Levitt, senior vice president of the Kaiser Family Foundation, called Newsom’s approach “promising.” But he noted that the state can’t walk away from a negotiation, because it has an obligation to make sure that Medi-Cal recipients can access the drugs they need.

“Leveraging the purchasing power of the state is certainly a smart move,” said Sacramento Democratic Senator Richard Pan, chair of the Senate Health Committee. But he added a caveat: “We want to make sure it’s done in a way that ensures that people have access to the medication they need.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

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