This Date in UCSF History: Fewer Health Services

Originally published in Synapse - The UCSF student newspaper, February 8, 1979. In coming years, Californians can expect decreased health care services, a larger tax bite to compensate for revenue lost after Proposition 13, or some combination of the two.

“People are going to be in for quite a surprise,” stated San Francisco Director of Public Health Dr. Mervyn Silverman at a UCSF conference on Prop 13 in November.

California counties lost approximately $7 billion as a result of Proposition 13, which limits property tax to 1 percent of assessed value, down from the previous 2.2 percent limit.

As a result, counties faced a 55 percent reduction for such services as health care, schools, police, and fire control. In fiscal year 1978-79, however, counties were saved from financial ruin by a $4.1 billion “bailout” drawn from a $5 billion-plus state surplus.

While all counties suffered some cuts, the relief provided some degree of mitigation.

Where did the surplus come from? The huge state surplus which was used to offset Prop. 13 losses last year derived from a quirk in the California tax structure.

This is the conclusion reached by the Children's Rights Group in a December 1978 report on the impact of Prop. 13 on child services in the state.

The report noted that inflation over the last ten years pushed taxpayers (both corporate and individual) into higher tax brackets, forcing them to send more tax dollars to the State Treasury.

“In 1957,” the report stated, “because of inflation there was a negligible increase in real personal income (actual value of dollars earned) even though the nominal income (pay scale/tax rate) increased by 11 percent.”

The result was that tax payers landed in higher tax brackets “and paid more income tax than the state anticipated,” the report continued.

Priorities on allocation of this large surplus are set in the legislature.

So for example, due to efforts of influential people like Assembly Speaker Leo McCarthy (a hometown representative), San Francisco County was able to fare well in the bailout. The budget this year for health care in S.F.

County actually increased by $3.9 million over 1977-78. Of this, $2 million was a direct result of the state bailout over and above revenue replaced from the loss as a result of Proposition 13.

Even in this above-average situation, however, the health spending failed to keep pace with the 9 percent rate of inflation.

The story in many other counties was far worse. Service Cuts Despite increased funding, San Francisco health services suffered severe, almost across-the-board budget cuts in 1978--79.

The most notable of the cuts were:

• All public health nursing was transferred to City Health Centers 1-5, a $60,000 cut.

• Dental Clinics - 44 percent cut, which closed two clinics.

• Emergency Medical Services - 34.2 percent cut, and the closing of emergency stations, i.e., Park Emergency. (The Board of Supervisors was forced to allocate additional funding during the year to keep Central Emergency open through June 30.

• All contract agencies - i.e. Haight Ashbury Free Medical Clinic, Bayview Hunters Point Clinic, Telegraph Hill Neighborhood Clinic, and others, that were on the budget for last year and this, were cut an average of 20 percent of the percentage of their county funding from 1977-78.

• All of these cuts are added to losses each agency suffered due to inflation. Although San Francisco General and Laguna Honda

Hospitals enjoyed budget increases of millions of dollars each neither increase kept pace with inflation. Instead, they represent concessions forced from the city by nurses and other striking workers, who had not seen pay increases for several years.

Next Fiscal Year's Harvest As in the current year, California counties can expect at least $7 billion (plus inflation) loss of revenue from proposition 13 as compared to the last pre-13 year, 1977-78.

In his proposed budget Governor Brown has allocated $4,378 billion as relief to local governments.

This figure, $140 million or 3.3 percent above the current year's bailout, actually represents a further loss in revenue for the counties once inflation is figured in.

This plan has yet to be approved by the Legislature, which is expected to fight out the issue between March and June, despite Brown's hopes for an early, March passage. After approval, the Legislature will discuss the allocations for each county.

As far as San Francisco goes, further cuts seem imminent.

In a conversation last week, James L. Quigley, Fiscal Officer of the San Francisco Department of Public Health stated, “We expect cuts in the budget for 1979-80, but until the amount of the state surplus is known, no one will know how severe they will be.”

Quigley is submitting four separate budgets to Mayor Feinstein for each city health agency and contracted health agency, with reductions of 5-17 percent (added to losses from inflation) as compared with fiscal year 1978-79. This indicates that the cuts expected may be more severe than those incurred in 1978-79 for many agencies.

Once the mayor has these budgets in hand, she will prepare a more finalized version for submission to the Board of Supervisors.

After some negotiations between the two, a final budget will be released, probably in early 1980.

The state bailout for Prop. 13 revenue losses will not continue forever. In fact, a new state law which takes effect this year will significantly reduce the surplus from which the bailout monies have been drawn.

The law, AB 3802, irons out the quirk in California's tax structure which created the surplus in the first place.

According to the Children's Rights Group report, the new state law “provides for annual adjustments to the tax tables to reflect the rate of inflation.” This process is termed “indexing.”

According to the report, indexing will reduce state tax receipts by almost half a billion dollars in fiscal year 1979-1980 alone. And this reduction will come about at a time when inflation rages at 7-9 percent.

These tax changes at the state and local level will produce the real Prop. 13 financial crunch, as state bailout monies decline for good and local health needs continue unabated.

The magnitude of the crunch can be appreciated by glancing at the accompanying chart. Based on predictions made by the state Office of the Legislative Analyst in light of the new indexing law, all signs indicate that counties will be forced to slash local services (including health) since state bailout funds will fall considerably.

For example, while the 1978-79 bailout was $4.1 billion, even an optimistic prediction is that the 1980-81 bailout will be $2.84 billion.

Keep in mind that inflation alone greatly increases needed funds each year' and that the legislature is unlikely to spend 100 percent of the remaining surplus on bailouts in any case.

The exhaustion of the state surplus has caused other ideas to be entertained in Sacramento. One possibility is to increase or divert one cent per dollar of the (regressive) state sales tax to tax relief for social services.

What this may all boil down to for California's poor and working people, particularly renters (who gained nothing from Prop. 13) is a no-win situation.

Based on current information, the prognosis seems to be one of the following three scenarios:

• Cut-backs, gradually over a few years resulting in dramatically decreased health services.

• Increased taxes to recoup lost revenue, reinstate or maintain pre-proposition 13 health services.

• Diversion of current state tax revenue (after the decrease of the surplus-tax level) to the counties, with probably consequent reduction of other state services.

All in all, initial reports of the probable effects of Prop. 13 — called horror stories or scare tactics by many — may for the poor and working people of California be mostly true. And the next few years may mean a nightmare coming true in the public health sector of California.