Last week on this blog, Joe Matthews compared the California’s annual battle for state budget dollars to a game between two teams: Team Educate and Team Medicate.
He was correct in saying, “…you have to like the long-term prospects of Team Medicate.” Despite repeated cuts to social services, rising Medicaid costs and the Affordable Care Act are ensuring that healthcare’s share of the budget will continue to grow – and grow rapidly. And education funding has been either declining or growing slower than the rest of the budget in recent years.
I would, however, disagree with Matthews’s assessment that “…this budget, so far, looks like a rout for Team Educate.” The state legislature has limited discretion with respect to both education and health spending, and the two areas’ competitiveness is related.
Due to Prop 98, education automatically claims about 40 cents on each general fund dollar. Generally, Team Educate’s budget does proportionally as well as the state’s revenue, but not much better. Though the legislature technically has the discretion to increase education funding, it is rare to see allocations significantly above Prop 98’s funding minimum. That is because the money is already effectively allocated to more rigid funding areas such as healthcare (and other long-term growth areas like retirement benefit costs).
Rising healthcare costs persistently squeeze out education spending due to Medicaid’s entitlement nature. The state must provide coverage to its enrollees. Those costs are only rising as the number of enrollees increases under the Affordable Care Act and its woodwork effect, and as the healthcare system’s costs continue to rise.
As the state continues to roll out its Medicaid expansion, it has no sustainable mechanism in place to reduce the program’s costs. It can only continue to cut physician reimbursements for so long before they are simply too low to attract even the limited number of doctors who continue to accept them. The program’s costs will grow and Team Medicate will receive its funding.
At the same time, K-12 school districts should be looking forward as they contemplate budgets that will be emerging in the not-so-distant future. Over the next few years, they are expected to implement the Local Control Funding Formula and Common Core, shift greater portions of their budgets to fund scheduled teacher pension contribution increases, and do so as Prop 30’s inflated revenues level out.
Looking at the 2015-16 budget as a one-year endeavor, perhaps it seems Team Educate has the advantage over Team Medicate. But looking at it in the context of even the next few years, and Team Educate’s prospects look much more tentative.
My bet is that many school administrators are looking at the score board with wary eyes.