For some time, Obamacare critics have warned that health insurance premiums would skyrocket once the Affordable Care Act went into effect.

Now they say the leap in premiums, as calculated by state Insurance Commissioner Dave Jones, is just the beginning of hefty annual hikes in the years ahead.

Jones recently released an analysis – conducted in response to complaints regarding steep increases in health insurance rates – that compared 2013 and 2014 health insurance plan rates. The analysis found the average rate increases for people who had insurance in 2013 and bought 2014 coverage were between 22 and 88 percent.

Those with incomes that were low enough received premium subsidies under the Affordable Care Act. But many Californians whose incomes were not low enough received a major rate increase, Jones said.

“What the department found was that in many cases those purchasing 2014 coverage were paying significantly higher rates than what they had paid in 2013 and the beneficial differences in policies was minimal and therefore could not be justification for the significant rate increases,” said Janice Rocco, the deputy commissioner over health policy for the California Department of Insurance.

Just the beginning

Stephen Parente, a professor of health finance and the associate dean of the Carlson School of Management at the University of Minnesota, said these sharp premium hikes are just the beginning for Californians who don’t qualify for the Affordable Care Act.

Parente released a study in May finding that structural problems in the ACA would lead to significant premium increases in the years ahead, prompting droves of Californians to cancel their health insurance policies. As a result, Parente calculated the ranks of the uninsured in California would swell to 11 percent within a decade.

“The increases will be above 3-4 percent a year and will probably average 6-8 percent on average over the next 20 years,” Parente said. “There will be a spike, unless the Obama administration changes its policies, in 2017. That spike could increase the number of the uninsured by 2-3 million people over the long term and that would mean that 5-6 years later up to 5 million would be uninsured than otherwise would have been insured.

“So the short of it is that premium increases are going to drive increases in the number of the uninsured, so that by the time you get to 2023, we could have essentially 40 million uninsured nationwide. In fact, because of the premium increases, from 2015 on, we’ll have an increase in the number of uninsured that continues to grow for the next 10 years and beyond.”

For some, Parente’s expectation of rapidly rising health insurance hikes may seem puzzling, especially after Covered California announced recently that the vast majority of their clients will see low increases in their health insurance premiums next year. Covered California, the state’s marketplace for the federal Affordable Care Act, announced health insurance premiums will only rise an average of 4.2 percent next year.

‘Good news’

“This is good news for Californians and an example of how Covered California and the Affordable Care Act are working to make health insurance affordable,” Covered California Executive Director Peter V. Lee said in a prepared statement.

But Parente explained that the 4.2 percent increase over the next year is just to mollify voters between now and the 2016 presidential election and rates will spike significantly in 2017.

“It’s not surprising that they tried to get as much of a price increase as they could before the whole Affordable Care Act went into play and now, particularly with Proposition 45 on the ballot, the insurance companies who have enormous political influence decided not to raise their premiums very much,” said Joel W. Hay, a professor of health policy and economics at the University of Southern California.

In November, California voters will decide whether to approve Prop. 45 – a measure that is opposed by insurers, who have spent $37 million in an effort to defeat it. The measure would grant Jones the power to determine whether proposed health insurance rate increases are justified.

Delays

Opponents of Prop. 45 argue it would create lengthy delays and barriers to care and threaten access to affordable care for the more than 1.4 million Californians who secured health coverage through Covered California. They also dispute Jones’ analysis.

“The Insurance Commissioner’s report was misleading and politically motivated in order to promote a ballot measure that would give him sweeping new powers over health care decisions,” said Robin Swanson, the No on Prop. 45 spokesperson.

Proponents of Prop. 45 say it would prohibit excessive profits and require health insurers to get approval for rate hikes. Consumer Watchdog, a Santa Monica-based nonprofit organization, argues the measure will apply the same rules to health insurance that have saved state drivers more than $100 billion since 1988 while making the auto insurance market highly competitive.

“California consumers have been overwhelmed by a tsunami of relentless rate hikes because there is nothing at the federal or state level to stop insurers from imposing unreasonable increases,” Robert Leonard of the Consumer Watchdog Campaign said in a prepared statement. “Insurers hope that a $37 million campaign of deception will defeat Proposition 45. But if Prop. 45 doesn’t pass, health insurers will continue to stick it to consumers as they have for years.”

Continued increases

In spite of the pro and con arguments surrounding Prop. 45, Michael Cannon, director of health policy studies at the Cato Institute in Washington, D.C., said the reality is that health insurance costs will continue to rise for the majority of Californians in the years ahead.

“The overall trend is for premiums to rise,” Cannon said. “You’ll still get some disagreement about that. They will say that, after accounting for subsidies, a lot of people’s premiums will fall. The problem with that is it doesn’t mean premiums have gone down, but that the costs have just been shifted to the taxpayers.

“On average, premiums are increasing and you’d expect that to happen because this law makes health insurance available to people who were too sick to get health insurance before. And both of those factors will lead to higher claims and higher premiums.”

By Troy Anderson

In the early morning hours of Dec. 2, 2012, four people were found brutally shot and killed just outside an unlicensed boarding home in Northridge.

Not long afterward, four suspects allegedly involved in the crime were arrested at the Silverton Hotel and Casino in Las Vegas, according to a Los Angeles Police Department statement.

The primary suspect was Los Angeles resident Ka Pasasouk, 31, who was under the supervision of the Los Angeles County Probation Department, according to a motion Los Angeles County supervisors Michael D. Antonovich and Zev Yaroslavsky filed on Dec. 11 requesting a comprehensive report on the case.  Pasasouk, according to the LAPD, was charged with murder.

“Pasasouk is one of over 11,000 post-released supervised persons currently under the supervision of the Probation Department pursuant to [Gov. Jerry Brown’s] Public Safety Realignment program — AB 109,” Antonovich and Yaroslavsky wrote. “Absent AB 109, Pasasouk would have been the responsibility of the state and under the supervision of a parole officer instead of being the responsibility of the county and under the supervision of a probation officer. Counties across the state have been grappling with the enormous burden shifted to them under AB 109 since it took effect on October 1, 2011.”

Pasasouk, the supervisors wrote, “has a long criminal history, including robbery and drug-related offenses.”

“AB 109 was supposed to shift ‘low level’ offenders to counties; in reality, it shifts high and ultra-high risk offenders because it ignores the offender’s prior criminal history, including serious and violent offenses, and only considers the last offense,” Antonovich and Yaroslavsky wrote. “It has been reported that Pasasouk repeatedly failed to comply with the terms and conditions of his release, resisted rehabilitative programs, and was arrested multiple times over the past 11 months.”

Criminals freed

Michael Rushford, president of the Criminal Justice Legal Foundation in Sacramento, says Pasasouk is one of many potentially dangerous criminals freed as a result of AB 109 — the law Brown signed in April 2011 to “stop the costly, ineffective and unsafe ‘revolving door’ of lower-level offenders and parole violators through our state prisons.”

“[Pasasouk] was a realignment baby,” Rushford says. “A 46-year-old mother was stabbed to death in Fresno in September by a guy free because the state will no longer take people to prison for violating parole. I can go on and on with the anecdotes. Local law enforcement officials are reporting the crime increases in the double-digits, but the official numbers won’t come out until this summer.”

Dumped on counties

Former state Assemblyman Jim Nielsen, R-Gerber, says AB 109 “dumped the state’s criminal justice problems on our counties and cities and has unleashed an unprecedented crime wave.”

In response, Nielsen, who expects to be elected to the state Senate following a runoff election in January, says he plans to introduce legislation next year to correct problems created by realignment.

“There are a number of problems undergirding AB 109 that have to be addressed and corrected,” says Nielsen, the longtime chairman of the California Board of Prison Terms. “That’s why we anticipate legislation or an initiative will be necessary to correct this tragic course that is occurring in public safety in California.”

It’s now been more than a year since AB 109, a bill Brown described as a “landmark law that realigns certain responsibilities for lower-level offenders and parolees from state to local jurisdictions,” went into effect on Oct. 1, 2011. Shortly before that time, Brown issued a statement saying the law would give local law enforcement “the tools to manage offenders in smarter and cost-effective ways. AB 109 will help reduce recidivism, ease prison overcrowding and save taxpayers’ dollars.”

The law followed a U.S. Supreme Court decision ordering California to reduce its prison population from 143,000 to 110,000 inmates by 2013. Realignment provides for a reduction in the state prison population over time.

Population reductions

“The whole point behind realignment is to comply with the U.S. Supreme Court-affirmed population reductions in California’s 33 prisons,” says Dana Simas, spokeswoman for the California Department of Corrections and Rehabilitation. “The U.S. Supreme Court said we have to get down to 137.5 percent of our designed capacity, which is approximately 110,000 inmates.

“If we don’t do that by the court-ordered date of June 2013, then the court can order the wholesale, early unsupervised release of state prisoners.  That means anyone due for release in a specified amount of time is free to go. There is no supervision, no follow-up. We won’t know where these people are. They will get out of prison early. That is what is facing California if we don’t follow this court order.”

The law, according to a recent report by the Public Policy Institute of California, redirected 30,000 recently convicted offenders who would have gone to state prison to county jail, shifted the after-prison supervision of about 50,000 offenders from state parole agents to county probation departments and revised procedures dealing with sentencing, good-time credits and parole.

“Altogether, these changes represent the most significant shift in California corrections policy in decades,” author Dean Misczynski wrote. “Proponents of realignment believe that counties can achieve higher levels of offender rehabilitation, correspondingly lower levels of recidivism, and less (or at least not more) crime — and all for a lower cost than accomplished by the state.”

However, the law has generated a great deal of controversy. While some officials have touted it as a great success, others have warned “the streets are going to run with blood” as a result.

Supervision

The law, according to the Criminal Justice Legal Foundation, requires that some felons released from prison be placed on post-release community supervision rather than state-managed parole. The law also prevents habitual criminals convicted of new felonies such as assault, auto theft, drug dealing, identity theft, fraud and commercial burglary from receiving prison sentences, instead requiring that they receive sentences in overcrowded county jails, probation or “treatment” in county-managed rehabilitation programs, according to CJLF.

Law enforcement officials throughout the state have expressed concerns that counties don’t have the jail capacity or the resources to house or supervise the thousands of repeat felons they are now required to deal with, according to the CJLF.

“It’s still too early to really see what realignment is going to do, although we certainly are seeing increases in crime because people who would have been incarcerated previously are not in custody because the county jails don’t have room for all the types of people who can go to county jails — whether it’s pre-conviction or post-conviction,” says Scott Thorpe, the chief executive officer of the California District Attorneys Association.

But Simas claims critics of Realignment are misconstruing how it works.

“Well, first off, there is no one being released under realignment that would have been released anyway,” Simas says. “CDCR can’t hold anyone past their court-ordered release date. So there are no early releases.  The biggest fallacy is that there is this notion that people are out in the community that should have been behind bars. No one has been released early because of realignment. The only difference is who is supervising them. If they are serving a term for a nonviolent, non-serious, non-sex offense, then they report to county probation for their post-release community supervision.”

$1.3 billion saved

In a June report examining the first eight months of realignment, the Center on Juvenile and Criminal Justice found a 41 percent reduction in new prison admissions and a drop of 28,300 in the prison population, which stood at more than 144,000 prior to realignment. At an average cost of $46,000 to imprison one inmate for a year, the authors wrote the decline in the prison population should reduce prison costs by more than $1.3 billion.

“Overall, the state prison population is declining according to expected projections,” the authors of the CJCJ report wrote. “Generally, counties that have historically over-relied on state prison are experiencing larger reductions in their imprisoned populations and new commitments to state prison.

“In addition, it appears the reductions are occurring specifically within the low-level offender categories, rather than the more violent, serious offenders, which alleviates many public safety concerns. The decreased reliance on state incarceration should also produce significant cost savings for California taxpayers.”

Despite these savings, officials throughout the state are expressing growing concerns about Realignment’s impact on crime rates.

In its recent report,  “Corrections Realignment: One Year Later,” the PPIC report wrote that preliminary data indicates some communities around the state are experiencing an increase in property crime, particularly burglary and motor vehicle theft.

“Unfortunately, the cause and effect relationships within these communities are confounded by a prolonged recession and severe budget cuts to local law enforcement and social service programs,” according to the PPIC report. “Crime rates and realignment need to be closely monitored and carefully analyzed.”

Matt Cate, executive director of the California State Association of Counties, notes crime rates are up nationwide.

The Justice Department’s Bureau of Justice Statistics reported in October that violent crime rose 18 percent last year — the first year-to-year increase in nearly two decades — and the number of property crimes also jumped by 11 percent.

“California crime numbers have not come in yet,” Cate said. “But no criminologist worth his or her salt will be able to tell you whether realignment has a cause and effect relationship with crime going up or down. It’s very complicated. It’s really difficult to correlate crime rates with a change in certain policies.”

One year later

In a December report by the CJCJ, “One Year into Realignment: Progress Stalls, Stronger Incentives Needed,” author Mike Males noted that, while “some law enforcement and prison interests have cited anecdotes and selective local offenses to charge that managing tens of thousands of formerly imprisoned criminals at the local level has brought a new wave of violent crime … the latest statistics reveal no evidence of such a trend.

“New prison admissions for violent and other sex and serious offenses — which are still allowed under realignment’s guidelines as in the past — were actually slightly lower in the 3rd quarter of 2012 compared to the same period in 2011. In particular, new imprisonments for murder, robbery, rape, and most sex offenses showed modest declines from the 1st to the 3rd quarters of 2012, while assaults showed slight increases ….”

In a prepared statement, Los Angeles County Supervisor Michael D. Antonovich says recent data from the county’s Probation Department revealed that the state is releasing mentally disordered offenders to the counties — threatening public safety and adding to the county’s fiscal burden.

The state, Antonovich says, is decertifying mentally-disordered offenders just prior to release from prison to place them under local supervision instead of state supervision. In addition, several mentally-disordered offenders that were released from prison directly to a state hospital were later decertified by the state hospital and, again, shifted to local supervision instead of remaining on state supervision.

By decertifying mentally-disordered offenders prior to release from prison, who are ineligible for local supervision by county probation departments under Realignment, Antonovich says the state is effectively relieving itself from the obligation to supervise them.

“We see this as a significant concern because mentally-disordered offenders have to meet certain criteria to be certified as such, one of which is to have a severe mental illness,” says Anna Pembedjian, Antonovich’s justice deputy.

“These types of individuals require intensive care and supervision and they require a lot of resources. So this is a significant concern, which our board will discuss publicly in the coming weeks and potentially seek necessary legislative changes to prevent it from happening.”

New legislation

To address these and other issues, Rushford says Nielsen and other lawmakers are expected to introduce legislation in 2013.

“I know there is a move afoot to demand a repeal of the bill,” Rushford says. “There are groups around the state who are working on reforms. We have put together a working group. The idea is to repeal the measure and replace it with something that makes public safety a priority.”

But Rushford doesn’t expect quick legislative action given that Democrats now control two-thirds of the seats in both the Senate and the Assembly.

“This is going to be an issue for a long time,” Rushford says. “The state is broke and we really can’t take these guys back unless we spend more money on prisons. We are going to go forward with the $6 billion bullet train and we don’t have space in our prisons. They are going to have to drop other priorities and put this one back on top or, as former Los Angeles County District Attorney Steve Cooley says: ‘The streets are going to run with blood.’

“When this first started — when I first heard about this bill running through the Legislature, I called Cooley. He said: ‘You won’t be able to stop them.’ He said, ‘It will be like it was back in the 70s. There is going to have to be so much crime that the public insists on a new policy.’ I don’t want it to get that bad again. I was around during that period and the train is running in that direction now.”

Aug. 27, 2012

By Troy Anderson

During Vallejo’s bankruptcy, which began in 2008, the city cut the number of police in half rather than deal with the “pension problem.”

Now, a somewhat similar scenario is playing out in Stockton, a city of 292,000 east of San Francisco that recently displaced Vallejo as the nation’s largest city to declare bankruptcy.

Rather than trim generous pension benefits, the city is proposing to fully fund its pension system while defaulting on $124 million in pension bonds floated in 2007.

Assured Guaranty Ltd., a Bermuda-based bond insurance company, says Chapter 9 bankruptcy is not intended to be used as a “sword to prefer one class of similarly situated creditor over another.” In a prepared statement, the company described Stockton’s attempt to default on the bonds as “unprecedented, a contortion of the bankruptcy process and will foreclose Stockton’s access to the capital markets for the foreseeable future.”

As a growing number of cities in California are contemplating or filing bankruptcy, some pension experts say they are disappointed that the cities are choosing to default on their debts and cut public services instead of dealing with the exploding costs of public pensions.

“They won’t touch pensions,” says Joe Nation, a professor of the practice of public policy at Stanford University. “In the case of Vallejo, they literally reduced the number of police officers by about one-half. It’s horrible. They don’t want to even take modest steps to deal with the pension problem.”

To be fair, Nation says Vallejo officials contemplated the possibility of attempting to scale back generous pension benefits as part of the bankruptcy, but backed off under pressure from the California Public Employee Retirement system.

“CalPERS made it clear that if they tried to reduce those pension benefits that it would litigate,” Nation says. “These cities know CalPERS has deep pockets and is politically strong. Instead of taking on CalPERS, they took on a much easier target — their own citizens.”

CalPERS spokesman Brad Pacheco says CalPERS did not make any threat to the city of Vallejo.

“We did inform the city that any attempt to reduce pension benefits in the bankruptcy case would go to the core of CalPERS’ mission and that CalPERS would respond accordingly,” Pacheco says. “However, the city of Vallejo never seriously contemplated cutting benefits and it quickly affirmed its contract with CalPERS.”

Bankrupt cities

In recent months, Stockton, San Bernardino and Mammoth Lakes have filed bankruptcy, raising questions of whether local governments can reduce pension benefits as part of the bankruptcy process. Compton could be next. City officials say they are on pace to run out of funds by the end of summer. These bankruptcies occurred just months after Vallejo completed its three-year Chapter 9 process.

The filings come as public pensions are consuming a growing proportion of public payrolls throughout the state and nation. Last year, the Little Hoover Commission called on the governor and Legislature to freeze pension benefits for current workers and enact other reforms, noting city councils, county supervisors and school boards face the prospect of increasing contributions into pension funds by “40 to 80 percent of their payroll costs for decades to come.”

These skyrocketing costs follow decades in which public officials bestowed generous pension and retiree health benefits upon public servants. As a result, taxpayers are now on the hook for trillions of dollars in unfunded liabilities.

In California alone, Nation estimates the liabilities range from $265 billion to $737 billion. In a June report, the Pew Center on the States found the shortfall has grown to at least $1.38 trillion nationwide, up 9 percent over last year.

But a July report by the American Enterprise Institute found the true state of public sector pension funding is far worse.  The so-called “fair market valuation” reveals the average public employee pension plan in the United States is only 41 percent funded and unfunded liabilities total $4.6 trillion.

National reforms

In response, elected officials throughout the nation have undertaken pension reforms to reduce the costs, though most reforms have been incremental, such as increasing contributions or retirement ages. The most significant changes have been aimed only at newly hired employees, wrote Andrew G. Biggs, a resident scholar at the AEI, in the report.

“Unfortunately, these reforms won’t come close to restoring plans to true full funding, because current accounting conventions systematically understate pensions’ benefit liabilities and thereby overstate their financial health,” Biggs wrote.

Last October, Gov. Jerry Brown unveiled a 12-point pension reform plan for state and local pension systems designed to end “system-wide abuses and reduce taxpayer costs by billions of dollars over the long term.” Voters in San Diego and San Jose recently approved ballot measures to reduce pension benefits for current employees, although public employee unions are challenging the initiatives in court.

Jon Coupal, president of the Howard Jarvis Taxpayers Association, recently wrote:

“Compounding the problem, of course, is the fact that any suggestion that government employees help out and pay their fair share toward their own guaranteed pensions is rejected out of hand by the union brass who are accustomed — because of their ability to distribute campaign cash and  deliver members’ votes to favored candidates — to being the de facto bosses of the California Democratic Party, the Legislature, and, with their chosen candidate elected governor, the entire state. 

“Now, partially to meet this mammoth pension burden, Jerry Brown wants to increase sales and income taxes. And, in an attempt to show the public that the state deserves more money, he has proposed some reforms to deal with the radically out-of-balance pension system. But proposing is one thing, actually expanding political capital to see it through is another.”          

Modify existing pensions?

As this battle intensifies, a growing number of public officials are asking whether governments can modify existing pension plans. Once a taboo topic, some legal experts say public agencies may have far more latitude to change retirement benefits than once commonly believed.

The recent spate of bankruptcies in California has only magnified this debate.

“Modifying pensions for these cities may be part of the solution,” says Lisa Hill Fenning, a Los Angeles attorney and former U.S. bankruptcy court judge. “If you look at the movable pieces in any bankruptcy case, you have to consider that from an economic standpoint.

“The problem in California is the uncertainty of the degree to which pensions can be modified. The case law has been scattered over the years. It’s most developed in state court, not bankruptcy court. We are just going to see how that body of case law is interpreted in the bankruptcy context.”

In a new report, “Local Government Bankruptcy in California: Questions and Answers,” Brian Uhler, a fiscal and policy analyst in the Legislative Analyst’s Office, addresses common questions about the Chapter 9 process for local governments, including what types of obligations can be changed or eliminated through bankruptcy.

In its case, Vallejo became the first and so far only California city to use a plan of adjustment to significantly reduce health benefits for its retirees by decreasing its payments to a flat rate of $300 per month, Uhler wrote. So far, no city has used Chapter 9 to change pension benefits for current retirees. However, pension benefits were changed in a case in Central Falls, Rhode Island.

Due to the lack of case law regarding the treatment of retiree benefits in Chapter 9, it is not clear if and under what circumstances local governments would be permitted to reduce retiree benefits in future filings, Uhler wrote.

“So, the upshot is that it’s still pretty unclear right now — especially with pensions — because no city in California has tried to modify pensions,” Uhler says. “There is only one city nationwide that has successfully modified pensions, but because of differing state laws and differing pension systems, we just don’t know how applicable that is to California.

“But, in theory, pension agreements are a contract and are just like other obligations that can be restructured or rejected through the Chapter 9 process. So, it’s fair to say that there is at least some reason to believe pensions could be considered — that they are not completely protected from the Chapter 9 process. It’s just that no city has tried it yet.”

In a prepared response to the report, Pacheco wrote CalPERS remains committed to safeguarding the constitutionally protected pension benefits of public employees and retirees.

“The obligations owed to public workers have priority over those of general unsecured creditors including bondholders,” Pacheco wrote. “We don’t agree with all of the characterizations and explanations of Chapter 9 proceedings in the LAO report.”

Taking on pensions

John Moorlach, chairman of the Orange County Board of Supervisors, says elected officials in California are waiting for a city or county “to take on pensions to find out if we can in fact make dramatic changes in pension contracts.”

“When that happens, the city councils in this state are going to have to rally around that city and give CalPERS a good punch in the nose,” Moorlach says. “We have to do something with current employees. That’s the only solution to this mess.”

Former Los Angeles Mayor Richard Riordan and Alexander Rubalcava, president of Rubalcava Capital Management, an investment advisory firm in Los Angeles, warned as early as 2006 that rising pension costs would result in government bankruptcies, massive cuts in public services and calls for a taxpayer bailout.

As a result, Stockton’s attempt to default on its pension bonds is “entirely predictable,” Rubalcava says.

“California cities have been and continue to be run for their employees, not for the people who invest in or live in them,” Rubalcava says. “Whether they can get away with that, whether they can ring-fence pensions and cut everything else to the bone, including bondholders, remains to be seen and only the courts will be able to decide that.”

If local governments won’t attempt to reduce pension benefits as part of the bankruptcy process and agencies like CalPERS maintain unrealistic discount rates, Rubalcava says this first wave of municipal bankruptcies is only the beginning.

Last month, CalPERS reported a 1 percent annual return on its $233 billion portfolio — well below the fund’s discount rate of 7.5 percent. CalPERS’ 20-year investment return is 7.7 percent.

“Some of the world’s smartest investors like Warren Buffett of Berkshire Hathaway and Larry Fink of BlackRock, which is the world’s largest asset management firm, have said they will be lucky to make 5-6 percent going forward,” Rubalcava says.

“If that’s the case, the handful of bankruptcies we’ve had in 2012 will be just a taste of what’s to come. There will be dozens or hundreds of municipalities in California filing Chapter 9 in the decades to come.”

By TROY ANDERSON

For years, officials in California have used accounting gimmicks, stimulus funds and the state credit card to keep the safety net intact.

But experts say the state may have run out of tricks.

Facing a $25 billion state budget shortfall, Gov. Jerry Brown has proposed to cut hundreds of thousands of parents and their children from the welfare rolls on July 1. Additionally, law enforcement officials say the governor’s proposal to transfer thousands of convicted felons and parolees to county jails and oversight will “wreak havoc” on the criminal justice system.

“I don’t think there is any question the day of reckoning has arrived,” said Paul McIntosh, executive director of the California State Association of Counties, which has devoted a special section of its Web site — “Counties in Fiscal Crisis” — to educate officials about the situation.

“We have known this date was coming for quite some time,” McIntosh added. “As Gov. Schwarzenegger liked to say, ‘We’ve been kicking the can down the road.’ We’ve been doing that for the last several years as opposed to making the very difficult decisions to balance the state budget.”

Under the budget proposed by Gov. Brown, 115,000 families with 230,000 children are slated to be cut from the CalWORKS program on July 1.

Although Schwarzenegger made similar proposals to make significant cuts in the CalWORKS program, Frank Mecca, executive director of the County Welfare Directors Association of California, said officials are taking the threat more seriously this year.

“Hundreds of thousands of children who are already poor would be seriously affected under this cut,” Mecca said. “In particular, we are greatly concerned children will become homeless — and we don’t believe that’s an exaggeration.”

However, Adam Summers, a policy analyst at the Reason Foundation in Los Angeles, said the government often makes exaggerated claims to protect their budgets.

“I think they may be forced to make some cuts, but they tend to exaggerate those cuts,” Summers said. “It’s kind of like the Washington Monument Syndrome. They threaten to cut services to the poor and the services the public values the most to scare the public rather than address the lower-priority programs that really should be the first to go.”

Brown Proposals

Gov. Brown has proposed a $1.5 billion cut in the CalWORKS program. The proposal calls for a  48-month time limit on benefits and a 13 percent cut in the monthly checks. In Los Angeles County, Department of Public Social Services officials estimate 59,000 to 62,000 children in 34,500 families would lose their CalWORKS benefits effective July 1 because the 48-month time limit would be retroactive to 1998.

The proposal comes as the number of people seeking welfare benefits in Los Angeles County has soared since the recession began. The number of indigents collecting $221 monthly General Relief checks has nearly doubled from 61,406 in 2007 to 107,452 last year. Likewise, those receiving Food Stamps shot up from 641,215 to 978,920. The number of homeless families getting CalWORKS benefits increased from 6,341 in November 2007 to 9,294 in November 2010.

“If half the families the governor proposes to terminate from the CalWORKS program became homeless, the total number of homeless families in Los Angeles County would triple from the current level, which is already at a record unconscionable level,” said Phil Ansell, director of program and policy at DPSS. “The county of Los Angeles has no ability to absorb the fiscal impact of such a curtailment and no ability to address the resulting human suffering.”

Worse Than the Great Depression

Andy Bales, president of the Union Rescue Mission on skid row in Los Angeles, said the number of homeless people – especially single mothers with children – is growing by “leaps and bounds” and much of the burden is falling on nonprofits and the faith community.

“Without a real economic turnaround, we are already in a situation that compares to the Great Depression from everything we can see here,” Bales said. “In 1933, we provided 133,000 meals and fed 42 percent of the hungry in L.A. There were 1.2 million people in L.A. then. Now, there are 3.6 million people. That’s three times the size we were in the Great Depression. But the URM provided 1.4 million meals last year, or 10 times more than the number of people we fed during the worst year of the Great Depression.”

In Sacramento County, the grand jury noted recent budget cuts alone have put government operations under “great duress” and that the “safety net is in tatters.”

Chandra Walker, the chief executive officer in Santa Barbara County, says the combination of the state deficit, stagnant sales and property tax revenues and rising pension and salary and benefit costs have created “the perfect storm of a crisis in Santa Barbara County.”  At a time when the county has exhausted its reserves attempting to maintain service levels, Walker says the governor’s proposed cuts couldn’t come at a worst time.

“This year, given the fact we’re not seeing any increases on the revenue side, we are seeing retirement costs increase, which is exacerbating the crunch we find ourselves in and the need for really severe reductions,” Walker said.

Marin County Administrator Matthew Hymel agreed that rising pension costs are eating up a bigger portion of the county’s budget.

“Our board has agreed current pension levels aren’t sustainable and so we have negotiated a new pension tier for all of our miscellaneous employees, which are nonsworn police or fire, and we are in discussion with our sworn employees as well,” he said.

Marcia Fritz, president of the California Foundation for Fiscal Responsibility, said it’s too bad elected officials didn’t agree to pension reforms several years ago when there was still time to head off the “complete meltdown” the state is now facing. But Fritz said the CFFR is working on a new pension reform ballot measure that is designed to reduce existing pension costs and withstand potential legal challenges.

“CalSTRS needs another $4 billion a year to remain solvent, U.C. needs another $1 billion and the state isn’t setting aside the money required to fund retiree health ($5 billion),” Fritz said. “The governor appears to be putting pensions before poor people. Reform of pension benefits for current workers can reduce these costs.”

Currently, the annual taxpayer tab for California public employees’ pensions and retiree health care is $17 billion and increasing by several billion dollars each year, according to the Legislative Analyst’s Office.  As public pension costs eat up 25 to 50 percent of the payrolls of an increasing number of government agencies throughout the state, Summers said that means less money is available for public services like health, welfare and public safety.

Spending More Wisely

“One thing that strikes me in this debate over the budget is all you ever hear about are two options: You have significant tax increases and significant spending cuts,” Summers said. “What’s missing from the debate is how to do more with the money the government already has.”

Of the governor’s proposed “solutions” to the state’s $25 billion budget deficit, nearly $12 billion would have a direct impact on counties, including $6 billion in major cuts in health and human services programs and $6 billion from the complex realignment proposal, which would shift to the counties state program and financing responsibilities for various public safety, child welfare and adult protective services and mental health programs.

At a recent California Assembly Budget Committee meeting in downtown Los Angeles, county Supervisor Zev Yaroslavsky testified that Los Angeles County and other counties are “extremely concerned” about the realignment proposal.

“If we are not careful, realignment will be less a swap of services and revenues to pay for them, and more a dumping of costly criminal justice and human services from the state’s books to the county’s books, the end result of which will be only to shift the huge deficits that the state has been incurring to counties which can afford them even less,” Yaroslavsky testified.

Likewise, Los Angeles County Supervisor Michael D. Antonovich testified that the state’s budget mess is a result of mismanagement and to address the deficit the governor needs to eliminate excessive spending, reduce the “bloated bureaucracy,” adopt pension reforms and attack the costs and growth of the state workforce, which has grown from 213,794 in 1976 to 348,212 now.

He noted that nearly 19,000 state employees earn more than $100,000 a year. More than 5,000 employees collect more than $200,000 annually. And more than 1,000 employees are paid more than $300,000 a year. Antonovich also recommended the governor adopt the $32 billion in savings outlined in the California Performance Review and across-the-board regulatory relief to stimulate the economy and create jobs.

“Shifting unfunded state mandates to local government is a Trojan Horse that will bankrupt local governments and continue the exodus of jobs,” Antonovich testified. “Californians want a competitive state – not a bankrupt state.”

Risky Felon Transfers

Yaroslavsky, Antonovich and Los Angeles County District Attorney Steve Cooley also expressed concerns about the governor’s proposal to transfer thousands of convicted felons and parolees to the counties. CSAC President John Tavaglione has also expressed concern about the governor’s realignment proposal, saying it is “fraught with significant risks for counties.”

“The realignment proposal is a public safety nightmare,” Cooley testified. “Tens of thousands of convicted felons will be on the streets with minimal supervision, threatening all Californians.”

The county already faces a severe jail overcrowding problem. Of the county’s 18,000 inmates, about 90 percent are pre-trial detainees, leaving only 1,800 beds for post-conviction sentencing. Under the governor’s proposal, Cooley estimated up to 9,000 convicted felons would be required to serve their sentences in the county.

“There is no room in the jails for them,” Cooley testified. “Nor is there room for an estimated 6,500 Los Angeles County parole violators who would receive jail terms in lieu of prison under the proposal.”

During the hearing, Yaroslavsky testified the county would have to increase staffing by 600 to supervise these parolees.

“Is the state prepared to pay us dollar for dollar what it will cost us to take over this job?” Yaroslavsky asked. “Keep in mind that your parole officers are public safety officers who are entitled to a public safety pension. Our probation officers are not. Even worse, in its infinite wisdom, the state gave its parole officers the 3 percent at 50 pension benefit, which is breaking the back of many pension systems around the state. We did not. Are we expected to hire the state’s parole officers to handle this new responsibility at salaries and pensions that we don’t currently provide our own employees?”

The Sacramento grand jury also expressed concerns about the realignment proposal, noting the Sacramento police chief recently announced that serious violent crime was up 20 percent and that he believed this was the product of the poor economy and the early release of prisoners.

Curtis Hill, the legislative representative for the California State Sheriffs Association, said jails are full throughout the state and 34 counties have court-ordered caps on the number of inmates they can house.

“This is a dramatic and historic shift in the approach to criminal offenders,” Hill said. “So, if it’s handled in an appropriate manner, it will be a great success story and we’ll get the necessary savings along with the success story everybody wants to see from the state prison system. If it’s not handled appropriately with the funding going to the jail systems, then we are going to see a failure.”