Study: Cuts to health programs a bad plan for state economy

CA's budget is down to bare bones.

It doesn’t take a Ph.D. to understand that people who earn less shell out a greater percentage of their income from month to month than those occupying more elite ranks. Anyone fortunate enough to be holding down even a low-paying gig in a state where unemployment stands at 12.5 percent knows that basic living expenses can quickly consume a paycheck in San Francisco.

A study released by the Center for Labor and Research Education at the University of California at Berkeley has found that cutting relatively low-paying jobs in the state’s health and human services sector would deal a harsher blow to California’s financial health than alternative budget-balancing measures, like raising taxes on the wealthiest residents. Gov. Arnold Schwarzenegger has proposed cutting $6.4 billion from California’s health and human services budget, part of his solution for closing a roughly $20 billion budget gap.

“The budget proposals that the governor is making would … significantly worsen the economic crisis in the state, rather than pull us out,” said Ken Jacobs, chair of the Labor Center at UC Berkeley.

The report highlights “multiplier” effects of hypothetical cuts to statewide health and human services programs. The study examined the impacts of cutting $1 billion each from Medi-Cal, Healthy Families, and CalWORKS – state programs that assist low-income families – and found that the resulting losses would total 98,600 jobs for all three combined. The worst impacts from cuts to those programs would come from indirect consequences, according to Jacobs. Since those programs are funded in part from federal dollars, a loss in federal funding matched for every dollar the state invests also takes a toll.

A $1 billion cut to state funding for In-Home Supportive Services (IHSS), which aids disabled and elderly people who want to remain in their homes, would result in a statewide loss of 215,900 jobs, the report found.

Meanwhile, generating that same $1 billion through taxes from households in the highest income bracket in California would result in a comparatively lower job loss of 6,400, the research group estimated.

Health Access, a nonprofit consumer advocacy group, used the study’s findings in its own report to predict ramifications of the actual proposals in Schwarzenegger’s budget. According to Health Access, a minimum of 42,384 jobs would be lost as a result of proposed health cuts to Healthy Families and Medi-Cal, with more than $2.7 billion lost in business activity. It predicted 370,000 jobs would be wiped out if IHSS were eliminated altogether.

In a tumultuous economic downturn like the one facing California right now, “the best stimulus is funds in the pockets of low-income families,” according to Jacobs. Cutting these health and human service programs, which employ low-income workers and serve residents living near the poverty line, would do just the opposite.

Speaking of multipliers, Jacobs noted that corporate tax cuts produce the absolute worst bang for the buck out of any other schemes to fix the economy.