Report: California government will be slower to recover than rest of economy

Rising health care costs, underfunded pensions, eroding revenues and expected federal budget cuts - that's the rather bleak assessment of a task force studying six states, including California. And while the recession put these states into crisis mode, the fiscal problems predate the severe downturn. From the NYT:

The report added a strong dose of fiscal pessimism just as many states have seen their immediate budget pressures ease for the first time in years. It also called into question how states will be able to restore the services and jobs that they cut during the downturn, saying that the loss of jobs in prisons, hospitals, courts and agencies had been more severe than in any of the past nine recessions. "This is a fundamental shift in the way governments have responded to recessions and appears to signal a willingness to 'unbuild' state government in a way that has not been done before," the report said, noting that court systems had cut their hours in more than a dozen states, delaying actions including divorce settlements and criminal trials.

Medicaid funding is just one example of the challenges being faced. Even before the recession, spending was growing faster than state revenues, and the situation has only gotten worse. From the report:

California, the most populous state in the country, has the largest number of Medicaid enrollees, 7.5 million. Among the six study states, it also has the highest percentage of its population enrolled in Medicaid, 29 percent. California has been able to roll a number of its state-funded health care programs into Medicaid, thereby gaining federal participation in funding of these programs. Even with the addition of federal funds, however, the state's annual spending per enrollee, $3,364, is the lowest among the six study states and well below the national average of $5,337; its Medicaid spending as a percent of state General Fund spending, 11.8 percent, is also well below the national average of 15.8 percent. The state attributes this low spending level to low provider payment rates, efficient management of medical services, and a very large general fund budget for other services, such as education. Confronted with severe budget imbalances in the past several years, California has pursued an aggressive program to reduce or at least contain Medicaid costs. Its fiscal year 2012 budget included $2 billion in proposed Medicaid cuts and savings. But most of these cuts and savings required federal approval, and many of the proposals were rejected by CMS.