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A Public Sector Crash Coming in July 2020?

EASTSIDER--There are three basic facts about the much maligned public sector in the United States.  There are over 90,000 distinct units nationwide, representing about 10% of the Annual US GDP. 

They employ almost 20 million people.  And, read it and weep, they almost all have July 1 - June 30 fiscal years with a requirement to have balanced budgets.  Or else. 

So when Senator Mitch McConnell tells the States (evidently including his own) to go bankrupt, and when President Donald Trump refuses to reimburse the States for any COVID-19  related expenses. what they are saying in in effect is ‘let’s have another great depression”.  The combined economic impact these bankruptcies would tank the economy beyond relief. 

Consider, there are roughly 50 states, with 19,519 cities, 3031 counties, 16,360 townships, 38,266 special districts, 12,880 independent school districts, and 2090 higher education institutions.  Just try to put that Easter egg back together again. 

For those interested, my source for these statistics is a fascinating website, Govtech Navigator, which you can find here. 

California

It is no surprise that the surplus in the 2019-2020 State budget are gone, gone, gone. As Governor Newsom announced May 7th, there is over a $54 Billion dollar deficit looming as of June 30, 2020.

It’s concerning enough that on May 7th, California and 4 other Western States joined together to ask the Federal Government for $1 trillion dollars in Federal reimbursement (the other states are Washington, Oregon, Colorado, and Nevada).  You can find the text of that letter here.

 

Absent some kind of reimbursement/bailout from the President and Congress, who blew the whole virus Pandemic out their collective ass, life is going to be bleak, restarted economy or no.  For example, the State pays around 80% of public education.  But as a recent CalMatters piece notes: 

“The state’s projected $18 billion decrease in minimum funding guaranteed for K-12 schools and community colleges come at a time when school officials are asking for more state and federal support to help cover emergency spending, such as buying computers to facilitate distance learning and distributing food to students in need.” 

This against a backdrop of bad news for the State in general:

“Without sugar-coating how hard the prolonged shutdown of businesses and job losses will hit the state, Gov. Gavin Newsom’s administration released bleak projections on key statewide indicators: 18% unemployment rate for the year, 21% drop in new housing permits and nearly 9% decline in California personal income.”  

LA City

A couple of months ago, Mayor Garcetti took an unusually bold move regarding the COVID-19  virus, especially since the City has no major healthcare function..  As reported in The Atlantic: 

“Yet Garcetti has emerged as a prominent fighter in the battle against the corona virus, last week ordering the month-long closure of all but essential businesses, and requiring residents to stay in their home except for necessary trips to buy groceries and gasoline, obtain medical care, and the like. “Each one of us is a first responder in this crisis,” he said at the time, “and Angelenos understand that we have to make big sacrifices right now to save lives.”

It was a bold move for Garcetti, 49, who in his nearly seven years in office has often been criticized as ambitious but politically hyper-cautious. And it had a big effect: Less than an hour later, Governor Gavin Newsom followed suit with a comparable statewide order, making California the first state in the nation to impose a virtual lockdown. Days later, the governors of New York, Illinois, and other states followed California’s lead.” 

The City Budget for 2020-21 was released April 20th, and as the LA Times described it: 

“Los Angeles Mayor Eric Garcetti unveiled a $10.5-billion budget for the city Monday that imposes cuts across an array of city agencies, with nearly 16,000 city workers being furloughed in response to the economic fallout from the corona virus outbreak.” 

I will be kind and call the budget very optimistic. As to the details, I’ll leave that to Jack Humphreville and other CityWatch writers, who routinely point out how Garcetti’s budgets are full of smoke and mirrors on the best of days.  

However, the Mayor is spot on describing how this challenge is potentially much worse than the 2008 Recession. As former LA City CAO Miguel Santana, noted in an interview with The Planning Report,

“Well, I think what the mayor said is true. I was there, as he was, for the last recession. It was the worst financial crisis that the city had experienced since the Great Depression. Last night he said that this is actually worse.

The mayor is absolutely correct that what the city is facing, and what the world is facing, is actually the worst crisis that any of us will ever experience in our lifetimes. The city is under attack, but I would say everybody is under attack: every person, every business big and small, the nonprofit sector, every level of government, everyone is under attack. There is no clarity or pathway on how to proceed.” 

Cities in California

Los Angeles City is unique in terms of size and revenue sources.  Many other Cities in the state are already in worse shape than Los Angeles, without much (or any) reserves to offset their 2020-2021 budget.  

For purposes of this article, I will only mention that using mediator math, around 60-70% of California municipal budgets are for Safety employees (Police and Fire).  And guess who’s been working around the clock since the whole virus thing blew up?  You got it, and I’m sure with tons of necessary overtime thrown in.  This unanticipated expenditure  will not be pretty 

Healthcare

Public healthcare in California is a complicated patchwork of County, State, and even Special Districts. Top of the food chain, of course, is California’s  enhanced Medicaid, called Medi-Cal. It has a number of very good enhancements from federal Medicaid, and yes, it costs a lot to provide. 

On the mental health front, California has the California Department of State Hospitals,

You can read about them in their 2018-2023 Strategic Plan

“The Department of State Hospitals (DSH) is the largest inpatient mental health hospital system in the nation. DSH oversees five hospitals: Atascadero, Coalinga, Metropolitan, Napa, and Patton, and employs nearly 11,000 employees. DSH is one of thirteen departments who report to the California Health and Human Services Agency (CHHS).” 

The County based healthcare systems are part of the California Association of Public Hospitals and Health Systems, called CAPH.  You can read about them in detail here. 

As their directory explains it,

“California’s 21 public health care systems include county-affiliated systems and the five University of California academic medical centers. Together, these systems form the core of the state’s health care safety net.” 

Finally, there are 79 Special Districts are called Health Care Districts. 

The Wikipedia article is a great read, and well worth the time.  These Districts are the backbone of healthcare in California’s rural communities.  Just to give you a taste, here’s a list of rural districts operating hospitals: 

  • Bear Valley Community Healthcare District, Big Bear Lake
  • Chowchilla Memorial Hospital District, Chowchilla
  • Coalinga Hospital District, Coalinga
  • Corcoran Hospital District, Corcoran
  • Eastern Plumas Healthcare District, Portola
  • Hi-Desert Memorial Health Care District, Joshua Tree
  • John C. Fremont Healthcare District, Mariposa
  • Kern Valley Healthcare District, Lake Isabella [17]
  • Kingsburg District Hospital, Kingsburg
  • Lompoc Healthcare District, Lompoc [18]
  • Mayers Memorial Hospital District, Fall River Mills
  • Mendocino Coast Healthcare District, Fort Bragg
  • North Sonoma County Hospital District, Healdsburg
  • Northern Inyo county Local Hospital District, Bishop
  • Oak Valley Hospital District, Oakdale
  • Palm Drive Health Care District, Sebastopol
  • Pioneers Memorial Healthcare District, Brawley
  • Plumas District Hospital, Quincy
  • San Benito Health Care District, Hollister
  • San Bernardino Mountains Community Hospital District, Lake Arrowhead
  • San Gorgonio Memorial Health Care District, Banning
  • Seneca Healthcare District, Chester
  • Sierra Kings Health Care District, Reedley
  • Sierra View District Hospital, Porterville
  • Sonoma Valley Health Care District, Sonoma
  • Southern Humboldt Community Healthcare District, Garberville
  • Southern Inyo Healthcare District, Lone Pine
  • Southern Mono Healthcare District, Mammoth Lakes
  • Surprise Valley Health Care District, Cedarville
  • Tahoe Forest Hospital District, Truckee
  • Tehachapi Valley Healthcare District, Tehachapi [19]
  • Tulare District Healthcare System, Tulare [20] 

I show this listing in detail, because our fellow Californians who live in rural communities are often at least 50 miles or more from a hospital.  Think about it.  These Special Districts are critical for a lot of people, and they really don’t have reserves to withstand next year without help. 

There’s a lot more to our crazy quilt healthcare system, but this brief overview should give everyone a taste of the size, complexity, and reach of California’s sprawling healthcare system. The one the President and Senator Mitch McConnell want to tank. 

The Takeaway

.I am afraid that the Corona virus Stimulus Package (CARES Act) expenditures are the template for federal giveaways that only benefit the already rich and those with expensive lobbyists. 

So I guess it’s ok for the President & the Congress to give $50 billion away to “important” industries like the airlines, who last I checked were private entities and who treated passengers like cattle.  Or even better, having to take back the cruise ship bailout after finding that they don’t pay taxes, and aren’t even US Companies.  Duh. 

Or my favorite, “small business” bailouts that mostly went to the wealthy,and all the bank connected firms,. The 1%  Check out this Forbes article.

Or a Vox article on Why major food and hotel chains are getting stimulus money meant for small businesses. 

On the one hand, you have Wall Street traders who have the fastest computers in the world, making money by being a few milliseconds faster than everyone else, as they game the whole financial system.  Masters of the Universe indeed. 

On the other hand, there are a lot of public agencies & schools who have mainframes still running on Cobol, or the like. They simply don’t have the money to do decent IT replacements and upgrades. No federal bailout for the schools. I guess tools for the rich beat hell out of IT to help our children and their schools prepare them for the ‘real world’. 

We know this story:

“The governor’s budget update projects California’s economic losses will fall disproportionately hard on low- and middle-income Californians, which will only exacerbate income inequality. At the same time, low-income households and people of color are at greater risk of contracting and dying from the virus as the number of confirmed cases reaches 60,000. ” 

If there is no help for our public sector entities, a few million Californians are about to discover all about Medi-Cal, as they lose the ‘private insurance’ they thought was so wonderful, discovering it only existed for them as long as they had jobs with benefits, . 

Take the message of this article, and just think how bad it will be for the othere 49 states.The nation simply cannot survive the next fiscal year if the public sector agencies all get stiffed by an indifferent President and totally corrupt Speaker of the Senate, who seem to control all.  And if they wait too late,  I simply do not know if the Congress could put Humpty Dumpty back together again, even f they  want to.

 

(Tony Butka is an Eastside community activist, who has served on a neighborhood council, has a background in government and is a contributor to CityWatch.)

-CW