MCO Fixed – Now How About Our Roads?
In this election year, we’ve heard a lot of rhetoric about how politicians from different parties cannot work together. However, this week in Sacramento, Republicans and Democrats alike voted for the “MCO Fix” that addresses what could have been a billion-dollar hole in the state budget and Governor Brown has already signed the three-bill package. Hopefully, that spirit of cooperation will extend into other areas — especially transportation funding.
I won’t go too deep into the policy here, but a federal ruling required California to change how it taxed Managed Care Organizations (MCOs). Without new methodology, the existing tax on MCOs would have gone away, reducing revenue by more than a billion dollars. That would have required deep cuts throughout California’s health care budget. The new MCO deal offers health plans a series of incentives and generally changes the way existing taxes are applied so California complies with federal rules. Some county health plans will be impacted under the new MCO fix framework, but overall, the MCO fix passed this week represents a reasonable solution to a $1.3 billion problem.
Governor Brown made this a priority issue, calling a special session on health care to get it done. He and Jennifer Kent, his new Director of the Department of Health Care Services, worked for months with health plans and the Legislature to ultimately put together the two-thirds vote required for tax-related issues. Voting for this deal was not an easy thing to do for some legislators, but it was the right thing to do. I applaud their fortitude. Important state programs that are just beginning to recover from the recession have been spared from untimely budget cuts.
The MCO fix was also one of CSAC’s priority issues this year, so I am glad to check that box off our list. I am hopeful that the spirit of bipartisanship and cooperation can continue because there are other priority issues that demand attention. Chief among them is the need to increase revenue for transportation. Our local streets, roads and bridges are deteriorating. The same is true of state highways. The fuel taxes that have traditionally been the source of revenue for road and highway maintenance have not been increased since 1994. Anyone who uses our roads knows that revenue is clearly not keeping pace with demands.
In the last few weeks, the California Transportation Commission was forced to slash transportation expenditures by $754 million. Cities and counties, faced with similar revenue reductions, are cutting back basic services like snow removal and clearing storm drains and delaying or eliminating maintenance and rehabilitation projects. Other critical projects that address dangerous road conditions and traffic bottlenecks are being put on hold or cancelled all together. In a state that boasts the eighth-largest economy in the world, this is unacceptable.
And the situation just got worse. As part of the fuel tax swap, the Board of Equalization is required to adjust a portion of the gas tax every year to match what a sales tax would have otherwise generated. Last week it reduced the rate by 2.2 cents or about $328 million. That loss of revenue will further impact safe and efficient local roads and state highways.
I realize that creating new transportation revenue may be a much heavier lift for legislators. No one wants to pay more taxes. But bad roads already cost the average California car owner an extra $762 per year in repairs. So even in this election year, California counties call on the Legislature again to do what is difficult, because it is also what’s right. Hammer out a bipartisan plan to increase revenue for roads in a meaningful way while also reforming how dollars are invested to ensure efficiencies at all levels of government. Compromise is never easy, but perhaps the MCO Fix is a symbol of a new spirit of cooperation. Californians want a government that works. The MCO deal is proof we can give it to them.