$200 Billion

Now that Governor Brown has acted on all 1,217 bills sent him by the legislature, we are turning our attention to the 2019 legislative session. One GFC focus will be improving the quality of services provided Californians. Below is a overview of two of the most important services.

The state runs a K-12 education system serving 6.2 million students and administers a single-payer Medicaid system (Medi-Cal) serving 13.5 million low-income residents. Together the two systems receive $200 billion in public funding, 50 percent ($65 billion) more than five years ago:

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Performance is unsatisfactory. Despite an extra $25 billion of annual K-12 spending compared to five years ago and spending of $16,000 per student, only about half of students meet or exceed reading and writing standards and only 39 percent meet or exceed math standards. Despite an extra $40 billion of annual Medi-Cal spending, emergency room visits are up, Medi-Cal appointments are often difficult to get, there’s little evidence of improved healthfulness, and unproductive emergency spending is crowding out more productive spending.

It’s not as if elected officials don’t know the truth. They do. Yet those same officials still deliver $200 billion a year to providers of K-12 and Medi-Cal services, many of whom make political donations to them. The recipients of that $200 billion are among the most powerful special interests in Sacramento. 

California can and should have the highest quality K-12 and Medicaid systems in the country. All that’s required is reform approved by 62 legislators and signed by the governor. The key to reform is liberation, both from special interests and from one-size-fits-all regulations that stifle innovation and protect incumbent providers.

To improve K-12 education, they should liberate local schools to build the best possible teams for kids and to capture billions being diverted from classrooms to special interests. In particular, they should (i) allow school boards to dismiss under-performing teachers and reward teachers based on performance, the subjects they teach, and for teaching in high need schools, (ii) stop offering permanent employment (tenure) after just 18 months, (iii) end the practice of determining layoffs by seniority, (iv) permit schools to reduce spending on pensions and county boards of education, and (v) encourage districts to reduce spending on health insurance by moving retired employees to Medicare and Obamacare.

To improve Medi-­Cal, they should liberate more medical professionals to provide services, reward excellent performance, punish poor performance, and intervene before costly medical treatment is required. In particular, they should (i) expand the scope of practice permitted nurse-midwives and nurse-practitioners, (ii) make fire stations and other public locations widely available for some healthcare services, (iii) reward providers that perform well and encourage treatment in lower-cost locations, (iv) penalize providers that perform poorly and overuse expensive treatments, and (v) use social services and mental health programs to intervene before more costly medical treatment is needed.

California’s elected officials aren’t required to utilize the state’s K-12 and Medi-Cal programs but they should have empathy for the 20 million Californians who do. Those Californians deserve the best  —  and for $200 billion per year, they should get it.