Underplayed Story of the Day

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In a development that is not a good omen for health care reform efforts on the state level or the similar federal plans being talked about by the Democratic candidates, the California Legislature has killed Arnold Schwarzenegger’s ambitious proposal to expand coverage, which was introduced* a little over a year ago.:

The Senate Health Committee voted down the $14.9-billion proposal, which would have required people to hold private insurance and subsidized the premiums for those who could not afford them. The repudiation came from Republicans and Democrats, with only one of 11 senators backing the plan that Schwarzenegger and Assembly Speaker Fabian Nuñez (D-Los Angeles) spent much of 2007 putting together.

Lawmakers called the plan, which passed the Assembly last month, “fundamentally flawed” and “a fairy tale” as a visibly frustrated Nuñez, sitting in the committee room, muttered disagreement under his breath. Senators said the proposal, while laudable in its ambitions, might fall apart financially in a few years, leaving the state to cancel its new healthcare services or put taxpayers on the hook for billions of dollars more.

It fell victim to, among other things, a fiscal crisis of the kind that is beginning to grip state houses across the country, which are one of the victims of the slumping economy, and particularly, of the falling real estate market. (Property taxes are the major source of their revenue.) States have been enjoying some flush years, and using the money to accomplish things that Washington has been unable to. That may all be coming to an end, as the health care reform effort showed:

Senators said it was too risky a financial commitment when California faces a $14.5-billion budget gap that could force them to cut existing healthcare programs. Schwarzenegger has proposed $2.9 billion in healthcare cuts over the next 18 months.

“It doesn’t matter if there are these good things in the bill if there isn’t the money to pay for them,” said Sen. Sheila Kuehl (D-Santa Monica), who chairs the health panel and has proposed that the state take over the role of providing medical insurance. “We can’t simply say to the people of California, ‘Go buy insurance.’ “

*Ah, memories. That was one of my earliest posts, the day after we started Swampland.

UPDATE: Commenter Jayackroyd, who clearly knows a heck of a lot more about this than I do, disputes and demolishes my assertion that property taxes account for a major portion of state revenues. (They are the biggest component of local government revenues). Please take a look at his explanation of all of this in the comments section.