New California Disaster Insurance Bill Launched to Stabilize State Budget Costs from Catastrophic Events
This past Thursday, Senator Bill Dodd (D-Napa), Insurance Commissioner Ricardo Lara, and Treasurer Fiona Ma proposed a new model to reduce wildfire risk with California Disaster Insurance (SB 290).
SB 290 would authorize the Governor, Insurance Commissioner, and Treasurer to enter into an insurance policy that pays out when California has unexpected costs for disaster response.
California Disaster Insurance would function like home insurance, but for the state – allowing the state to pay a premium using a portion of existing emergency funds that would trigger a payment to the state in the event of a disaster.
“Rising wildfire suppression costs can strain California’s financial resources and threaten cuts to critical programs,” said Sen. Bill Dodd, D-Napa. “As climate change continues to contribute to devastating infernos, we need a strategy to reduce the pressure on state and community coffers. This bill would do just that, allowing the state to invest in an insurance policy to ensure budget predictability and reduce taxpayers’ exposure to increasing costs associated with disasters, especially wildfires.”
“In seven of the last 10 years, our firefighting costs have exceeded our budget projections – by more than $450 million in 2017 alone,” said Insurance Commissioner Ricardo Lara. “California Disaster Insurance is a better solution that gives taxpayers the benefit of predictable costs, so we can invest in a safer future. As we confront destructive climate-driven events, we need to be open to new models that reduce risk to our communities and budgets. California Disaster Insurance is our first response.”
“This policy makes annual wildfire suppression costs more predictable, protecting the taxpayers from the volatility that has been seen over the past several years and creating budget stability and preserving other investments,” said State Treasurer Fiona Ma. “It is time for California to be proactive and not reactive.”
California spent $947 million in 2017-18 through the emergency fund for firefighting – more than $450 million more than budgeted, according to Cal Fire. The costs of fighting wildfires have overrun Cal Fire’s emergency budget in seven of the last 10 years. Since 2007, California has experienced 11 of the top 20 most destructive fires in its history.
The federal government, the World Bank, and the State of Oregon have all used insurance to reduce the risk to taxpayers following disasters. According to Senator Dodd, Oregon has purchased insurance protection against ever-changing wildfire costs for nearly 40 years – spending $61 million on premiums and receiving $102 million in insurance payments.
California currently pays for wildfire disasters with available funds, and California Disaster Insurance will come from those same sources. Senator Dodd argues that giving California greater budget predictability can empower the state to invest to reduce future risks.
SB 290 must be in print for 30 days before it can be scheduled for a committee hearing.
Governor Newsom Signs Emergency Drinking Water & Fire Recovery Package in Central Valley
Governor Gavin Newsom signed his first bills as Governor this week, focusing on drinking water and fire recovery. Alongside students, teachers, and community leaders, the Governor signed Assembly Bills 72 and 73 at Riverview Elementary School in Parlier -- a school where kids have been without safe drinking water for almost a year.
"This legislation provides emergency funding as a down payment -- but it's only the first step to addressing the clean drinking water crisis in our state," said Governor Newsom. "The fact that more than a million Californians can't rely on clean water to drink or bathe in is a moral disgrace. Our state must forge a long-term solution to this crisis, and I'm looking forward to working with the Legislature in the coming months to do just that."
AB 72 and AB 73 are early action budget bills that provide urgent assistance for communities that have contaminated and unsafe water, and also support communities that have been rocked by California wildfires. Hundreds of water systems across the state are contaminated by lead, arsenic, or uranium.
AB 72 appropriates $10 million General Fund to continue funding for emergency drinking water projects and adds $10 million General Fund to local water districts for technical assistance related to compliance with current drinking water standards. In addition, AB 72 authorizes funds to improve emergency preparedness and restore local tax revenue lost as a result of wildfires.
“California is united in support of our communities devastated by wildfires and other natural disasters,” Senate Leader Toni Atkins (D-San Diego) said. “This measure will allow us to continue the recovery process and improve our preparedness moving forward.”
Specifically, AB 72 appropriates $50 million from the General Fund for an emergency preparedness campaign, including $30 million for a statewide campaign through California Volunteers within the Office of Planning and Research, and $20 million for local grants through the Office of Emergency Services.
The measure makes an initial loan of $10 million from the General Fund to the State Emergency Telephone Number Account to begin immediate upgrades to the microwave network as part of NextGen 911 system activities.
Additionally, AB 72 authorizes $31.3 million from the General Fund to backfill property tax losses incurred as a result of wildfires, including estimated budget year losses for Butte, Lake, Los Angeles, Orange, Riverside, Shasta and Siskiyou counties, and estimated losses in 2019-20 and 2020-21 for the counties of Butte and Lake.
Thursday Governor Newsom traveled to Butte County to meet with Paradise residents and survivors of the Camp Fire, and highlight emergency funding in the bills for fire recovery and emergency preparedness.
Wildfire Legislation Introduced To Date
One of the predominant issues of 2018 has returned as a significant agenda item for the new administration and new legislative session.
Governor Gavin Newsom took a leadership role on California’s wildfire response immediately upon swearing into the office by announcing several executive actions on his second day in office to improve state government response to wildfires and other emergencies.
Several legislators have also begun introducing additional bills that support victims of past wildfires or better prepare the state to prevent or deal with future fires. Expect to see more in the next week, as the bill introduction deadline approaches next Friday.
AB 235 by Assemblymember Chad Mayes (R-Rancho Mirage) creates the California Wildfire Catastrophe Fund financed by participating utilities to reimburse the utility for liability costs that exceed their established insurance levels;
AB 281 by Assemblymember Jim Frazier (D-Fairfield) is a ‘spot bill’ without substantive language, but proposes to have utilities across the state take action to relocate, underground or otherwise enhance the safety of transmission and distribution lines in high fire risk areas;
SB 209 by Senator Bill Dodd (D-Vacaville) establishes the California Wildfire Warning Center in order to better predict wildfire conditions and provide actionable information to utilities around the state and requires that utilities install additional weather monitoring equipment in high fire threat areas; and
SB 290 (Dodd): As described in the story above.
UC Berkeley Releases Report on Universal Healthcare
Universal health care in California could cost $17.3 billion a year, under one plan proposed recently by UC Berkeley health policy researchers. The paper, by Richard Scheffler and Stephen Shortell of Berkeley’s School of Public Health, proposes a mix of new taxes on the health care industry, California employers and airline travelers, paired with contributions from the state’s general fund and premium payments from individuals who are now uninsured.
The figure in this report is significantly higher than other previous analyses, which found that working toward universal coverage by expanding Medi-Cal insurance for the poor would cost less than half of that. That is because the paper builds in the assumption that the uninsured would get on private health insurance plans, whereas other estimates factor in federal funding.
Under the UC Berkeley proposal, the largest source of financing, 41 percent, would come from a three percent tax on the revenue of hospitals, nursing homes, drug companies, home care providers and insurance companies, which would generate an estimated $7.2 billion a year. The tax would not apply to public hospitals.
The next source of funding, 31 percent or $5.2 billion, would come from currently uninsured residents who would pay a monthly premium for a health plan — envisioned as a plan bought through the insurance marketplace Covered California. The premium would be paid by those who earn too much to qualify for Medi-Cal, the insurance program for the poor, and would average out to $123 a month per person. The authors do not specify how many people would pay this premium.
The paper also proposes a tax on international and business class travelers who fly into and out of California’s five largest airports: Los Angeles International Airport, San Francisco International Airport, San Diego International Airport, Oakland International Airport, and San Jose International Airport. The taxes would be $50 per ticket for domestic business class passengers, $60 per ticket for economy international passengers and $250 per ticket for international business passengers. These five airports see a collective 188 million passengers each year, according to the authors’ analysis of California Department of Transportation air passenger traffic data. The tax would generate $2.3 billion a year.
The remaining funding would come from the state’s general fund in the amount of $1.7 billion, and a tax on employers that would generate $979 million. The employer tax would be modeled after Healthy San Francisco, a program started in 2007 to cover the city’s 14,000 uninsured residents. It would require employers that don’t provide insurance to their workers to pay into a fund by levying a four percent surcharge on customers. It would apply to for-profit employers with more than 20 workers and nonprofit employers with more than 50 workers.
Under the plan, the revenue generated through these proposed new taxes would go toward what’s known as integrated care systems (such as Kaiser) to expand and offer more insurance plans on Covered California. Those integrated care plans would be offered in Covered California.
Scheffler and Shortell say they hope their ideas are a starting point for debate and will inspire action by State Legislators. Other proposed measures and analyses put different cost estimates for getting California closer to universal coverage. A report released this month by Covered California found that providing more financial assistance to consumers to buy plans would cost between $2.1 billion and $2.7 billion a year.
One bill, AB 4, proposes expanding Medi-Cal to all undocumented adults — a move the Legislative Analyst’s Office has estimated would cost $3 billion annually. Another bill, AB 174, aims to provide financial assistance to those making between $48,000 and $72,000 to buy insurance. It would cost $40 million to $75 million a year, according to estimates included in a previous bill.
Gov. Gavin Newsom’s proposed budget included expanding Medi-Cal coverage to undocumented young adults between ages 19 and 25, and providing state-funded financial assistance to help Californians buy insurance — both of which would be steps toward universal coverage in the state. It is unclear how much the initiatives would cost.
Newsom’s State of the State
Governor Gavin Newsom delivered his first State of the State address this past Tuesday.
The Governor delivered an ambitious speech, to say the least, tackling issues such as immigration, the controversial high-speed rail, homelessness, and the housing crisis and water.
CALMatters, a local non-profit political news outlet, provided the text of Gov. Gavin Newsom’s 2019 State of the State Address, annotated by CALmatters’ reporters. The prepared text has been updated, where possible, with Newsom’s live remarks.
We thought this was a particularly interesting analysis of the full speech. For those of you interested in reading, please visit this link: https://calmatters.org/articles/newsom-state-of-the-state-annotated/
