Amid Cutbacks, Some ‘Appalled’ By Surplus at Health Department
By LAURENCE DARMIENTO
Staff Reporter
When county supervisors went begging for money from the feds and the state to bail out their troubled health department, they insisted there was no choice, citing dire predictions of a long-term budget shortfall.
The numbers, though, are anything but clear.
The department will end the year with a whopping $225 million surplus, $100 million greater than the one projected just this April.
Over the past decade, in fact, the department has consistently finished the year with an operating surplus, from as much as $238 million to as little as $55 million, according to department financial records.
As in past years, much of the surplus will be rolled over to fund the troubled department in the future. But unlike the past, the numbers come amid a year of budget cutting that resulted in 400 layoffs and the closure of 11 clinics and a hospital.
Health advocates say it just confirms their suspicions that the department’s financial problems were not immediate and the cuts in services could at least have been delayed.
“They began the year making cuts when they did not have a shortfall,” said Mandy
Johnson, executive director of the Community Clinic Association of Los Angeles County. “They made those cuts, consciously aware they would be denying people care.”
Supervisor Gloria Molina was especially angered. “I looked at these numbers and they’re appalling to me that we have a department that plays so loosely with these figures to get us to make decisions that are inappropriate on behalf of the communities so desperately in need,” she said at a recent meeting of the Board of Supervisors.
Now being called into question is the long-term projection of a roughly $800 million deficit for the 2007-2008 fiscal year, without yet another federal or state bail out. But as might be expected given the complexity of financing a $3 billion health department, it may not be so simple.
County health officials contend that even the large surplus wracked up this year amounts to less than 3 percent of the overall department budget and is not unusual in the context of $3 billion in overall spending.
Moreover, health officials say that while the department has historically wrung up surpluses, their amounts and causes have been so varied as to make projections of future ones almost impossible.
In any case, they say, it is highly unlikely that any future surpluses could completely close the department’s budget gap.
“Go ahead and add what you want, and see how much money you would have to be wrong by to get to that ($800 million) dollar figure,” said Fred Leaf, the health department chief operating officer.
Historic surplus
The county’s health department, the nation’s second largest municipal health agency, built into the budget a projected $40 million surplus they anticipated would not be spent. But they were far off on its ultimate size.
In April, the Board of Supervisors was notified that the surplus was running about $82 million higher than projected, and in late July that figure was upped another $103 million to bring the total to $225 million.
The latest update showed a number of changes. Among them: a recent decision not to proceed with a variety of computer upgrades, saving nearly $34 million. The department also received an unexpected $35 million in federal funds for outpatient services after state audits better identified county costs.
In that vein, the department received $12.6 million more than expected in reimbursement from commercial health plans for services rendered insured patients after upgrading their billing software to itemize charges. Other changes included $6 million less spent on medical malpractice settlements.
Health Services Director Tom Garthwaite said the department has studied prior budgets and has not been able to better project the size of future surpluses. “It’s a complex system and there are a bunch of variables,” said Garthwaite. “It is extremely hard to do projections.”
However, a former health department official said that while their are thousands of line items in the budget, the long-term trend indicates that individual health department units are being very conservative in their budget making, leading to predictable surpluses.
“The supervisors keep asking tree questions, and (department officials) have an answer for every tree, when the real answer is a forest question,” the official said. “Anybody could have looked at the past six or seven years and know we are going to come up with a more money than expected.”
Steven Frates, a senior fellow at The Rose Institute of State and Local Government at Claremont McKenna College, said the tendency in government is to pad budgets.
“It is obviously easier for them to give back money than it is go the opposite direction and get money that isn’t there,” he said. “And it only takes one or two percent each year compounded to add up to substantial money.”
Changes coming
Sheila Shima, the county’s chief administrative officer’s health budget manager, said she knows managers throughout the county and not only in the health department who are conservative in their budget forecasts.
“They feel it would be worse to come in with a deficit,” said Shima, who said she is redoubling her effort to curb the practice.
However, health advocates say that the surplus was predictable, and that they begged supervisors to reconsider their decisions over the past year to close High Desert Hospital, shutter the clinics and cut $15 million in funding from a network of private clinics that augment county services.
“We have argued that the county has been too conservative in its budget and as a result has cut services before it was really necessary,” said Bart Diener, assistant general manager of Local 660 of the Service Employees International Union, which represents county health workers.
Opponents of a planned reduction of 100 beds at USC-Los Angeles County Medical Center and the complete closure of the Rancho Los Amigos National Rehabilitation Center are seizing on the latest numbers. A federal court has already blocked the moves and the county, which appealed the decision to Ninth Circuit Court of Appeals, has agreed to enter mediation next week in an attempt to resolve the disputes.
“It’s hard for them to poor mouth as effectively in mediation, especially when you come up with an extra $103 million,” said Elena Ackel, an attorney with the Legal Aid Foundation of Los Angeles, a plaintiff in one of the lawsuits.
While Molina has expressed the greatest outrage, supervisors are far from united on the surplus issue. Supervisors Zev Yaroslavsky and Mike Antonovich call the surplus the result of good, conservative budgeting, and said cuts must proceed or the county will face a big deficit in two years no matter what the size of any annual operating surplus.
“This is a very disingenuous complaint from one or more of my colleagues,” said Yaroslavsky. “Everybody had known for quite some time that we will have a surplus in the context of the health department budget but what is driving this is what will happen in (the future.)”
As a result of the furor, county health officials have decided that they will more frequently update the supervisors on the department’s revenue picture.
