Will California budget cuts take transit off track? 

Programming note: The newsletter will take a break on Monday, Jan. 16 for the Martin Luther King, Jr. holiday. We’ll be back in your inbox Tuesday, Jan. 17.

California’s projected $22.5 billion deficit means budget cuts are almost inevitable — much to the chagrin of climate activists, public health advocates and others who have criticized Gov. Gavin Newsom’s proposal since its unveiling this week. 

We can also expect to see pushback from the Legislature on Newsom’s proposals to cut money for public transit.

State Sen. Scott Wiener, a San Francisco Democrat, let it be known Thursday that he is analyzing the impacts on transit — and potentially forming a “big coalition” to fight the proposal. That would include transit agencies, advocates and others in the Legislature.

• Wiener: “There are a lot of people in general, and a number of people in the Legislature, who are deeply concerned with the future of transportation given the fiscal cliff that agencies are going to experience in the next one to two years as federal emergency funds run out, but ridership has not fully rebounded yet. It could lead to significant service cuts, which is a downward death spiral for some of these agencies.” 

What Wiener is raising alarms about is on page 51 of Newsom’s proposed budget, as part of the  climate change section, since transit is key to reducing greenhouse gas emissions:  

• A $2 billion cut (in intercity projects) from the $7.7 billion set aside for transit capital infrastructure;
• A $200 million cut to bicycle and pedestrian programs;
• Delaying $350 million in funding to improve rail crossing safety from 2023-24 to 2025-26.

Sen. Nancy Skinner, the Oakland Democrat who leads the Senate Budget Committee, said she agrees with the governor’s approach to shifting or delaying funding except for core programs such as health care and childcare.

But is transit funding appropriate to delay? “The Legislature will have a lot of discussion about that,” she told CalMatters. “I think everyone in the Legislature would not want to have any funding shift, for example, for a public service like transit.”

Transit agencies were hit hard during the COVID pandemic — especially in the Bay Area, which both Wiener and Skinner represent.

• Michael Pimentel, executive director of the California Transit Association: “We’re going to be working with the Legislature throughout this budget process to identify a path forward to restoring the proposed cuts — but also to address this operational funding shortfall that agencies across the state are facing.” 

If the revenue picture improves, it’s possible that the cuts will be restored and delays canceled.

Transit is also on the mind of state Sen. Lena Gonzalez, a Democrat from Long Beach and chairperson of the Senate Transportation Committee, who said she plans to introduce a bill to ensure the state moves forward on its Clean Transportation Program with “sustainable funding to reduce transportation-related emissions and improve air quality for a healthier future for our families, especially those historically overburdened by pollution.”

And Sen. Maria Elena Durazo, a Los Angeles Democrat and chairperson of the budget subcommittee on transportation, said last year’s investments in transit reflect the state’s focus on regional equity, completion of major projects, and leveraging federal funds. 

• Durazo: “If we are serious about climate mitigation and improving mobility and quality of life for all Californians, we must follow through on these investments.”

But transit advocates are also angry at Newsom for vetoing a bill last year that would have created more reduced fare pilot programs, including for students. Advocacy group MoveLA rallied at the state Capitol on Tuesday to lobby again for free student passes. 

• More budget news: The nonpartisan Legislative Analyst’s Office today released an initial review of the governor’s proposed budget, with more detailed reports in coming weeks. It agreed with Newsom about not dipping into reserves to cover the deficit, but said that the Legislature should look at cutting more one-time and temporary spending and that it should not include deficits in future years. The analyst’s office projected tax revenue at $5 billion less than the governor and pegged the “budget problem” at $18 billion, compared to the $24 billion it estimated in November. In that earlier report, the LAO also noted it expected higher inflation to persist — and that might require further spending reductions to balance the budget.

The coronavirus bottom line: As of Tuesday, California had 10,972,516 confirmed cases and 98,393 total deaths, according to state data now updated just once a week on Thursdays. CalMatters is also tracking coronavirus hospitalizations by county.

California has administered 87,315,550 total vaccine doses, and 72.5% of eligible Californians have received their primary vaccine series.

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1 Bonta goes after insulin makers

From CalMatters health reporter Kristen Hwang: California is suing the six largest insulin manufacturers and pharmacy benefit managers in the country over unfair business practices, Attorney General Rob Bonta announced Thursday, as part of the state’s broader strategy to bring down the cost of pharmaceuticals.

The complaint alleges that drug manufacturers Eli Lilly, Novo Nordisk and Sanofi — along with benefit managers CVS Caremark, Express Scripts and OptumRX — have illegally conspired to artificially raise the price of insulin by 600% over the past two decades. The civil suit seeks to prohibit the complex system of price setting and rebates companies engage in that drive out-of-pocket costs, to secure damage payments for diabetic Californians and to levy monetary penalties against each company.

More than 3.2 million Californians are diagnosed with diabetes, and many rely on the blood-sugar regulating hormone to survive. The cost of a vial of insulin ranges from $170 to $400, depending on the brand, and many patients require more than one vial per month. In comparison, patients paid as little as $21 in 1999 for the same prescriptions. 

• Bonta: “The increase in price is not based on cost. It’s not based on research and development. It is artificially being increased. And so we ask ourselves, Is this fair? No. Is this illegal? Yes, it is.”

In a statement to CalMatters, Eli Lilly characterized the complaint as “false accusations” and noted that the company lowered the price of its generic insulin last year to 2008 levels.

While insulin is a “poster child for inflated prices,” the state’s lawsuit could have far-reaching impacts on the cost of other prescription drugs, said Anthony Wright, executive director of Health Access California, a consumer rights advocacy group. The negotiation tactics targeted in the lawsuit are used to set prices for most pharmaceuticals.

• Wright: “It’s a system that benefits both the manufacturer and the benefit manager to the detriment of the patients…Californians feel these high prices of prescription drugs in their premiums and in their monthly visit to the pharmacy, especially if they’re paying out of pocket if they’re uninsured or underinsured.”

In a statement, one of the targeted benefit managers rejected the lawsuit’s claims. 

• CVS Caremark: “Pharmaceutical companies alone set the list price for their products. Nothing in our agreements prevents drug manufacturers from lowering the prices of their insulin products and we would welcome such action.”

The lawsuit comes at the same time that state lawmakers are poised to announce which company will partner with the government to manufacture generic insulin. 

2 The costs of not filing taxes

If you don’t owe taxes, why bother filing? Because — as stimulus payments and gas rebates during the last two years have shown – not filing can lead to losing money, CalMatters’ Grace Gedye reports. 

One of the requirements for getting those payments was to have filed taxes for the year 2020. But it’s not just the one-time payments. There are also annual cash back tax credits that provide thousands of dollars to lower income people. 

Nationally, about one fifth of the people who qualify for the federal earned income tax credit don’t receive it, according to the U.S. Department of Health and Human Services. And, researchers found, of the California households who receive food assistance and are eligible for CalEITC, about 400,000 households that qualified for credit didn’t receive it, largely due to low-income families not filing taxes.

• Anna Hasselblad, policy director at United Ways of California: “We like to say, ‘It’s your money, go get it. And going and getting it means also: Ask for help if you need it.”
  

One caution: Paid tax preparation can cancel out the benefits of some of those payments. But there are a number of free resources to get tax help or to file online yourself. 

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