Fears of a lengthy state budget impasse and news that the state will withhold Medi-Cal check reimbursements beginning June 18, has health care and social service providers preparing for the worst.

“The prospect of not being paid for things that weren’t being cut for six weeks, eight weeks, three months is scary,” said Herrmann Spetzler, executive director of the Open Door Community Health Centers. “It’s a cash flow issue that I don’t think our safety net providers have the ability to weather.”

Advocates of social services and higher education have spent the last two months focusing on the “devastating” impact of the governor’s proposal to cut 10 percent across the board from next year’s budget.

But getting to next year is not a guarantee as the state continues to withhold gas tax payments to counties and will start putting the pinch on Medi-Cal providers almost a month earlier than it did a year ago.

“We won’t get that money until the budget is signed,” said Maggie Kraft, director of Adult Day Health Services in Eureka.

“It’s not a cut. Eventually, we’ll get the money but that means some hospitals may not be able to make payroll and if they borrow the money for payroll, the state doesn’t pay the interest,” said Jan Emerson, spokesperson for the California Hospital Association.

Payments will resume with the passage of the state budget, but nobody is harboring any illusions that the 2008-09 version will come in on July 1.

“I’ve heard October, if we’re lucky,” said Joyce Hayes, executive director of the Humboldt Senior Resource Center.

“We would be much better off with an on-time budget. I don’t know how likely that is, but I certainly will be pushing for it,” said Assemblymember Patty Berg, D-First District.

The California Legislature has sent the governor a budget before the July 1 start of the new fiscal year just 13 times since 1977, and only four of those met the June 15 constitutional deadline.

The governor is only one-for-four in on-time budgets. He had never gone past July 31 prior to last year’s signature on Aug. 24.

But the fault is not his alone. Arkansas, California and Rhode Island are the only three states that require a two-thirds majority vote to pass a budget.

“I think there’s a good chance it will go on as long as it did last year,” said John Travis, chairman of the California Faculty Association political legislative committee. “It may even go later, which will cause a tremendous problem to the State of California. It will be hard to maintain contracts with people doing a lot of infrastructure work and salaries of state employees.”

Travis said a wild card in the process is that this is an election year.

“It might make it easier for some people who are going out to choose to do the right thing or it may make some people say they can’t take a chance of upsetting folks and losing their seat.”

Hayes called her agency “fortunate” to have multiple funding streams and a hefty reserve that solves the cash flow problem for two to three months. But the threat of a protracted budget fight, less Medi-Cal revenue and start-up costs for the new Alzheimer’s Center to consider, Hayes is planning for the worst.

“We’re just starting to discuss with our bank a contingency for a line of credit,” she said. “We’re very concerned with having to pay interest on it — interest that would normally go into providing services for people.”

A year ago, Mad River Community Hospital spokesperson Tom Ayotte put a month of interest to make payroll at $30,000. He could not be reached for comment about what this year’s potential impasse could mean.

“We used our retirement account for the two months they didn’t pay us last year, but now it’s gone,” said Yolanda Speers of Humboldt MeditTrans. Her owner-husband downsized earlier this year by terminating drivers and taking over a six-days-a-week driving schedule for one van. With the Medi-Cal suspension and the prospect of a 10 percent cut next year, Speers said, “I don’t know how we survive. Take out a loan, I guess.”

Smaller, less established businesses and individual providers may find loans and good interest rates harder to come by than the Humboldt Senior Resource Center and Mad River Community Hospital.

“How many of us can go out and buy something and say I’m not going to pay you until I want to?” asked Kraft. “For the government to say to people they cut deals with and have contracts with that they can arbitrarily change their minds is, in a way, insulting to us. I’d love to go to my Visa and everyone I pay and say: ‘I’m not paying, no harm, no foul.’”

The state’s decision to hold back gas tax revenues is costing Humboldt County about $300,000 per month. Supervisor Jimmy Smith said a conservative public works director, access to other proposition money and frugal spending have helped the county continue road service as usual, but the prospect of going more than eight months without is daunting.

“I think we’ve projected that we could get to about September before it began to have a negative effect if the state was to continue holding that,” Humboldt County Supervisor Jill Geist told the governor during his visit to Eureka on April 9.
“It would be very detrimental if it goes past September.”

“We are concerned with our ability to upkeep,” Smith said. “This is what pays salaries, enormous fuel costs and equipment on a daily basis. If you don’t have money to get men and equipment out on the road, you are in big trouble.”

The governor called the gas tax money a “deferral” and promised to “terminate” the fiscal advisor with him on the Eureka trip if the gas tax funds weren’t flowing by September.

“What if they argue and debate over this (budget) for several months?” Smith asked. “If that happens, there is no real guarantee.”

The Associated Press also contributed to this story.