Newsom Wants $3.4B Loan to Fund Health Care, Including for Illegal Aliens

Gov. Gavin Newsom's Department of Finance on Wednesday notified state lawmakers that California will need a $3.44 billion loan to cover costs associated with the state's Medicaid program known as Medi-Cal.

The letter did not specify why exactly the program fell short on funds and lawmakers from both sides of the aisle told KCRA 3 they want more specifics from Gov. Newsom's administration.

While experts note there are many factors that go into Medicaid costs, some are pointing to the money the state spends providing health insurance to undocumented people.

The letter comes weeks after Newsom's administration officials told lawmakers they had underestimated the cost by about $3.5 billion.

"To ask for a loan of $3.5 billion without any explanation as to what it is, is in my opinion, is absolutely absurd," said State Senator Rogier Niello, R-Roseville. "But it's very typical for the way Democrats are managing the budget process."

Three Democratic sources close to the budget negotiations who spoke on the condition they remain anonymous told KCRA 3 that while Newsom's administration has said the healthcare for undocumented people is not the sole reason for the cost increases, they want more specifics from the Newsom administration.

The loan would come from the state's general fund, specifically an account meant for economic uncertainties which California taxpayers provide.

In response, Assembly Speaker Robert Rivas took aim at the Trump administration and federal lawmakers on Thursday.

"The greatest threat to health care in California is Republicans and their reckless budget cuts to Medicaid," he said in a written statement. "There are tough choices ahead, and Assembly Democrats will closely examine any proposal from the Governor. But let's be clear: We will not roll over and leave our immigrants behind."

During a line of questioning in an Assembly budget hearing last month, Assemblyman Carl DeMaio, R-Riverside, asked about the expense. Newsom's Department of Finance said the state is estimated to spend $9.5 billion to provide Medi-Cal to undocumented people, with $8.4 billion coming from the state's general fund. The number had grown from the $6 billion that was initially projected.

DeMaio criticized the expense, and Speaker Rivas eventually removed him from the committee weeks later.

"The big story is they're saying Trump is putting Medi-Cal at risk, when in fact Newsom and the California Democrats have put it on the brink of financial collapse," DeMaio told reporters on Thursday. "They need to act immediately, they need to cancel insurance for illegal immigrants and say we're going to take care of the low-income citizens of our state first."

The funds will be at the center of a budget hearing in the Assembly on Monday afternoon.

"This isn’t new — as the administration outlined in the Governor’s January budget proposal, additional funding is needed to support Medi-Cal," said Izzy Gardon, a spokesman for Gov. Gavin Newsom. "Rising Medicaid costs are a national challenge, affecting both red and blue states alike. This is not unique to California."

Other states grappling with the rising Medicaid costs include Pennsylvania, Colorado and Indiana.

Newsom's Department of Finance submitted a similar letter last year to the legislature for a $1.75 billion loan. The department at the time said that the loan was specifically necessary primarily because of an issue with timing related to a tax on health insurance plans.