The Future of Taxation Is Bleak

Welcome to the brave new world of government revenue in California, where public agencies must ask tax haters to change their ways.

What, another election? And they’re asking us to raise taxes again?

For the foreseeable future, that’s the tenor of our times. Every couple of months, someone — a board of supervisors or a school district or whoever — will ask you for more money. And if you don’t give it to them, your hospital or your schools will shut down. Thanks to the bizarre tax structure of California, which ties public money to income, capital gains, and other fluctuating revenue sources, we’ll all have to endure this pageantry of begging to save critical services until the economy revs back up to 1999 levels. Thanks again, Prop. 13!

This time, thanks to an eerie convergence of factors, the voters of West Contra Costa will be asked in June to approve not one, not two, but three parcel taxes — or watch the Doctors Medical Center in San Pablo, as well as virtually every library and sports program in the West County schools, go belly-up. And thanks to a new California law, you won’t be going to the polls to vote. Instead, you’ll mail in your ballots. You know what kind of people mail in absentee ballots? People who hate taxes.

This has nurses, doctors, and schoolteachers throughout the county stocking up on antacid tablets, as the stress of possibly losing their jobs begins to take its toll. Unless, by some miracle, they can convince absentee voters to tax themselves, West County could lose the second largest emergency room in Contra Costa, and the schools will have no football, no libraries, and no music program. It’s a great time to be alive.

It all started in 2002, when forty FBI agents raided the offices of the Redding Medical Center and investigated two cardiologists for allegedly performing unnecessary surgeries on their patients. The Redding Medical Center was operated by the Tenet Healthcare Corporation. At the time, Tenet was the most successful hospital chain in the country, and officials with the West Contra Costa Healthcare District couldn’t believe how fortunate they were to have so accomplished an administrator. But within months, the Redding scandal bloomed, and officials with the Securities and Exchange Commission began investigating the company for Medicare fraud. Tenet’s stock dropped by 74 percent, and to top it off, the nurses at Doctors Medical Center went on strike. “By the end of 2002, they were an unmitigated disaster, under investigation by a half-dozen agencies and Congress,” says Jim Beaver, the executive director of the healthcare district.

According to Beaver, district officials began planning for the day when Tenet pulled up stakes and bowed out of its contract to run Doctors. That day came last January 24, when Tenet sent the district a letter announcing that on August 1, it was on its own. The district was prudent enough to see this coming, but Beaver claims that all the planning in the world couldn’t have prevented the dire crisis that will hit when Tenet leaves.

The West Contra Costa district enjoys a respectable reputation among health care providers, and its $4 million reserve ain’t too shabby. But Doctors Medical Center’s operational costs run to $10-$12 million a month, far more than the district can pony up. What’s more, hospital revenue such as Medicare reimbursement lags behind the services by around three months, which means that the center won’t see any real cash until around December, at which point it will have amassed about $40 million in debt. “For that three- or four-month period, I’ve got $10-$12 million in expenses a month, and I’ve got nothing coming in,” Beaver says. “If we don’t find some sort of bridge financing, the hospital will close on August 1.”

In late February, the district’s board of directors voted to put a $6 million parcel tax on the June 8 ballot. If approved, the money would enable the district to secure reasonable loan terms from private lenders to stave off the crisis. They hope that the voters will approve taxing themselves at roughly $52 a year in order to save a 232-bed hospital and an emergency room that sees 40,000 patients annually. But then again, they never thought they’d have company on the ballot.

The story of the West Contra Costa Unified School District’s financial woes is familiar to everyone by now. Hamstrung by a thirty-year promise to pay health care costs for its teachers in perpetuity, as well as by an annual $2 million in loan repayments stemming from its 1991 financial meltdown, the district’s board of directors voted on March 9 to eliminate all high school sports, as well as library and music programs. The voters of West County had rejected a parcel tax to save the schools just one week earlier, but news of the end of football prompted such an outcry that companies and private foundations donated $800,000 to the district virtually overnight. Taken aback by the public’s reaction, district officials thought that perhaps the sensational publicity could turn the tide on another parcel tax measure. On March 12, four days after announcing the cuts, the board voted to put an $8 million parcel tax on the June 8 ballot. “I find it fascinating how people can go from saying they don’t want to be involved to giving us half a million,” says board member Charles Ramsey. “I’m pretty comfortable we can succeed.”

Not everyone shares his optimism. Many people worry that because the June 8 election will be conducted entirely by mail, the voter profile will change in favor of people opposed to taxes. In the March 2 vote on the district’s parcel tax, for example, 71 percent of people who went to the polls to vote approved the tax, but the absentee ballots overwhelmingly opposed the tax, which went down to defeat. It’s hard enough getting absentee voters to approve one tax — getting them to approve two may well prove impossible. And in fact, West County Supervisor John Gioia worries that the two measures may provoke an antitax backlash, particularly since he’s pushing a third parcel tax to finance smart growth projects later that month. “Both being on the ballot risks the other,” he says.

It all comes down to the seniors, who are most likely to vote on June 8. School officials hope that seniors will notice that they can exempt themselves from the parcel tax and will at least vote to tax other people. Others, such as health care union representative Dana Simon of SEIU Local 250, hope that voters will see a theme of saving critical public services and step up to save both institutions. “They’re not inconsistent,” he says. “The issue here is saving essential services, and both are critical to West County.”

Privately, some people resent the school board for spoiling the hospital’s chances of passing the tax; after all, the hospital got on the ballot first. But others just chalk it up to the brutal realities facing the public sector — what else, they ask, could the district do? The fact is that absent a reliable state revenue source or reform in the health care sector, doctors and teachers will keep coming to us all with their hats in their hands. At least, those of us who remember to drop that ballot in the mail. “It’s a disadvantage for us to go to a special election,” Beaver says. “This whole mail-in thing is new for everybody — even our political experts don’t know how to predict the outcome.”

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