Non-Payment Pains : Pharmacies, Other Vendors Hit Hard by Budget Impasse

Pharmacist Esther Lainer dispenses medicine for elderly people. At the moment, she does it for free.

This is not by choice. Lainer, who owns Olympic Boulevard Pharmacy in Beverly Hills, is one of the many invisible victims of the weeks-long state budget battle, trapped in the middle as legislators 380 miles away inch toward compromise on a spending plan.

Lainer is hurting because many of her customers have low incomes and are reliant on Medi-Cal to pay for their pills. Normally, Lainer gets reimbursed for Medi-Cal prescriptions a week after they are filled, but these are not normal times. Because of the budget impasse, the state has not covered those payments since the fiscal year ended June 30.

“I’m not getting paid, but I can’t turn away the elderly gentleman who needs his blood pressure medication, or the woman who needs her seizure medication,” said Lainer, who has borrowed heavily from her savings to keep her small, independent pharmacy afloat. “It’s a very difficult situation. The politicians in Sacramento don’t seem to realize there are little people like me being hurt.”

Lainer’s pharmacy is one of 5,200 that are suffering while the budget impasse drags on. An additional 1,800 health facilities and an unknown number of businesses that provide goods and services to state prisons and agencies are struggling as well.

Thanks to court rulings issued after previous budget stalemates, most of the state’s 250,000 workers are getting paid. But about 2,500 of them--including legislative staffers and high-level gubernatorial appointees--are not so fortunate. The governor and his appointees missed their first paycheck Tuesday, while the staffers went without their second.

The 120 Assembly members and Senators also were not paid, but will be reimbursed, like other employees, when the impasse ends. The total amount of missed paychecks was estimated by the state controller’s office at $10 million.

“It makes you watch your spending and pinch your pennies, that’s for sure,” said Chris Manson, chief of staff for Assemblyman Mickey Conroy (R-Orange). Manson faces a double whammy because his wife is also a legislative staffer going without pay: “I’ve got a big car payment and the rent. I can make ends meet for now, but if it drags on, things get tight.”

Luckily for Manson, he’s a member of the Golden One credit union, which is assisting employees with no-interest loans. So far, more than 600 state workers have taken advantage of the offer, for a total of $1.5 million.

“Through no fault of their own, these people are caught up in the budget battle, so we’re trying to help them out,” said Stan Hollen, Golden One’s president and chief executive officer. “This has happened before, so we were braced for it. Budget delays just seem to be a fact of life in California these days.”

Bank of America took a different approach. In a letter to the Assembly last month, Vice President Frank Abraham said it would not be “appropriate or feasible” for the state’s largest bank to front money for unpaid state workers.

“We believe that to serve as a shock absorber in this year’s budget impasse only contributes to lengthening this emergency,” wrote Abraham, whose stand sparked an angry response from many state workers who patronized the bank.

Among those hurt worst by the standoff are nursing homes and centers housing the developmentally disabled, which rely exclusively or in part on Medi-Cal money to cover patient costs.

Tony Schrick runs four small homes for adults with cerebral palsy, spina bifida and other severe disabilities. Unlike many larger facilities, Schrick relies 100% on Medi-Cal payments. His meager reserves dried up long ago.

So far, he has held his business together by delaying payments to suppliers, taking a line of credit against his house and borrowing money from his partner’s mother. But D-day is approaching fast.

“Late August is my drop-dead time,” said Schrick, whose six-bed homes are scattered through the Sierra foothills. “In another two weeks, I’ll have to make plans to discharge my clients. That’s very upsetting because medically fragile people don’t transfer well. That kind of trauma can cause people to die.”

In Panorama City, operators of the Sun Air Convalescent Hospital are no longer buying wheelchairs, linen and other non-emergency supplies. Glenn Bennett, the home’s administrator, said the stalemate is particularly hard on small facilities that lack bountiful reserves and easy access to credit.

“The smaller places like ours are getting beat to death,” said Bennett. “We can buy food, but we have a really tough time buying other supplies and carrying on business because the cash flow just isn’t there. Meanwhile, the legislators goof around.”

Other businesses stung by the crisis include suppliers of paper clips to state agencies, contractors performing freeway repair work for Caltrans and large meat companies that ship bologna and sides of beef to California’s prisons.

Joe Wasserman, a food distributor in Marina del Rey, did $4 million in business with the state last year, providing prisons with everything from sugar to pickles to pancake mix. A man of his word, he faithfully made his July deliveries and has begun his August shipments as well. But he has yet to be paid for any food he has put in the bellies of California’s inmates.

“They’re playing politics up there and I’m sitting here waiting--and hurting,” Wasserman said. “Would you like to lend me some money?”

As they continue their quest for a budget, legislators say they sympathize with those suffering because of the delay. One of them even has an idea to prevent it from happening again.

Assemblyman Jim Morrissey (R-Santa Ana) wants legislators to forfeit a day’s pay from their $72,000 annual salaries and their $109 per diem for every day they fail to adopt a budget. Morrissey believes his proposed constitutional amendment is the best way to make legislators “understand the seriousness of the budget and the seriousness of getting it passed on time.”

“We’ve had great response to the idea from our constituents--300 phone calls, all in support,” Morrissey said. “We’ve got to do something. It’s the principle of the thing.”