‘Poison Pill’ Threatens Counties

Is Sacramento friend or foe of local governments? In 1991, provisions were slipped into state law aimed at dissuading counties from legally challenging some state budget decisions. That so-called “poison pill” now poses a serious threat to cash-starved counties. The situation calls for prudence on the part of Gov. Wilson and action by the Legislature. Otherwise counties stand to lose a total of $898 million and a realignment of state and local responsibilities for health care could go awry.

The State Supreme Court ruled Monday in favor of a suit by San Diego County demanding that state government reimburse counties for providing health care to poor adults.

Under state law, counties are the provider of last resort for the medically indigent. But after the passage of Proposition 13 in 1978 and the resulting drop in county property tax revenues, the state assumed responsibility for providing care to the poor through Medi-Cal. In 1982, the state shifted the responsibility to the counties and mandated levels of services, but it paid the counties only about 70% of the costs. The state further reduced compensation in 1989. In 1991, Gov. Wilson supported a funding realignment that shifted certain other state health and welfare services to counties and guaranteed funding through a sales tax increase and higher vehicle license fees.

That was the year of the poison pill. To thwart other counties from seeking repayment, the Legislature passed a bill that would deprive them of hundreds of millions in state vehicle license revenues if San Diego prevailed in its lawsuit. Los Angeles County received nearly $278 million in such fees in fiscal 1994-95, the latest year for which figures are available.

The state Department of Finance can trigger the poison pill simply by notifying the Department of Motor Vehicles but, wisely, it is taking time to review the Supreme Court ruling.

Not only is money at stake. The ruling has implications for the overall state-local relationship on fiscal matters, as well as the realignment of health and welfare responsibilities. Governments cannot be run like this. A legislative repeal of the poison pill is in order.