California lawmakers are moving to crack down on taxpayer-funded health care districts that have banked tens of millions of dollars at the expense of funding community-health projects.
A bill moving through the Legislature targets the spending habits of these little-known governmental agencies that were created to run hospitals, which many of them no longer do. These districts are run by publicly elected boards that have power over multimillion-dollar budgets.
New legislation in Sacramento would require the districts to spend at least 95 percent of their annual tax revenue on community programs and services. Districts would have to report their spending annually to local officials, including their county boards of supervisors.
Some of these districts have banked tens of millions of dollars and diverted resources to administrative and overhead costs.
“We really felt that there were three things that we wanted to see from these districts: transparency, accountability and responsibility,” said Assemblyman Rich Gordon, D-Menlo Park who co-authored the legislation, AB 2418, with Assemblyman Roger Dickinson, D-Sacramento.
In March, a Bay Citizen investigation revealed that about 30 of the state’s more than 70 publicly funded health care districts no longer run hospitals, a departure from their original mission. Some now give grants to fund community-health programs, such as physical education in schools.
Four grand juries over the last decade have called for the dissolution of the Concord-based Mt. Diablo Health Care District. The district has not run a hospital since 1996, yet it spent just 17 percent of its $3.2 million in property-tax and other revenue on community grants from 2000 to 2011, according to public records. The district is currently being taken over by the city of Concord.
Dickinson, chairman of the Assembly Committee on Accountability and Administrative Review, held a hearing last month at which district officials were grilled on their spending practices. “We found districts that had large real estate holdings, providing noncompetitive grants and have very large reserves,” Dickinson told the Assembly’s Committee on Local Government last Wednesday.
Health care district officials do not relish the increased oversight and regulation. None of them is supporting the bill, and a lobbyist from the Association of California Healthcare Districts spoke against the bill before two Assembly committees last week, arguing that it would hinder the ability of smaller districts to operate.
“AB 2418 will have a dire unintended consequence for many districts that serve underserved communities and the communities that created them,” said Amber Wiley, senior legislative advocate for the association. “Restricting the use of these tax dollars will have a detrimental effect on small, rural districts.”
Lawmakers want all the districts to refocus on providing health services.
“These are property-tax dollars, and in a time when you have literally millions of people across the state uninsured with no access to any kind, let alone quality health care, I think you have to prioritize,” Dickinson said in an interview.
The Assembly Committee on Local Government approved the legislation last Wednesday, one day after it was approved by the Assembly Committee on Health. If it becomes a law, it would take effect on Jan. 1, 2013.
Supporters of the bill include health advocates from Health Access, a consumer advocacy group, and SEIU California, a union representing health care workers who may benefit if more money is injected into providing health services.
Assemblyman Luis Alejo, a Democrat from Salinas, where a financial scandal engulfed a local health care district last year, is attempting to restrict lavish payouts to hospital executives by health care districts. His bill, which the Assembly will consider this week, would prohibit districts from giving financial perks to hospital administrators that are not available to other employees.
"This is ongoing in many places for far too long," he said. "Some of their expenditures have been questionable."