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Date: June 12, 2009

To:  Mayor and Councilmembers

From:  Carol Swindell, Director of Finance

Subject: Responses to Questions Raised During Council Study Sessions

Concerning the City of Santa Monica FY2009-10 Proposed Budget and

the FY2010-11 Budget Plan.

Introduction

Responses to questions raised during Council Study Sessions concerning the City of

Santa Monica FY2009-10 Proposed Budget and the FY2010-11 Budget Plan.  

3. How much would the City save if single payer healthcare plan is

implemented in California? 

The two proposed bills (SB 810 & SB 840) would likely have no impact on City

employees, given the City’s existing coverage.  The League of California Cities

commented that for any universal health care effort, most cities would probably

meet or exceed the minimum level of benefits that would presumably be

defined in such a bill, which appears to be the case in Santa Monica.  Over the

past two years, three major policy efforts have been undertaken to reform the

health care system, but none have resulted in substantive legislation.

SB 840, a bill sponsored by Senator Kuehl, was vetoed in September 2008. 

This bill would have provided a single payer plan, established new taxes, and

divert current funding for health care from federal, state, and local

governments.  A report by the California Legislative Analyst Office, dated May

22, 2008, indicated that the cost of this coverage would have been

approximately $210 billion in FY2011-12, leading to a deficit of $42.4 billion in

the plan in the first full year of operations.  Proposed revenue sources for the

plan included employer wage taxes of 8 percent and employee wage taxes of 4

percent on employees earning between $7,000 and $200,000.

To estimate the financial implication of this proposed bill on the City of Santa

Monica, we will assume FY 2008-09 budgeted citywide salaries of $150.8

million.  The LAO estimates that program costs, including the deficit, would be

covered if payroll tax rates were 16 percent and other tax rates, such as capital

gains, were increased to 15.5 percent.  If the City were to pay the entire 16

percent of health care costs under the single payer plan, it would incur $21.8

million in annual expenditures.  Projected medical costs for FY 2008-09 for the

same salary level were $27.8 million, which indicates an estimated savings of

$6.0 million over current medical, dental, and vision costs.  These estimates

are based solely on information provided by the LAO in the aforementioned

letter and do not consider the financial impact of non-wage taxes levied to

provide additional revenue for the proposed single payer plan.