Prop 3 asks voters to direct millions to Children’s Hospital

Clare Major on October 31, 2008

By CLARE MAJOR

While the presidential election and Prop 8 rule the headlines, one less-noticed proposition could have seriously-noticed local impacts. Children’s Hospital Oakland could receive $98 million if Proposition 3, the Children’s Hospital Bond Act of 2008, is approved Nov. 4.

Proposition 3 would authorize $980 million in general obligation bonds to fund grants for the construction, renovation, or related improvements of California children’s hospitals. The bonds would be repaid over 30 years, for a total estimated cost to the state of $2 billion, or $64 million per year.

Children’s Hospital and Research Center Oakland, located on 52nd Street in the Temescal neighborhood, is one of thirteen potential Prop 3 beneficiaries, including eight private and five University of California children’s hospitals. Children’s Hospital Oakland hopes to use the funds for construction to bring its facilities into compliance with state seismic retrofitting standards.

Children's Hospital Oakland

The California Children’s Hospital Association, which advocates for the eight private children’s hospitals, has spent almost $6.4 million in support of Prop 3. While there is no organized opposition to the initiative, critics have raised questions about the wisdom of more spending during a budget crisis. They have also pointed out that there are still unused funds from a nearly identical 2004 bond measure, Proposition 61. There are also general concerns about the use—or, some say, abuse—of the California initiative process to fund private organizations with public money.

In February of this year, Alameda County voters rejected Measures A and B, parcel tax measures which would have funded construction at Children’s Hospital Oakland. Neighborhood opposition in Lower Temescal was fierce, as the hospital’s plans were to build up and to expand its footprint, either buying adjacent homes or seizing them through eminent domain.

“The previous administration of Children’s Hospital had worked with the neighbors and come to an agreement about how far the hospital would expand,” said Amy De Reyes, Health Policy Analyst for Supervisor Keith Carson, “and this new plan had it going far beyond that. The neighbors were incredibly well organized and they did a great job of getting their message out—they wanted the hospital to stay, but they had land there, and there were other alternatives [for the hospital to expand]. And they really did force the hospital to go back and reevaluate.”

Dr. Bertram Lubin, Director of Medical Research for the Children’s Hospital Oakland Research Institute, said the new expansion plans that Proposition 3 would fund are different. “We’re going to build a new hospital on the property that we currently have,” Lubin said. “It’s not going to be something that imposes any physical constraints on the neighbors.”

Part of the funding for this new construction would come from the hospital’s $60 million share of Proposition 61 funding. Approved by 58% of California voters in 2004, Prop 61 authorized $750 million in general obligation bonds to fund children’s hospitals. As of June 1, 2008, about $403 million of those funds had been distributed.

Ted Costa, president of People’s Advocate and co-author of the ballot argument against Prop 3, said hospitals are being disingenuous about their needs. “Four years ago, I saw this initiative [Prop 61] on the ballot and I said, ‘OK, children’s hospitals, I’m OK with that,'” Costa said. “And then a group of the administrators from all these hospitals got together and said, ‘That worked so good, let’s get another billion.'”

Lubin, however, maintains that the Prop 61 funds, even combined with what Children’s Hospital Oakland has in reserve and with potential Prop 3 funds, won’t be enough to cover the $400 million cost of complying with the state’s seismic standards. Rising construction costs and limited funds mean the hospital will rely on major donors to make up the difference, but those donors’ support is contingent upon Children’s Hospital Oakland receiving the Prop 3 funds that would supply its share of the budget.

“If Prop 3 doesn’t pass, we’re in trouble,” said Lubin. “We’d have to go back to the drawing board and figure out how we’d survive.”

In California, bonds generally fund major infrastructure projects such as roads, educational or prison facilities, and water projects. The long repayment periods—in Prop 3’s case, 30 years—spread out the high cost of infrastructure improvements over time and distribute it across the broad pool of taxpayers who benefit from these projects. General obligation bonds such as those in Prop 3 must be approved by voters and are repaid from the state’s General Fund, which is fed primarily by tax revenues.

A key argument put forth by proponents of Prop 3 is that it doesn’t raise taxes. However, as David Vasché of the Legislative Analyst’s Office explained at a July hearing of California’s Senate Health Committee, though bond measures don’t directly raise taxes, the money to repay them comes from the taxpayer-supporter General Fund.

“You’re basically trading off different things in the budget,” explained Vasché. “For every dollar you add in, you have to take a dollar out for something else.”

Lewis Uhler, President of the National Tax Limitation Committee and co-author of the argument against Prop 3, says this bond initiative is a special-interest abuse of the initiative process.

Children’s hospitals, he asserts, are attempting to push through bonds that benefit their own interests rather than the public’s. “The initiative process, its purpose is to give the people ultimate control over their own government,” he said. “And when expenditure measures are placed on the ballot for bonded moneys, those moneys should be used for the benefit of all citizens—roads, that sort of thing—rather than for the special interest proponents of such a measure.”

Uhler also argues that public funds have no business going to private institutions. “They try to claim that their non-profit nature gives them a degree of public-ness, but they’re still privately owned and controlled,” he said.

But when 60% of Children’s Hospital Oakland’s patients rely on state funds to pay for their care—and those funds aren’t enough to cover the hospital’s actual costs—the line between public and private becomes blurred. “Essentially, Children’s Hospital Oakland serves as the county hospital—the public hospital—for pediatrics,” said Amy De Reyes.

“We’re barely able to survive because of the safety net that we provide and because we don’t turn away kids, regardless of their ability to pay,” said Bertram Lubin. “We’re not a profit-making industry; we rely on philanthropy.”

Amy De Reyes worries that Children’s Hospital Oakland may decide to leave for an area with better-paying clients. “Because of the quality of Children’s Hospital Oakland, our focus at the Alameda County Medical Center has been on adult care and specialty services,” said De Reyes. “They really have picked up all of those clients. If they were to go, we have no capacity to absorb them. Absolutely none. And that terrifies us.”

Lubin, however, says Children’s Hospital Oakland has no plans to leave the city. “That is not on the table right now,” he said. “We’re committed to serving this community.”

Ultimately, taxpayers will be deciding just how much money $2 billion really is. While paying for the bonds would cost Californians only about $1.75 each per year, there are three other bond measures on the November ballot competing for their money. Also, California is currently $53 billion in debt for outstanding general obligation bonds, with another $68 billion already authorized.

“When our state budget deficit was $15 billion in one year alone, and it looks like were facing six to eight billion to just close out the year, $2 billion over 30 years is not very much,” said De Reyes. “But it’s still a lot of money.”

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: Children’s Hospital Oakland

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Prop 3 asks voters to direct millions to Children’s Hospital

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