Spending Changes in Governor Schwarzenegger's May Revise of 2007-08 California Budget: A Detailed Analysis by Category

Medi-Cal Current Year: The May Revise proposes expenditures of $35.4 billion, a decrease of $85.8 million. The adjustments are as follows:
• $92 million increase to repay the federal government for non-institutional provider over payments.
• $63.5 million decrease due to the Medi-Cal dental fiscal intermediary’s repayment of premium costs that exceeded audited expenditures.
• $51.9 million decrease in anticipated capitation payments to County Organized Health Systems due to dually eligible individuals.
• $27.1 million decrease in estimated amount to be repaid to the federal government for federal share of non-emergency services provided to qualified aliens who have resided in the country for less than five years.
• $21.7 decrease in county and administration costs due to lower caseload growth and a delay in county billion for outreach costs.

Medi-Cal Budget Year: $37.7 billion, an increase of $330.3 million from the Governor’s Budget.
• $107.1 million increase to implement a new rate-setting methodology for Medi-Cal managed health care plans according to recommendations made by an independent consultant.
• $39.4 million for implementation of federal Deficit Reduction Act citizen verification requirements.
• $20 million to cover the loss of federal financial participation in the Medi-Cal Minor Consent Program.
• $34.2 million cut in amount budgeted to be repaid to federal government for the federal share of non-emergency services provided to qualified aliens who have resided in the country for less than five years.
• $26.1 million decrease in anticipated capitation payments to County Organized Health Systems due to dually eligible individuals.
• $10.6 million decrease in the Medically Indigent Adult Long-Term Care program resulting from a $10.6 million increase in federal funds through the Safety Net Care portion of the hospital financing waiver.

Family Health Current Year: California Children’s Services (CCS), Child Health and Disability Prevention (CHDP), and the Genetically Handicapped Persons Program (GHPP) are cut in the May Revise by $7.8 million due to caseload adjustments and the collection of $3.5 million in blood factor rebates in the GHPP.

Family Health Budget Year: $3 million cut from the $290 million January Budget for CCS, CHDP, and GHPP.

AIDS Drug Assistance Program (ADAP): $10.5 million cut from January’s Budget. The Administration lists this as fully funded due to savings from program efficiencies and drug rebate revenues. The May Revise also redirects funds from ADAP:
• $4 million for the Therapeutic Monitoring Program
• $1.8 million to backfill expected federal fund loss to six eligible metropolitan areas
• $1.5 million for the AIDS Regional Information and Evaluation System
• $500,000 for support and development of capacity building activities

Access for Infants and Mothers (AIM) Current Year: $124.4 million, a decrease of $3.1 million in federal funds due to changes in the way subscriber contributions are budgeted.

Access for Infants and Mothers (AIM) Budget Year: $5.5 million decrease in federal funding. $8.3 million backfill from the General Fund due to lower than expected Proposition 99 revenues.

Healthy Families Program (HFP) Current Year: $1 billion, an increase of $1.3 million from the January Budget. The increase is due to a higher caseload than expected.
• Health-e-App: $1.2 million shift to 2007-08 due to a delay in rolling out the program.
• The federal government has notified California that the Medi-Cal Bridge Program will no longer qualify for federal financial participation. The May Revise proposes to continue this program with state only funding at $1.5 million. The Revise would convert this program to a presumptive eligibility program as of July 1, 2007, qualifying it for 50 percent federal participation.

Healthy Families Program Budget Year: $1.1 billion, an increase of $23.8 million from the January Budget. The increase is due to monthly capitation payments for health, dental and vision services.

Human Services

Cost of Doing Business: AB 1808 (Chapter 75, Statutes of 2006) requires that the Department of Social Services (DSS) estimate the costs for county administration of human services programs and include the estimated costs in this May Revise. The county survey indicated an $835.8 million gap in funding county costs of doing business. The May Revise proposes to adjust county administration funding beginning in 2008-09 based on the equivalent salary and benefit increases provided to state employees, subject to appropriation. These adjustments would be paired with an increased focus on accountability and incentives, a county share in federal Child Welfare Services penalties, and the establishment of performance and accountability measures for IHSS. CalWORKs, Food Stamps, Child Welfare Services, Foster Care, Adoptions, In-Home Supportive Services, and Adult Protective Services would all be included in this new methodology.

Department of Developmental Services (DDS) Current Year: $4.4 million increase in funding ($3.2 million GF, $1.2 million reimbursements) due to increase in populations in Developmental Centers caused by the closing of Agnews Developmental Center. The increase in funding is offset by a transfer from the regional center budget.

Department of Developmental Services (DDS) Budget Year: $89,000 decrease in General Fund, $2.2 million increase in reimbursements.

Department of Mental Health (DMH) Long Term Care/State Hospitals Current Year: $25.9 million decrease in funding.
• $24.9 million to reflect the reduction in Judicially Committed/Penal Code population (487 patients).
• $366,000 increase in Sexually Violent Predator evaluation services.
• $527,000 decrease for headquarters positions and consultant services in the Sex Offender Commitment Program.

Department of Mental Health (DMH) Long Term Care/State Hospitals Budget Year: $12.4 million decrease in funding due to the following adjustments:
• $4.4 million increase to fund increase in Judicially Committed/Penal Code patients.
• $49.9 million decrease to reflect full-year impact of the reduction of 487 patients from the state hospital.
• $5.9 million increase

Elimination of the Integrated Services for Homeless Adults with Serious Mental Illness: The May Revise maintains the program’s elimination for a savings of $54.9 million.

CalWORKs: The CalWORKs budget retains the Administration’s focus on meeting the federal work requirements in the TANF program. The Governor proposes the following programmatic changes to become effective November 1, 2007:
• Impose full family sanctions when the adult takes longer than 90 days to comply with program requirements. Grant savings are estimated at $24.7 million and services, eligibility, and child care costs are expected to cost $26.7 million. Therefore a net cost of $2 million is assumed in the budget year.
• Continue safety net benefits for families beyond their 60 month time limit only if they meet work participation requirements for a savings of $159.1 million.
• Limit aid to families receiving child-only benefits to 60 months for a savings of $157 million.
• Switch to semi-annual reporting to increase state’s ability to track work participation at a cost of $18.7 million.
• The Governor plans to suspend the July 1, 2007 COLA for CalWORKs recipients to save $124 million.

Supplemental Security Income/Supplementary Payment Program (SSI/SSP) Current Year: $3.5 billion, a decrease of $11.4 million from the Governor’s Budget.

Supplemental Security Income/Supplementary Payment Program (SSI/SSP) Budget Year: $3.6 billion, a decrease of $262.3 million due to suspension of the COLA and caseload growth.
• Proposed suspension of the January 2008 COLA for a savings of $184.7 million for 2007-08 and $369.5 million in the future.

In-Home Supportive Services (IHSS) Current Year: $1.5 billion is allocated in the Budget, an increase of $30.4 million.

In-Home Supportive Services (IHSS) Budget Year: $1.6 billion is allocated in the Budget, an increase of $85.6 million. Wages and benefits are still frozen at $11.10 per hour for state participation as in the Governor’s January proposal.
• $8.2 million increase in 2006-07 and $35.7 million in 2007-08 to fund IHSS wages/health benefit increases in 19 counties since the Governor’s January budget.
• $33.2 million increase in 2006-07 and $48.5 million in 2007-08 to reflect lower than expected savings from the IHSS Quality Assurance Programs.
• $11 million increase in 2006-07 due to delay in implementation of IT systems.

Child Care: Stage 1 Child Care is budgeted at $526.7 million, an increase of $93.4 million due to an expected caseload increase based on policy changes and changes to the Regional Market Rate Estimate.

Child Welfare Services: $4 billion, a $16.5 million increase.

Administration of Justice Proposals

The Governor’s May Revision proposals regarding the administration of justice are rather limited, and not likely to have a significant impact on county programs. The proposed appropriations for anti-gang activities appear to be insufficient, given the scope and nature of gang-related crime throughout the state. In addition, one of the proposed anti-gang programs does not have a funding source, since the proposal calls for the creation of a new penalty assessment as a funding source. Creation of a new penalty assessment would require enabling legislation.

Please note, if an item is not mentioned here, it is not proposed to be reduced, eliminated or otherwise changed from the Governor’s January Budget (e.g. STC, JJCPA).

Probation Specific Items:

• California Adult Probation Accountability and Rehabilitation Act (CAPARA) – The May Revision proposes $25 million in “ongoing funding.” To provide all local probation departments with a dedicated funding source to increase the effectiveness of adult probation services in California. “The CAPARA is designed to support statewide local probation department efforts to reduce crime through improved rehabilitative services and increased supervision of adult probationers ages 18-25. “ The governor’s January budget proposed $50 million for this effort in 2007-08 and annual appropriations of $100 million thereafter.

• Update to the Local Housing of the Juvenile Justice Population – The May Revision reflects a net decrease of $7.2 million General Fund as a result of adjusting the per capita cost for housing wards within the DJJ to reflect 2007-08 costs and revising the number of juvenile offenders that will be housed locally based on updated estimates of intake. The Governor’s Budget assumed that the DJJ’s institution population would be reduced by 1,338 juvenile offenders by June 30, 2008. The DJJ’s institution population is now projected to decrease by 931 juvenile offenders by June 30, 2008. Since the May Revision does not contain a new proposal for per juvenile ward funding, it must be assumed that the administration continues to propose funding a $94,000 per ward, per year.

• Proposition 36 – No changes were proposed since the January Budget. The Governor’s January Budget indicated that the Administration would revise the budget proposal at the May Revision to transfer all funding from Proposition 36 to the Offender Treatment Program (OTP). The Administration is no longer proposing to transfer all Proposition 36 funding to the OTP. However, the Administration continues to support its proposal to transfer $60 million from Proposition 36 to the OTP.

• Court Security – The May Revision proposes $36.6 million for court security based on recommendations from the Court Security Working Group. The funds would provide for security personnel to stand guard in the courtrooms, monitor screening stations, and transport prisoners within court facilities.

• Gangs – There is nearly $12 million for new gang prevention efforts under the general direction of Office of Emergency Services (OES). Clearly there are more details to follow because this proposal is specific on the appropriation but non-specific on operational details.

o $4.9 million in federal funds to establish for new federal anti gang grants as part of a six-city gang suppression effort (May Revision does not identify the six cities).
o $7.4 million to fund local anti-gang efforts, including a State Anti-Gang Coordinator position in OES. Funds would be allocated to local agencies on a competitive basis and would be used for local gang suppression, intervention, and prevention programs.

The May Revision does not appropriate $7.4 million to fund the anti-gang programs; rather, it proposes an increase in the state surcharge levied on the base fine used to calculate the state penalty assessment from 20 percent to 40 percent. The administration also proposes that the responsibility for collective fines, fees, and penalties be transferred from the counties to the courts to enhance collection efficiencies.

In addition to the direct grants for local anti-gang efforts, the May Revision proposes a $3.3 million appropriation to the Department of Corrections and Rehabilitation (CDCR) to fund regional gang task forces. Specifically, the appropriate would fund the creation of three pilot task forces in Los Angeles, the Bay Area, and the Inland Empire to work with local law enforcement to help disrupt gang activities those areas. Pursuant to this effort special agents in the CDCR would collaborate with police officers, sheriff’s deputies, prosecutors, and various federal agencies.

Transportation Proposals

Public Transportation Account (PTA): The May Revise increases the raid on PTA funds from $1.1 billion to $1.3 billion. This increase is due to the spill over estimate growing from $617 million to $827 million. The Governor proposes to divert the bulk ($200 million) of this increase to the general fund to partially off set home-to-school transportation costs in the current fiscal year.

Department of Finance estimates that the spillover will reach $935 million in 2008-09. With this lofty projection the May Revise hints that $100 million would actually flow to PTA capital projects. The remaining $835 million would be used to reimburse the general fund for home-to-school transportation costs.

The Governor continues the January proposal to use the spillover and PTA capital funds for the following expenses:

• $627 million to reimburse the general fund for home-to-school transportation costs. The Governor no longer proposes to transfer this program from the K-12 budget to the PTA, but would transfer the PTA dollars to the general fund on a reimbursement basis. With the higher spill over projections, this funding shift would grow to $835 million annually in 2008-09.

• $340 million is diverted to pay debt service on transportation related general obligation bonds. This would be a one-time shift with future debt payments being made from the general fund. This is a round-about process to use bond funds to pay for debt service on bonds.

• $144 million to fund the transportation costs at the regional centers operated by the Department of Developmental Services. This would also be a one time expense for the PTA.

• The Governor proposes to permanently discontinue the flow of spill over dollars into the State Transit Assistance program.

State Transit Assistance (STA): With high fuel prices the base amount for STA is bumped up by $21 million, for a total allocation of $206 million in 2007-08. However, if the Governor did not divert the spillover the STA appropriations would be $598 million in 2007-08.

Supplanting Funds – The Governor’s budget continues to propose to use $600 million in Prop 1B bond funds to supplant PTA capital funds programmed in the STIP. The PTA funds are then diverted to non-transit purposes.

Proposition 1B – The May Revise requests the Legislature to appropriate over half of the Prop 1B funds. The Governor increases the appropriation request for Prop 1B funds from $7.6 billion to $11.5 billion. This appropriation would be available for allocation over the next three years. The appropriation request includes $3.4 billion in CMIA funds, $1.8 billion in STIP augmentations, $1 billion in Local Street and Road funds, $599 million in State and Local Partnership funds, and $1.3 billion in transit capital funds.

Capital Outlay Support: The May Revise increase staff support funding for 2007-08 by $206 million and 527 personnel years. The Governor’s staffing proposal would be split with 85% of the funds for state staff and 15% would be used for contract staff. The May Revise also includes $13.4 million and 112 positions for administrative costs directly related to Prop 1B programs. This includes staff costs for accounting, planning, programming, and auditing.

Lynn Suter of Lynn Suter & Associates is a legislative advocate based in Sacramento. Her firm primarily represents local government entities, including counties, cities, and special districts.