Bad News Likely Wednesday When Governor Schwarzenegger Releases Budget Changes in “May Revise”

The Governor is expected to propose some new measures to raise revenues including possibly taxing several services but seems almost certain not to propose general tax increases that Democrats say is needed to help bridge the budget shortfall.

Even Democratic leaders in both houses, who fought many of the major cuts to proposed to health and human service programs, concede that with a budget gap as large as it is, cuts will be necessary. However Democratic leaders say that they will refuse to balance the budget solely with spending cuts, and with a budget gap at over $16 billion and possibly as high as $20 billion, few policymakers from either party believe spending cuts alone can fill that gap.

Republican leaders in both houses say that a mixture of spending cuts, budget reforms and use of special fund money can help bridge the gap - but strongly oppose any new taxes. Republican votes are necessary to pass any budget and most observers predict a budget delay that could last for months.

Budget Delay This Year Could Have More Immediate Consequences

Democrats, Republicans in the Legislature and the Governor at odds on how to solve the budget crisis, a long budget fight lasting into the summer seems certain. However another crisis looms that could make any budget delay even more devastating than in previous years: the State is simply running out of cash and without a budget in place, will likely be unable to pay its bills.

The State's cash situation is worse than in previous years - while the Legislature took steps to improve the cash flow problem, with no budget in place by July 1, unlike in previous years, the State will be out of money, unable to pay its bills much earlier than in previous budget delays.

The impact will likely be more immediate to many community-based organizations who provide critical services and supports to thousands of people with disabilities, mental health needs and seniors.

Underscoring the grim news, State Treasurer Bill Lockyer warned Senate President Pro Tem Perata last week of the State's cash crisis, and urged the Legislature to pass a budget on time because the State will run out of money without a budget in place.

Some Major Cuts Approved In February Set to Take Effect July 1, 2008

Many cuts have already been approved at the Governor's request, as part of the Legislature's special emergency session in February. These reductions, which included budget changes and reductions that total over $7 billion, will take effect either June 1 or in the case of Medi-Cal, July 1, 2008:

• Effective July 1, 2008, a permanent 10% Medi-Cal provider rate reduction, including doctors, clinics, pharmacists, Medi-Cal equipment providers, programs including adult day health and more. Two lawsuits were filed to block this rate reduction from taking effect - court hearings on those suits are expected within the next 30 days.

• Elimination, effective June 1, 2008 for at least four months, the cost of living money due to the lowest income seniors, the blind and persons with disabilities for the state funded portion (SSP) of the SSI/SSP grants, and also cost of living money due to persons on CalWORKS (which includes thousands of parents and children with disabilities or other special needs)

• Making permanent over $350 million in spending reductions to regional center funded community-based services to children and adults with developmental disabilities (including thousands of children and adults with autism spectrum disorder), effective July 1, 2008 including expansion of family cost participation, and freezes on several other programs

Major Cuts Still Waiting Action by the State Legislature

Many more of the Governor's proposed cuts in made in January remain to be acted on. This does not include yet any of the new proposals and cuts that are expected from the Governor next week when he releases his budget changes and revisions.

The Legislature has held budget subcommittee now on most of the Governor's proposals - and in some cases, either the Senate or the Assembly has rejected a few of the proposals - but no action is final.

Action however on nearly all of the major proposed spending cuts are being held off at least until after the Governor releases his budget changes on May 14th - with the final round of budget subcommittees during the week of May 19th, which will be the last opportunity this year for people to testify. Here are just some of the major cuts proposed still waiting final action:

• 10% permanent rate reduction to Adult Protective Services effective July 1, 2008

• 10% permanent rate reduction of the Deaf Access Program under the Department of Rehabilitation

• Permanent elimination effective July 1, 2008, of 11 Medi-Cal benefits that the state is not required to provide (referred to as "optional benefits") for children and adults (except where noted) with disabilities, mental health needs, seniors and others on Medi-Cal and not in long term care facilities:
- Chiropractor Services
- Incontinence Creams and Washes
- Acupuncture Services
- Adult Dental Services
- Speech Services
- Audiology Services
- Optometry Services
- Optician
- Optical Laboratory Services
- Podiatry Services
- Psychology Services.

• 10% permanent rate reduction to foster care and adoption assistance programs that serve thousands of children with disabilities, special and mental health needs. Thousands of these children have developmental disabilities effective July 1, 2008

• 10% permanent rate reduction to supported employment programs that provide critical assistance to persons with developmental disabilities effective July 1, 2008

• 18% permanent reduction in the non-medical domestic and related hours of nearly every one of the over 400,000 children and adults receiving In-Home Supportive Services (IHSS) and impacting over 350,000 workers.

• 10% permanent reduction to the counties for the administration and oversight of In-Home Supportive Services

• 10% permanent reduction to Department of Rehabilitation that will mean closure of at least 10 to 15 field offices

• Over $480 million cut in funding to special education (included in the over $4.8 billion cut to education) that will have major impact to over 650,000 students with disabilities and other special needs in special education.

• 10% permanent reductions in funding to a wide range of programs under the Department of Aging serving the lowest income most vulnerable seniors including the Multipurpose Senior Services Program (MSSP), Linkages Program, Alzheimer's Day Care Resource Centers, Respite, Senior Nutrition Programs including home delivered meals and brown bag program, senior companion program, and senior legal hotline.

• 10% permanent rate reduction in rates of the Community Rehabilitation, Individual Service and Contract providers who provide critical vocational rehabilitation services to people with disabilities (under the Department of Rehabilitation)

• 10% permanent reduction in funding of the Department of Social Services State Hearings division that will mean elimination of at least 13 hearing officers - that will significantly impact fair hearings including IHSS, CalWORKS

• 10% cut to Office of Client Rights Advocacy for 230,000 children and adults with developmental disabilities

• Elimination of the cost of living money promised in State law on June 1, 2009 to the lowest income seniors, the blind and lowest income persons with disabilities, including those with developmental disabilities (the federal cost of living money that was January 1, 2008 was given however, and the federal cost of living money due January 1, 2009 is also supposed to still be given)

• Major cuts to mental health services including 10% reduction to community-based services by imposing a prior authorization requirement on all requests for the Early and Periodic Screening Diagnosis and Treatment (EPSDT) program day treatment services that exceed 6 months; eliminate annual cost of living adjustment to provider rates and reduce non-inpatient provider rates by 5%.

• Permanent 10% reduction to the Early Mental Health Initiative Program that provides mental health intervention and prevention services for children with mental health and other special needs in schools (Kindergarten through grade 3). Also reduce mental health managed care provider rates due to elimination of annual cost of living and other rate reductions.

• Major reduction to Community Care Licensing that would reduce the current 30% random inspection protocol to 14% of facilities and reduce about 100 related staff positions (state and local) over the next two years

• Delays in payments to Medi-Cal providers on top of rate reductions

NEXT STEPS

GOVERNOR

• Governor will release his budget changes sometime likely after 11 AM.

LEGISLATURE

• Will hold final round of budget subcommittee hearings to consider final action on the Governor's previous proposals made in January - and hear testimony and take action on his new proposals.

• Hearings will start the week of May 19th and possibly continue the week of May 26th. (CDCAN will issue report when schedule becomes available. Some hearing dates are set - but subjects have been assigned yet to those dates.

• This is the last opportunity for this budget year for people to testify.

The California Disability Community Action Network, is a non-partisan link to thousands of Californians with developmental and other disabilities, people with traumatic brain injuries, the Blind, the Deaf, their families, community organizations and providers, direct care, homecare and other workers, and other advocates to provide information on state (and eventually federal), local public policy issues.