COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager's Office

DATE:

December 10, 2002

BOARD MEETING DATE:

December 17, 2002

TO:

Honorable Board of Supervisors

FROM:

John Maltbie, County Manager

CC:

San Mateo County Legislative Delegation

San Mateo County City Managers

San Mateo County Press Corps

SUBJECT:

County Manager's Report-Special Session on State Budget Mid-year Spending Reductions

Recommendation

None. Informational Only.

Summary

If the Governor's mid-year reductions were adopted as proposed and carried through the 2003-2004 budget year, the most significant impacts would include:

●

Elimination of CalWORKs Stage 3 child care could result in the annualized loss of approximately $4.98 million from Stage 3 providers and the loss of child care for 779 children from 425 San Mateo County families.

$4,976,000

●

Suspension of Transportation Congestion Relief Program related funds could result in $1.13 million loss of expected funds for paving and other work already completed by the Public Works Department.

1,130,000

●

Lowering the 1931 (b) Medi-Cal income eligibility to 61% of the federal poverty level could result in the loss of Medi-Cal coverage for approximately 1,500 San Mateo County residents.

Undetermined

●

Reducing all Medi-Cal provider rates by 10% could result in increased difficulty in recruiting service providers for Medi-Cal patients. While a dollar approximation is difficult to determine a rate reduction for all services, staff estimates that the County could lose $780,000 (annualized) in mental health services and $250,000 (annualized) in long term care.

>$1,030,000

TOTAL

>$7,136,000

Background

In mid November 2002, the Legislative Analysts Office (LAO) estimated a current year (2002-2003) General Fund budget deficit of $6.1 billion and a 2003-2004 budget cumulative year-end deficit of $21.1 billion. The Governor has been reported in the news as indicating a potentially larger budget deficit. In response, the Governor has called for a special session of the Legislature to consider and enact mid-year spending reductions for the 2002-2003 fiscal year. The Legislature convened on December 9 and will begin committee hearings in the coming weeks. The Senate has not yet selected Senate Budget Subcommittee members and has not scheduled special session hearings for the State Budget. The Assembly Budget Committee meetings are below.

Assembly Budget Committee Meetings:

Sub 1-Health and Human Services
December 17, 1:00 pm
Ronald Reagan Blvd., 300 South Spring St.
Los Angeles

Sub 2-Education Finance
December 18, 1:00 pm
Santa Clara County Board of Supervisors Chambers, 1^st Floor, County Government Center, 70 W. Hedding
San Jose

Sub 3-Resources
December 16, 3:00-5:00 pm
State Capitol, Room 447
Sacramento

Sub 4-State Administration
December 16, 1:00-3:00 pm
State Capitol, room 447
Sacramento

Sub 5-Information, Technology and Transportation
December 18, 3:30 pm
Alameda County Board of Supervisors Chambers, Room 512, 5^th Floor, Administrative Building, 1221 Oak Street
Oakland

Many reports indicate the Legislature will take no action in the Special Session until after the Governor releases his proposed budget for the 2003-2004 fiscal year, which will likely occur on January 10.

The Governor's special session proposal includes $10.2 billion in spending reductions and other adjustments. According to the California Budget Project, the proposal includes $2.4 billion in current year reductions and $6.62 billion in 2003-2004 spending reductions. The remainder of the $10.2 billion comes from fund shifts, transfers and loans. For the proposal, visit www.dof.ca.gov.

Find below a brief, preliminary analysis from reporting departments of the most significant impacts of the Governor's Mid-Year Spending Reduction Proposals. This initial report is not comprehensive or detailed. Rather, it is an initial, rough estimate of some of the potential impacts. Several areas have not been fully detailed. This analysis will be refined as more information becomes available.

Education funding has not been considered in this analysis.

Discussion

CalWORKs Stage 3 Child Care
The Governor proposes elimination of CalWORKs Stage 3 child care, which would result in a $4.98 million annualized lost of revenue for such services in San Mateo County. Stage 3 child care was created with the intention of minimizing the child care barrier for those who have moved from welfare to work but do not have the self-sufficiency to pay for their own child care. The loss of $4.98 million in funds could result in the elimination of child care for 779 children in 425 families that currently receive Stage 3 child care through CCCC and PACE, which contract with the State Department of Education to provide such services. In some respects, elimination of Stage 3 child care is a disincentive to move from welfare to work. Working parents need child care since they generally are not able to care for their children during working hours. Most recently employed welfare-to-work participants do not earn enough to pay for child care and as a result would have to choose between working and caring for their child, which can incentivize families to revert to a level that can accommodate both their child care needs and ability to work.

Medi-Cal Eligibility
The Governor's proposal would lower eligibility for the 1931 (b) Medi-Cal program to families with incomes at approximately 61% of the federal poverty level. The Governor also proposes that families receiving Medi-Cal submit quarterly reports to determine their eligibility and/or share of cost. The Health Services Agency approximates 1,500 persons in San Mateo County would lose Medi-Cal coverage if the 1931 (b) eligibility is reduced. The increased eligibility restriction in addition to the other proposals would likely result in an increase in the number of uninsured in San Mateo County and an additional (but undetermined) number of families foregoing medical care, especially preventative care, due to ineligibility or failure to comply with the quarterly reporting. County staff cannot predict the impact this could have on emergency medical services or other "last resort" medical care. In addition, the quarterly reporting requirement could result in significant workload increases for County staff. The proposal does not indicate an increase in funding for the additional administration of quarterly reports. The Human Services Agency asserts that counties, through CWDA, could seek workload relief from other required eligibility determination activities.

Medi-Cal Provider Rate and Service Reductions
The Governor proposes reducing all Medi-Cal provider rates by 10% and eliminating some adult services. While staff cannot make a dollar approximation of what a reduction in provider rates would mean, the rate reduction would increase the difficulty in recruiting California Children's Service providers. While determining the potential dollar impact of the provider rate reductions, especially in combination with the lowering of the Medi-Cal eligibility, is difficult, Health Services predicts it will be significant due to Health Services' and the Medical Center's focus on Medi-Cal patients. In addition to an approximate $250,000 loss, the long term care rate reduction would also make more difficult community placements that help the Medical Center reduce its administrative days. The reduction would also impact long-term care rates upon which the San Mateo Medical Center's long-term care unit relies for funding. Generally, the reduction in provider rates discourages providers from serving Medi-Cal patients and destabilizes the existing medical system, which has come to rely on Medi-Cal payments as a source of funding. The most significant service proposed for elimination is dental.

Mental Health Managed Care
The Governor proposes a 10% provider rate reduction for mental health services for Medi-Cal eligible clients. The proposed 10% cut would result in a $780,000 annualized loss. The state's portion of mental health managed care funds were used to match federal funds. The loss of such state funds could result in the loss of federal funds if other matching funds cannot be found.

Traffic Congestion Relief Program and Related Funds
The Governor proposes the reallocation or suspension of over $1 billion in transportation related funds (AB 2928 funds). Public Works estimated receipt of approximately $15 million in AB 2928 funds for pavement and pavement improvement projects for this year. In anticipation of the funds, of which the County has received approximately $370,000, Public Works has already completed the related work. As a result, the County may not realize $1.13 million in funds for completed work. Should the AB 2928 funds be suspended, Public Works anticipates payment for the work through other funds.

Transfer of Unencumbered Low and Moderate income Housing Funds
The Governor proposes the transfer of unencumbered low and moderate income housing funds from Community Redevelopment Agencies. While county government has no fiscal interest in these funds, many San Mateo County cities and redevelopment agencies have a significant interest. San Mateo County allocated approximately $12.9 million for this purpose in the 2001-2002 fiscal year. It is unclear how much (if any) of these funds remain unencumbered and at risk for transfer to the state General Fund.

Supplemental Security Income/State Supplementary Payment (SSI/SSP)
The Governor proposes the suspension of the June 2003 and January 2004 COLA increases for SSI/SSP. With a statewide savings of $22.3 million. It would also relieve the state of making $1.8 million in payments for June 2003 and $328 million in January 2004 for the 2003-2004 budget. The COLAs, each 2%, would translate to approximately $30 per month per person for an approximate monthly rate of $800.

Aging and Adult Services and Related Reductions
The Governor proposes reductions in congregate setting and Meals on Wheels food service programs as well as the elimination of the Foster Grandparent program and Senior Companion program. While staff cannot determine a dollar impact to the County's Meals on Wheels programs, the reductions will likely lengthen the current waiting list for such services and threaten the ability of providers to continue their programs. Through the elimination of the Foster Grandparent and Senior Companion programs the County will lose approximately $93,000, which is used to support a unique collaboration of low-income/fixed-income volunteers providing needed monitoring of seniors and children. The program represents approximately 24 volunteers and 1100 annual hours of service.

Vision Alignment

Consideration of the Governor's proposed mid-year spending reductions would align with the County's commitment to responsive, effective and collaborative government and impact Goal # 20 and 22.

Fiscal Impact

Direct fiscal impact to County-government provided services and program is undetermined but likely in excess of $7 million.