COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager’s Office

 

DATE:

October 29, 2010

BOARD MEETING DATE:

November 9, 2010

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

 

TO:

Honorable Board of Supervisors

FROM:

David S. Boesch, County Manager

SUBJECT:

County Manager’s Report #13

 

Analysis of the 2010-11 State Budget Act

 

BACKGROUND:

On October 8, 2010, Governor Schwarzenegger signed the 2010-11 State Budget Act. With no new taxes, the plan includes $86.6 billion in State General Fund expenditures. The plan closes $17.9 billion of the gap through $7.8 billion in expenditure reductions, anticipates $5.4 billion in federal assistance, $3.3 billion in revised revenue projections, and $2.7 billion in “other solutions.”

 

The Governor vetoed $963 million in General Fund spending that had been approved by the Legislature to increase the reserve to $1.3 billion.

 

Consistent with actions taken over the last two years, over 96 percent of the Governor’s line-item vetoes occurred in the health and social services area: $365.9 million reduction to the CalWORKS program, $256 million reduction to the CalWORKS Stage 3 Child Care program; $132.9 million reduction from the suspension of the AB 3632 program; $52 million in AIDS Local Assistance Programs; $22 million in County Administration of the Medi-Cal Program; and a $17.7 million reduction to the Substance Abuse Offender Treatment Program. The Governor also vetoed a budget trailer bill that would have enabled local governments to securitize the nearly $1 billion in pre-2004 mandate claims.

 

The budget package includes a constitutional amendment to strengthen the state’s “rainy day” fund and to establish a General Fund spending limit based on a twenty-year revenue trend. The amendment will be placed before the voters on the March 2012 primary ballot and, if approved, would take effect beginning in the 2013-14 fiscal year. The measure would increase the maximum size of the existing Budget Stabilization Account (BSA) from 5 percent to 10 percent of annual General Fund revenues and provide new requirements for depositing state funds to that account. It would also restrict withdrawals from the BSA to certain situations.

 

The Budget also achieves long-term pension reform for new state employees by setting benefit levels for future employees at pre-1999 levels and all future state employees will have their pension benefits calculated based on a three-year final compensation method.

 

Finally, the State Budget suspends the Proposition 98 minimum guarantee for 2010-11; extends for two additional years (2010 and 2011) the previously enacted temporary suspension of businesses’ abilities to use net operating losses to reduce tax liabilities; and assumes $1.2 billion in one-time revenues from the sale of 11 state properties.

 

DISCUSSION:

 

HEALTH SYSTEM—($7.6 MILLION)

BEHAVIORAL HEALTH AND RECOVERY SERVICES (BHRS)

AB 3632 Program Mandate ($7.6 million)

The Health System’s AB 3632 program currently serves 390 youth, with 110 more students expected to receive services during the course of the school year, for a total of 500 students. The program’s total budget is $9.6 million per year ($7.6 million in state funding and $2 million in federal funds). BHRS is working with the County Office of Education and school districts to develop a transition plan, and will continue to provide services to children currently enrolled in the program until a new service arrangement can be worked out. BHRS will regularly update the Board’s Housing, Health and Human Committee on their transition plans.

 

Substance Abuse Offender Treatment Program (Proposition 36) (No impact)

The Governor reduced State General Fund support for the Substance Abuse Offender Treatment Program by $18 million statewide. With this action, all funding for Prop. 36 has been eliminated from the State Budget. Due to the loss of all Prop. 36 funding, the state will not meet its federal Maintenance of Effort requirements for federal substance abuse funding, and approximately $100 million in federal funds are in jeopardy. No further impact to County services is expected as the funding was not included in the BHRS’s budget.

 

AGING AND ADULT SERVICES (AAS)

IHSS Reduction in Services (Direct client impact)

The State Budget assumes $300 million in General Fund savings that would be achieved through the establishment of an IHSS provider fee effective July 1, 2010; a 3.6 percent across-the-board reduction in authorized hours for IHSS recipients and a 2.3 percent reduction in caseload growth. AAS estimates that the reduction equates to 4 less hours of care per month per client, or 1 less hour of care per week. IHSS recipients currently receive an average of 114 hours of care monthly.

 

AAS Community-Based Services Programs (Direct client impact)

The Governor vetoed the $6.4 million the Legislature provided to restore funding for aging and nutrition programs. AAS continues to provide a scaled back Linkages program funded through Disability Parking fines, but discontinued its contract with Second Harvest for the Brown Bag program. Community providers of the Alzheimer’s Day Care Resource Centers are struggling to continue to provide services. AAS included this reduction in their budget.

 

SAN MATEO COUNTY MEDICAL CENTER, BEHAVIORAL HEALTH AND RECOVERY SERVICES

Medi-Cal (No impact)

The State Budget includes a reduction in coverage for some over the counter drugs, a reduction in co-pays for ancillary services and a rate freeze for inpatient services. While these reductions will have an impact on the patients served, they will not currently have an impact on the Health System budget.

 

FAMILY HEALTH SERVICES (FHS)

Immunizations (No impact)

The State Budget includes an $18 million reduction in statewide funding for immunizations. There will be no impact on County services as all immunization funding is federal funding.

 

Healthy Families Program (No Impact)

The State Budget fully funds the Healthy Families program through a combination of a fee paid by Medi-Cal managed care plans, a hospital fee and First 5 funding. Despite increases in premiums and co-payments instituted earlier this year, enrollment in the County has remained flat.

 

CORRECTIONAL HEALTH/COMMUNITY HEALTH

AIDS Drug Assistance Program (ADAP) (No impact)

The Governor deleted a $52.1 million restoration for various AIDS programs, including $7.6 million for the ADAP Program for services at the County’s jails. There will be no impact to County services as the reduction was implemented in FY 2009-10.

 

HUMAN SERVICES AGENCY—($16.5 MILLION)

CalWORKs Stage 3 Childcare (Direct client impact)

The Governor’s veto of $256 million in funding for this program is effective November 1, 2010. Although not administered by the County, the local program is administered by two non-profit agencies (the Child Care Coordinating Council (4C’s) and PACE) with funding from the California Department of Education. PACE and 4C’s currently provide care to 508 children in the County, or 184 families. It is feared that many families may now have to choose between employment and staying home to care for their children. If the latter were to occur, there could be an impact to the Stage 1 Child Care program, which is administered by HSA.

 

County Administration of Medi-Cal Program ($1.5 million)

The Governor reduced $22 million in State General Fund support for county Medi-Cal caseload growth. This is in addition to a $26 million cut approved by the Legislature for Medi-Cal caseload growth and $10.8 million from suspension of the Medi-Cal Administration COLA, for a total reduction of $58.8 million statewide. HSA estimates a loss of $1.5 million in their allocation. This reduction will impact the department’s ability to provide benefits in a timely manner to clients. As of September 2010, there were 30,151 Medi-Cal cases in the County. This represents a 6 percent increase from September 2009. The County has not received a cost of doing business adjustment for the last three fiscal years.

 

CalWORKs Single Allocation (Direct client impact)

The State Budget does not include further cuts to the program. HSA estimates that their Single Allocation will remain flat at $16.4 million. The County has experienced a 12 percent increase in CalWORKs cases in the past year. Child care dollars within the allocation are being shifted to employment services. This will limit the amount of money available for the Child Care Stage 1 program. This could be problematic if Stage 3 clients re-emerge as CalWORKs clients that require Stage 1 funding.

 

Child Welfare Services (No impact)

The Governor reduced $80 million for Child Welfare Services administration previously restored by the Legislature. The estimated loss to the County is $1.6 million; however, the Department anticipated this loss and included it in their budget for 2010-11. It is expected that the reductions will have a minimal impact to the County’s current clients.

 

Food Stamps ($500,000 increased allocation)

HSA anticipates an increase of at least $500,000 in their Food Stamp Administration Allocation. This increase is based on caseload growth, which has risen over 38 percent in the past year.

 

Cost of Doing Business ($15 million)

The State continues to fail to reimburse counties for the true cost of providing services. This is the eleventh straight fiscal year that counties have not been reimbursed for their cost of doing business for CalWORKs programs and Child Welfare Services. It is also the third consecutive year that counties have not been paid for the actual costs of administering the Medi-Cal program. HSA estimates that the County is owed $15 million.

 

PROBATION—(UNKNOWN)

Juvenile Parole Realignment (Unknown)

Supervision of juvenile parolees was shifted from the State to county probation departments. Counties will receive $15,000 per parolee, per year, for up to 24 months and $115,000 per ward for juveniles detained in county detention facilities. Probation estimates that this proposal will increase the number of juvenile parolees under their supervision by approximately 4 per year. Despite the dedicated funding, there is concern that it will not be sufficient to cover the costs of supervising this population that requires more intensive services and interventions.

 

SHERIFF’S OFFICE—(UNKNOWN)

Local Safety and Protection Account ($1.7 million)

There was no agreement to extend the Vehicle License Fee increase dedicated to public safety programs that will expire June 30, 2011. Locally, these funds are used for the Cal-MMET and Citizens Option for Public Safety programs, as well as Booking Fees. If the Legislature fails to extend the fee increase, the Department estimates a loss of approximately $1.7 million in funding.

 

PUBLIC WORKS—(UNKNOWN)

Proposition 1B and New HUTA (Unknown)

The Legislature failed to pass the budget transportation trailer bill which would have provided cities and counties with a one-year extension on the use-it-or-lose-it requirement for Proposition 1B Local Streets and Roads funds. The legislation also clarified that Proposition 42 provisions do not apply to the new Highway Users Tax Account funds per the transportation tax swap that was adopted in March 2010. Additionally, it is feared that if Proposition 26 passes on November 2 that the state will raid transportation funds before the proposition goes into effect. Public Works estimates that such a raid would devastate the County’s Road Fund ($16 million) and lead to service level reductions in the unincorporated areas.

 

GENERAL GOVERNMENT—($754,000)

State Mandates ($754,000)

The Budget suspends and defers $232 million in mandate payments. This includes $137 million due to the suspension of all state mandates except those related to elections, law enforcement, or property taxes, and $95 million in mandate deferral payments for FY 2010-11 that are due to counties for costs incurred prior to the FY 2004-05. Estimates are that the suspension will result in a loss of $20.5 million to the County. This includes a $754,000 loss in the current fiscal year.

 

Election Reimbursement ($1.6 million reimbursement)

The State Budget provides a one-time increase of $68.2 million in local assistance to reimburse counties for the costs incurred in the May 19, 2009 Statewide Special Election. The estimated County share is $1.6 million.

 

Approval of this report contributes to the Shared Vision of 2025 of a Collaborative Community by providing County residents with information on the impact of the 2010-11 State Budget Act on County services and programs.

 

Performance Measure(s):

Measure

FY 2008-09
Actual

FY 2009-10
Projected

Federal/State Measures analyzed and acted on

25

35

 

FISCAL IMPACT:

Analysis of the 2010-11 State Budget indicates a $7.75 million net reduction in state funding for county programs and services in FY 2010-11.