Inter-Departmental Correspondence

County Manager’s Office



January 28, 2011


February 8, 2011







Honorable Board of Supervisors


David S. Boesch, County Manager


County Manager’s Report #3


Analysis of the FY 2011-12 Proposed State Budget



Accept this report.



On January 10, 2011, Governor Brown released his proposed FY 2011-12 State budget. The proposal includes $84.6 billion in State General Fund expenditures and projects a $25.4 billion deficit over the next 18-months; $12.5 billion of expenditure reductions and $12 billion in tax increase extensions, borrows $2 billion from various special funds, and would establish a $1 billion reserve.


Of the proposed solutions, 47 percent are expenditure reductions to health and human service programs provided by counties. These include a $1.7 billion reduction to Medi-Cal and a $1.5 billion reduction to the CalWORKs program. The budget proposal would also make $1 billion in reductions to higher education: $500 million to the UC system and $500 million to CSU’s, in order to flat-fund K-12 at their FY 2010-11 levels.


The Governor proposes to phase out redevelopment agencies (RDAs) return billions of property tax revenues to school, cities, and counties to help sustain core functions including law enforcement, fire protection, and education.


Important for counties, the Governor’s Budget contains a proposal that would shift an estimated $10 billion in major program responsibilities from the State to counties in two phases. The Governor argues that the Realignment Proposal would result in both state and local governments becoming more efficient and effective.


    Phase One— would transfer $5.9 billion in program responsibilities from the State to counties primarily in the area of public safety. The Governor proposes to fund the realigned programs by extending the 1 percent sales tax rate increase ($4.5 billon) and 1.15 percent of the Vehicle License Fee rate increase ($1.4 billion), with 0.5 percent dedicated to local governments, for five years. Governor Brown is proposing a June 2011 Special Election to ask voters to approve this measure. No funding is afforded in year six and beyond.


    Phase Two— assumes that the State would become responsible for California Children Services and In-Home Supportive Services, while the counties would assume responsibility for CalWORKs, Food Stamp administration, and child support.


    With the increase of low-income individuals currently served in the county indigent health system becoming eligible for Medi-Cal, there is a belief there would be a shift of costs from counties to the State, which would necessitate a re-examination of the 1991 Realignment agreement and which level of government is best suited to provide health-related programs to this population.



Phase 1 impacts include proposed changes in funding to the following programs:


Public Safety

Court Security— $530 million in funding would shift from the State to the counties for court security activities. Under this proposal, funding and responsibility for court security would transfer to the counties, allowing courts and counties to negotiate service levels and agreements locally. Responsibility for the provision of court security would remain with county sheriff’s departments. Our court security budget for FY 2011-12 is $9.4 million.


Shift of Low-Level Offenders— $1.8 billion would shift from the State to counties transferring responsibility for approximately 37,000 non-violent, non-serious, non-sex offenders to counties to serve their terms locally, either in jail and/or on probation. The Sheriff’s Office estimates that approximately 396 current inmates would be sent back to the County to serve an 11.5-month sentence at a cost of $20.6 million. The District Attorney’s Office estimates that the early release of state prisoners to the County would mean an estimated increase of between 400 and 500 new prosecution cases each year. Such an increase would significantly increase the caseloads for District Attorney’s Office and require additional deputy district attorneys since County prosecutors already have one of the highest caseloads, per prosecutors, in the State. Finally, the Health System estimates $1.05 million annual added Correctional Health costs.


Vehicle License Fee (VLF) Public Safety Programs—The Governor proposes to extend funding for a variety of public safety programs through a continuation of the temporary .05 percent increase in the VLF (dedicated to local governments) set to expire at the end of 2010-11. The extension requires a vote of the Legislature to place an initiative on the June 2011 Special Election Ballot for voter approval. This proposal would provide $506.4 million to support these Local Safety and Protection Account programs (LSPA):


    $181.3 million to support juvenile probation efforts at the county level

    $107.1 million for the Citizens Option for Public Safety Programs

    $107.1 million for Juvenile Justice Crime Prevention Program

    $ 57.4 million for a variety of public safety program grants

    $ 35 million for Jail Booking Fee Subventions


Due to the uncertainty of the current LSPA funding, the Sheriff’s Office budget for State booking fees and COPS are set at FY 2008-09 levels. Thus, a possible return to the lower levels will not impact the department’s budget. The Probation Department receives approximately $4 million in combined funding for JPCF and JJCPA funding from the LSPA annually to provide a variety of services to middle- and high school students. The possible loss of this funding would necessitate the elimination of all but mandated institutional programs.


Juvenile Justice Programs—eliminate the Division of Juvenile Justice by June 30, 2014 and shift $257.6 million from the State to counties to house, treat and supervise all juvenile offenders. The Probation Department estimates that approximately 20 youth would be returned to the County. The Health System estimates that Correctional Health costs would increase with an increased number of juveniles; however, it is expected that these costs would be minimal given the limited number of youth.


Adult Parole—$741.1 million would be shifted from the State to counties for supervision of all parolees upon their release from State prison. While an implementation date has not been set, it is expected that implementation would be phased in over at least three years. The Probation Department cannot estimate at this time how many parolees would be released to the County; however, the department does not currently have staffing levels sufficient to handle the added caseloads.


Health and Human Service Programs

Mental Health Services—give counties full responsibility for the administration and funding of: 1) mental health managed care; 2) Early and Periodic Screening, Diagnosis and Treatment (EPSDT); and 3) AB 3632, special education mental health services. Program funding would come from unspecified Mental Health Services Act (Prop. 63) funding in FY 2011-12, on a one time basis. It is expected that a substantial portion, if not all of these MHSA funds, would be redirected from County allocations. Such a reallocation would represent a loss of $9.3 million in current MHSA funding for existing mental health programs. In subsequent years, the Administration proposes new realignment funding for counties.


Substance Use Disorder Treatment—shift substance use disorder treatment funds and services to counties. This shift could include Drug Medi-Cal, Drug Court treatment, and other discretionary services. The Governor’s budget does not provide any details on this plan.


Adult Protective Services (APS)—transfer $55 million in funding and all responsibilities for the Adult Protective Services Program from the State to counties. Such as shift, would allow for greater flexibility, integration of APS intervention into long-term care integration, as well as heightened ability to target local needs.


Foster Care and Child Welfare Services—transfer to counties the State share of financing and responsibilities for Foster Care and Child Welfare Services, including Kin-Gap and adoptions. It is currently unclear how much flexibility counties will have in utilizing any new realignment funding and whether the proposed revenue will provide sufficient funding during economic downturns. According to the Human Services Agency, the County’s estimated annual State share for these programs is $14 million, which serves a caseload of 500 children. The Human Services Agency currently funds three health nurses who serve foster children and some small overhead at a cost of $567,000 per year. According to HAS, the Governor’s Budget does not contain sufficient information to determine the net impact to Family Health.


CAL FIRE—shift fire protection services and medical emergency response responsibilities from CAL FIRE to local jurisdictions in State Responsibility Areas (SRAs). It is expected that this proposal would take 18-months to complete and may not impact the County as CALFIRE does not provide service to urban areas that are not under contract.


Phase Two

Shift responsibility for Child Support Services, CalWORKs, CalFresh (food stamps) Administration, and Child Care to counties and shift back to the State responsibility for California Children Services and In Home Supportive Services (IHSS). The budget proposal does not provide any details on the implementation date for the proposed shifts or other restructuring details to determine net County impacts.


The Governor’s FY 2011-12 proposed budget would have the following impacts to County residents, programs and services:


Health System—($8.7M)


Medi-Cal Reductions ($3.94M)— $1.7 billion reduction including: 10 percent reduction in provider payments ($709.4 million), requiring Medi-Cal beneficiaries to pay a share of cost services ($557.1 million), and establishing annual dollar caps on services ($217.4 million). The Health System anticipates that the combined imposition of limits on services, increased costs to implement new co-pays and/or the loss of uncollected payments and a 10 percent reduction on provider reimbursement rates would result in a loss of approximately $3.94 million in revenues to the SMMC. The changes would also directly impact almost all 57,000 Medi-Cal beneficiaries in the County. The changes would also mean lower Medi-Cal enrollment and a drop in the Federal Financial Participation (FFP) rate. Both are very important revenue drivers for the following programs: Targeted Case Management (TCM), Medi-Cal Administrative Activities (MAA), Maternal Child and Adolescent Health (MCAH), Black Infant Health (BIH), and others. These proposed reductions could require federal approval.


In Home Supportive Services (IHSS)—reduction of $486.1 million, including 8.4 percent reduction in service hours for all recipients, elimination of domestic and related services, elimination of services for recipients without physician certifications, and elimination of State funding for IHSS Advisory Committees. The Health System estimates that these combined proposals would impact about 2,474 IHSS beneficiaries and result in a loss of approximately 224,424 hours of care. It would also result in net County savings of $535,378 in FY 2011-12. Should the State eliminate funding for IHSS Advisory Committees, the Health System would seek to integrate the current IHSS Advisory Committee into other stakeholder or advisory groups.


Multi-Purpose Senior Services Program (MSPP) ($371,000)— eliminate local MSPP for a savings of $19.9 million. The Health System estimates that approximately 250 low income, older adults (65 and older) will be at risk of needing skilled nursing facility (SNF) placement, with an immediate SNF placement needed for 100 clients. The program elimination would also result in a loss of $371,000 in revenue to the Health System.


Adult Day Health Care (ADHC) ($1M)— eliminate ADHC for a savings of $1.5 million in FY 2010-11 and $176.6 million in FY 2011-12. The Health System estimates that approximately 139 medically fragile older adults, who require supervision during the day, would be impacted with a net County loss of $1 million for two ADHCs in the County.


Supplemental Security Income/State Supplemental Payment (SSI/SSP)— reduce the SSI/SSP grant for individuals by $15.00 per month, to the federally required minimum payment standard, effective June 1, 2011, for a state savings of $14.7 million in FY 2010-11 and $177.3 million in FY 2011-12. The Health System estimates that this reduction would cause significant hardship to clients, particularly to those that reside in placements that only accept the current SSP rate. The cut would also cause financial hardship for small board and care homes.


Healthy Families—reductions to the Healthy Families program including: 1) elimination of the vision benefit; 2) an increase in monthly premiums for families with incomes over 150 percent of the Federal Poverty Level by $14 to $18 per month per child, to a maximum of $90 to $126 per family per month; and 3) an increase in co-payments for emergency room visits (from $15 to $50) and inpatient hospital stays ($100/day; $200 maximum). Approximately, 10,599 children enrolled in the County’s Health Kids program will be affected. While applying these benefit reductions to the County’s locally funded Health Kids program would result in budget savings, the Health System predicts that the reductions would discourage children from seeking services and/or not enrolling in health coverage programs.


Proposition 10 Funding for Medi-Cal ($3.34M)—shifts $1 billion in Prop. 10 Fund to fund Medi-Cal services for children through age five (subject to voter approval). If enacted by the voters, implementation would begin on July 1, 2011. The Health System estimates the loss of approximately $1 million per year in funding for Family Health for Pre to 3 early childhood services from the County’s First 5 Commission. This reduction would also significantly affect the Children’s Health Initiative (CHI) budget as the current contract (ending June 30, 2012) between CHI and First 5 is for $2.34 million.


Human Service Agency—($2.2M)


CalWORKs—reduction of $1.5 billion to CalWORKs, including: 1) establishing a 48 month time limit on program benefits from the current 60 month limit (child-only benefits would continue beyond the 48-month time limit for families meeting the work participation requirements; 2) reducing the maximum monthly grant for a family of three from $694 to $604 per month (13 percent reduction) effective June 1, 2011; and 3) maintain the 2010-11 County Single Allocation reduction to the levels set in the 2009 and 2010 Budget Acts. The Human Services Agency estimates flat Single Allocation Funding in FY 2011-12, despite a 70 percent increase in their caseloads.


Child Care Programs— $716 million in reductions to state child care (except preschool) including: 1) the elimination of subsidized services for 11 and 12 year old children; 2) the reduction of eligibility for subsidized child development services from 75 percent (80 percent for SMC as we currently have waiver in place) to 60 percent of the State Median Income; 3) reducing the level of subsidies across the board; and 4) providing greater flexibility at the local level to administer remaining child care and development funds. Families would also be required to contribute to the overall cost of care at higher rates than they currently pay. The Human Services Agency anticipates that there would be an impact to their services (HSA administers Stage 1 Child Care) as clients are forced to choose between employment and staying home to care for their children. In October 2010, over 270 families were enrolled in Stage 3 Child Care, serving approximately 477 children.


Child Welfare Services ($650,000)—reduce funding for the Transitional Housing Program-Plus (THP-Plus), which provides services to 18- and 19-year olds, by $19 million in July 2011. The reduction is proposed in light of the passage of AB 12 (Chapter 559, Statutes of 2010) that expands foster care to age 19 in 2011-12 and allows for the placement of non-minor foster youth in transitional housing program similar to THP-Plus. The Budget would use AB 12 funding in the place of current State General Funding, which is still not in place. The Human Services Agency estimates a loss of $650,000 in funding for this six month period.


Veteran Services ($50,000)—reductions to programs for veterans for a savings of $9.9 million. The Human Services Agency estimates a loss of $50,000 in funding for services to this population.


Cost of Doing Business ($1.5M)— no increase in the allocation for the cost of administering the CalWORKs, Child Welfare programs and Medi-Cal programs. This is the eleventh straight year that counties will not receive their allocations in the human services area and fourth for Medi-Cal. The Human Services Agency estimates a loss of $1.5 million in FY 2011-12 in the area of Medi-Cal Administration, despite a 15 percent increase in program applications. The cumulative shortfall to the County is approximately $15 million.


Child Support Services—($350,00)


Child Support Collections ($350,000)—suspend the county share of child support collections in FY 2011-12 estimated to be $24.4 million. Under the proposal, the entire non-Federal portion of Child Support collections would benefit the State General Fund. The Department of Child Support estimates that this amount is approximately $350,000 for the County. After receipt, Child Support forwards the funds to HSA that distributes them to either state or County accounts for use in the funding of benefits to other clients.


Public Works—($6.0M)


Gas Tax Swap—recommends the passage of trailer bill legislation to re-enact the 2010 gas tax swap in response to the passage of Proposition 26 passed in November 2010 that requires a two-thirds vote threshold for any tax measures occurring after October 2009. The proposed trailer bill language is intended to protect the revenue sources for highways and transit and continue the State General Fund relief provided in the 2010 Budget Act. Without a two-thirds vote of the Legislature, the Department of Public Works would lose approximately $6 million in County Road Funds, one-third of its transportation funding used for the maintenance and operation of roads in the unincorporated areas of the County.


First 5

Shifts $1 billion in First 5 funding to pay for Medi-Cal services for children through age five would allow for the use of 50 percent of future state and local revenues to fund State General Fund-supported early childhood services; a loss of approximately 50 percent of the County’s First 5 funding. San Mateo County First 5 estimates a loss of approximately 6 FTE positions effective July 2012 and a loss of 200 jobs in the County currently funded with First 5 County dollars.


Performance Measure(s):


FY 2009-10

FY 2010-11

Federal/State Measures analyzed and acted on





The FY 2011-12 State Budget proposal would result in an estimated $17.25 million loss in funding for County programs and services. Cost estimates related to a possible realignment of services are currently unknown, but could potentially be substantial.



Resolution approving the 2011 State Legislative Program for San Mateo County



Adopt a resolution approving the 2011 State Legislative Program for San Mateo County.



The 2011 State Legislative Program Session Program articulates the state legislative priorities for the County. These priorities, in combination with positions taken by the Board of Supervisors, guide the County’s legislative advocacy efforts.



Due to the continuing State budget crisis and the Governor’s Realignment Proposal, the County’s top priority in the 2011 Legislative session will be ensuring that any realignment of state programs be fully funded with a logical, dedicated, stable and ongoing revenue source. Also critically important, will be ensuring that counties are guaranteed maximum flexibility to manage discretionary programs and design services for populations transferred to county responsibility.


Other top priorities in the first year of a two year session will be advocating for the protection of other current County revenues and operations, supporting a continuation of the temporary increase in the Vehicle License Fee that supports local public safety programs, supporting full implementation of Federal health reform in the State and strengthening the finances of existing programs, advocating for mandate reimbursement, and passage by the Legislature for re-enactment of the 2010 gas tax swap.


Approval of this resolution contributes to the Shared Vision of 2025 of a Collaborative Community by providing the County with a basic policy framework on the Board of Supervisor’s positions on a range of proposals, priorities and policies that impact the County. The resolution has been reviewed and approved as to form by County Counsel.


Performance Measure(s):


FY 2009-10

FY 2010-11

Federal/State Measures analyzed and acted on