COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager’s Office

DATE:

April 18, 2011

BOARD MEETING DATE:

April 26, 2011

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

David S. Boesch, County Manager

SUBJECT:

County Manager’s Report #4

Analysis of the FY 2011-12 Adopted State Budget Trailer Bills

RECOMMENDATION:

Accept this report.

BACKGROUND:

On March 24, 2011, the Governor signed 13 trailer bills as a partial solution to the State’s 18-month $26.6 billion budget deficit. The adopted solutions include $8.2 billion in expenditure reductions (primarily to health and human service programs); $2.6 billion in loans and transfers; and $360 million in revenues. Eight days later, the Governor signed the two main public safety trailer bills—Assembly Bill 109 that enacts a portion of the criminal justice realignment and Assembly Bill 111 that makes revisions to Assembly Bill 900.

To date, the Legislature has not been able to pass by a two-thirds vote the thorniest of the Administration’s budget proposals, including $12 billion in revenues ($5.9 billion earmarked for Realignment), $1.7 billion in expenditure reductions related to ending redevelopment agencies and a call for a special election on the tax extensions. A $15.4 billion State budget gap remains. The Governor has also not yet signed the main budget bill (Senate Bill 69), which enacts all parts of the FY 2011-12 State Budget.

It is expected that the Governor will release the May Revise on May 13, at which time the Administration will provide new revenue forecasts and a plan to balance the remaining State budget deficit.

DISCUSSION:

The recently signed budget trailer bills make the following reductions to County programs and services, and will have direct client impacts:

HEALTH SYSTEM—($10.9M)

San Mateo County Medical Center, Medi-Cal ($10.8M)

• $7.6M loss due to a 25 percent reduction in the Medi-Cal rate paid by the State for Long Term Care to service providers.

• $2.6M loss due to the soft cap of seven visits for each Medi-Cal adult patient. Visits exceeding seven would be required to be certified by a physician and would need to meet certain criteria including that care would prevent the need for emergency room care. The estimated funding loss may be less than projected and dependent on individual physician decisions.

• $392,000 loss due to a 10 percent rate reduction to Medi-Cal providers. This rate reduction only impacts inpatient services.

• New mandatory co-pays include $5 per visit at the point of service; $3 per prescription for generics and $5 for brands; $50 for emergency room visits; and $5 for dental office visits. It is unclear at this time whether the hospital’s reimbursement rates will be adjusted downward to account for the new co-pays. If this occurs, it would represent a loss of approximately $305,689 in funding. Also unclear is whether higher co-pays will deter patients from seeking care.

The Medi-Cal reductions require federal approval and some are already facing legal challenges. These reductions will first impact the Health Plan of San Mateo and it has not yet decided whether, to what extent, and when to implement the reductions. Given the timing and uncertainty of the reductions, the Health System has not proposed to change its FY 11-12 budget; however, it is developing contingency plans to manage the potential funding loss.

In-Home Supportive Services (IHSS) ($49,000)

• $49,000 loss in State funding for the IHSS Advisory Committee. The Health System will not eliminate the County’s Committee, but may need to reduce staff support. Its long term plan is to fold the IHSS Advisory Committee into the Long Term Care Integration Advisory Committee.

• Applicants and recipients must now obtain certification from a licensed health care professional declaring that the client is unable to perform one or more activities of daily living independently. Aging and Adult Services believes that this requirement will have minimal impact to its caseload, as clients will be able to get the certification. However, it will increase the workload for County eligibility staff who must add the certification to the enrollment and re-enrollment processes. The County’s current three month backlog for services will likely increase.

Mental Health Services Act (Unknown)

The mental health budget trailer bill shifts Proposition 63 reserve funds to the State on a one-time basis in FY 11-12. The funding will be used to support mental health programs administered by the State, including the AB 3632 and Early Periodic Screening Diagnosis & Treatment programs. An accrual process will now be used to distribute funds to counties, rather than the current year delay in distributions. The Department does not anticipate a negative fiscal impact in the first year, but funding in future years is unclear.

Healthy Families (Direct Client Impacts)

• 6,700 County children enrolled in the program will be required to pay higher health care premiums—an increase of $168 to $216 per year per child.

• 10,600 County children enrolled in the program will have to pay higher copayments for hospital services, including emergency room services and inpatient hospital co-payments.

Adult Day Health Care (Direct Client Impacts)

The health budget trailer bill eliminates Adult Day Health Care Services as a Medi-Cal optional benefit. Approximately 150 Medi-Cal consumers at two County sites will be affected. Without this service, clients are at risk for health decline and may require more acute care, additional emergency room visits and possibly skilled nursing care.

Supplemental Security Income (SSI)/State Supplementary Payment (SSP) (Direct Client Impacts)

Effective June 1, 2011 payments to recipients will be reduced to the minimum federal level. The maximum combined SSI/SSP grant for individuals will be reduced from $845 to $830. Approximately, 68 percent of current IHSS participants receive payments, as do many mental health clients.

HUMAN SERVICES AGENCY—($5.4M)

CalWORKs Administration ($1.3M)

The human services budget trailer bill reduces the Department’s allocation for the cost of administering the CalWORKs program in FY 11-12 by $1.3 million. This is the eleventh straight year that counties will not be reimbursed for the cost of administering this mandated program. Despite growth in caseloads, the state is using past year caseload numbers to determine current year allocations.

Medi-Cal Administration ($1.0M)

The health services budget trailer bill reduces the Department’s allocation for the cost of administering the Medi-Cal program in FY 11-12 by $1 million. This is the fourth consecutive year that counties have been underfunded for the costs of this program. In February 2011, your Board approved a $2.9 million fund transfer from Non-Departmental Reserves to the Department to address a $2.9 million reduction in funding in FY 10-11 from the State for the administration of this program.

Child Welfare Services ($1.6M)

The Department anticipates the CWS Allocation to remain flat for FY 11-12. This is the eleventh straight year that counties will not be reimbursed for the increasing costs of administering these programs.

Single Allocation ($1.3M)

The County’s CalWORKs Single Allocation will be reduced by approximately $1.3 million above the current year allocation for child care, employment services and County administration. HSA has already included a $225,000 reduction in its FY 11-12 budget. It is unclear how this reduction will affect the Welfare-to-Work participation rate mandated by the Federal government, which carries possible penalties for those counties that do not comply.

Shift to General Assistance ($817,000)

The continuing economic downturn and reductions in State assistance programs have resulted in increased demand for General Assistance (GA). As a result, County GA benefit costs increased by $817,000 in the current fiscal year. In February 2011, your Board approved an on-going $817,000 fund transfer from Non-Departmental Reserves to the Department to address this shortfall.

Cal-Learn ($164,638)

Case management services and sanctions available under Cal-Learn for pregnant and parenting teenagers will be suspended for one year. Instead, teens will be eligible for regular welfare-to-work services. County services are provided through a county contract.

CalWORKs (Direct Client Impacts)

• Effective June 1, the number of months parents and caregiver relatives can receive aid is reduced from 60 to 48 months. Approximately, 117 adults in the County will reach 48 months this June, and for a family of three that falls under this sanction, their grant will be reduced by up to 33 percent or $231 per month.

• Effective June 1, CalWORKs aid payments will be reduced by an additional 8 percent. The maximum grant for a family of three in a high-cost county will be lowered from $694 to $638 per month. This will impact approximately 3,052 County families. The reduction will also impact the relative caregivers of foster children and could result in an estimated $50,000 in County saving for aid payments.

• Effective June 1, grants will be reduced by 5 percent for children in cases without an aided adult who have received assistance for more than 60, 72 and 84 months, for a total reduction of 15 percent.

• The human services budget trailer bill amends the current policy of disregarding the first $225 of earned income and 50 percent of each dollar earned beyond $225 when calculating a family’s monthly grant. Instead, the first $112 of earned income and then 50 percent of all relevant earnings will be disregarded. Approximately, 46 County families are receiving the current income disregard and could possibly have a reduction in aid payments.

Cash Assistance Program for Immigrants (CAPI) (Direct Client Impacts)

Effective June 1, cash aid payments to eligible immigrants will be reduced to the federal minimum level of the SSP grant. This will result in a reduction in income to 318 elderly and/or disabled immigrants in the County. CAPI is a fully State funded program.

Child Care (Direct Client Impacts)

• Effective July 1, 2011, the human services budget trailer bill reduces license-exempt provider rates from 80 percent to 60 percent. This will reduce reimbursement rates by $800,000 to 462 providers in the County.

• Stage 3 Child Care funding is restored starting April 2011 through FY 11-12.

• Child care services for 11- and 12-year-olds will be eliminated, unless they receive services during non-traditional hours, are disabled, at-risk of abuse, or homeless. Approximately, 114 children in the County will be impacted.

• Fees for families will be increased by 10 percent, not to exceed 10 percent of a family’s monthly income. Approximately, 504 children in the County will be impacted.

• The income limit to qualify for child care programs will be reduced to 70 percent of the State median income. The number of County families impacted by this change is not known.

• Effective July 1, 2011, funding in FY 11-12 for the Centralized Eligibility Lists will be eliminated. Clients will no longer have a single place to register for all California Department of Education subsidized child care programs, but will need to place their names on multiple waiting lists for services.

PUBLIC WORKS—(Unknown)

Gas Tax Swap

The transportation budget trailer bill validates the “gas tax swap” legislation initially passed by the Legislature in March 2010. The legislation addresses issues related to the passage of Propositions 22 and 26 in November 2011. The legislation will preserve approximately $6 million in County transportation funding and prevent significant reductions in Public Works Department staffing. As in previous years, these funds remain subject to deferral, delay, or borrowing to resolve any State budget shortfalls.

State Park Closures (Unknown)

The state resources budget trailer provides criteria for determining the closure of State parks, which will impact the use of County parks. The State has not released the names of parks to be closed; therefore, the Department cannot yet estimate the level of impact to the County.

Fees for Waste Discharge Permits (Unknown)

The state resources budget trailer bill implements language for an increase in the fees counties pay for Waste Discharge Permits for construction projects, landfill permits, and sewer/sanitation districts. The amount of the increase has not yet been specified; however, the increase could be substantial.

FIRST 5 ($15.5M)—Informational

The Proposition 10 budget trailer bill provides a shift $1 billion in First 5 (Proposition 10) funds to the Medi-Cal program to support medical services for children 0-5 years of age. The bill specifies that, of this $1 billion, $50 million is to come from the State reserves and $950 million is to come from county First 5 commissions. Each county commission is to transfer 50 percent of its reserves to the State by June 30, 2012. This transfer represents a loss of $15.5 million in funding for County early childhood development programs.

EXPIRATION OF VEHICLE LICENSE FEES (VLF) ($5.3M)

The Governor has been unable to secure a two-thirds vote of the Legislature for a constitutional amendment, to be approved by the voters, to maintain current tax rates. The legislation includes an extension of the temporary increase of 0.65 percent in the VLF, 0.15 percent of which is dedicated to the Local Safety and Protection Account (LSPA). The fee extension is set to expire on June 30, 2011.

Sheriff’s Office ($1.3M)

The Sheriff’s Office is expected to lose LSPA funding for the following services:

• $682,777 in State Booking Fees

• $314,840 in COPS funding

• $297,000 in Cal-MMET funding

This total funding amount is equivalent to the cost of approximately seven Deputies. If the State does not appropriate funds for the booking fee subvention, the Sheriff’s Office may begin to charge cities a fee per booking as outlined in the Government Code.

Probation Department ($4.0M)

The Probation Department is expected to lose LSPA funding for the following services:

• $1.7 million in Juvenile Justice Crime Prevention Act funding

• $2.3 million in Juvenile Probation and Camps funding

Collectively, these programs serve approximately 1,400 youth countywide. There are approximately 14 County positions funded with these monies, including 7 positions in the juvenile hall, which are mandated, and would, therefore, necessitate reductions in other areas of the Department. The funding provides for early intervention alternatives for at-risk youth provided by community-based partners, as well as Behavioral Health-Human Services-Probation collaborative programs.

REALIGNMENT

The Governor signed two justice-related trailer bills—Assembly Bill 109 and Assembly Bill 111 (revisions to AB 900, the Public Safety and Offender Rehabilitation Services Act of 2009). In broad terms, AB 109 outlines the low-level offender population for which counties would assume responsibility; defines post-release community supervision, which is effectively counties’ newly defined role in supervision of adult parolees; and gives counties responsibility—and ability to contract back—for the juvenile offender population that previously was placed with the Division of Juvenile Justice.

Assembly Bill 109 specifies that it becomes effective only after a community corrections grant program is established and an appropriation is made to support the program. In his signing message, the Governor reiterated the need to secure funding for public safety realignment through a constitutional guarantee. Assembly Bill 111 would also only become operative upon the enactment of AB 109.

Key elements of AB 109 include:

1. Defines the low-level offender population to be shifted to locals.

• Changes the sentencing construct for low level offenders—those convicted on non-serious, non-violent, non-sex offenses—by having this class of offenders serve their time locally in county jails.

• Amends and/or adds provisions related to alternative custody, involuntary home detention, and work furlough programs to provide local correctional administrators (sheriff’s and correctional directors) more flexibility in dealing with the local offender population.

2. Requires the Local Community Corrections Partnership pursuant to Senate Bill 678 (Chapter 608, Statutes of 2009) to develop and recommend a 2011 realignment plan to the County Board of Supervisors.

• Creates an executive committee of the local partnership to include: the chief probation officer, a chief of police, the sheriff, a county supervisor or county administrative officer, and the director of county social services that will develop and present the plan to maximize effective investment of the criminal justice resources.

3. Establishes the Post-Release Community Supervision Act of 2011.

• Shifts low-level prison inmates—those convicted of non-violent, non-serious and non-sex offenses—released from State prison to the responsibility of counties and allows each county to determine what county Department supervises this new population.

• Vest local courts with the authority and responsibility to handle all parole revocations beginning July 1, 2011.

• Requires that counties house parole violators sanctioned by the court to serve 30 days or less in detention; however, any State supervised parolee will return to State supervision upon serving time for their parole violation.

• Limits the term of post-release community supervision to three years.

• Sets broad terms of post-release community supervision for State inmates discharging to the program and allows the court and county to set more defined and individualized supervision terms once the offender is in the community.

4. Vests full responsibility of the juvenile justice population with counties.

• Requires counties to keep all juvenile offenders locally, on a prospective basis.

• Requires counties to enter into a Memorandum of Understanding with Department of Juvenile Justice (DJJ) and allows counties to contract with DJJ for housing juvenile offenders.

Estimated County Impacts

Sheriff’s Office—Low Level Offenders ($27.2M)

Based on data provided to-date by the Department of Finance, the Sheriff’s Office estimates that approximately 400 inmates per year are expected to remain in the County jail for an average length of time of 515.7 days. At the County’s current daily rate of $169.92 for male inmates, the Sheriff estimates an increased cost of $27.2 million to house this new population. Based on currently proposed reimbursement rates, the County would be reimbursed approximately 80 percent of its costs for short-term stay offenders and 24 percent for long-term stay offenders by the State.

Probation Department—Adult Parole Offenders (Unknown)

The Department estimates that approximately 400 to 600 adult parole offenders will be retained in the County under this proposal. This new population (50 percent of whom are prior probation failures) would require court services, supervision and community support. The supervision of this population will also require a modification to field supervision practices and reassessment of officer safety practices by the Department. Additional training and safety equipment will also be needed.

Probation Department—Juvenile Offenders (Unknown)

Based on available data, it is estimated that about 16 juveniles would be realigned to the County. It is unclear whether the proposed funding of $242 million statewide will be sufficient to cover program costs as funding details have not been developed. Responsibility for the supervision of this population will pose new challenges for the Department, including legal and technical issues regarding shifting jurisdiction from the State to counties, appropriate conditions of local supervision, and appropriate detention and court procedures when violations or new crimes occur.

Approval of this report contributes to a Shared Vision of 2025 of a Collaborative Community by providing County residents with information on the impact of the FY 2011-12 Adopted State Budget trailer bills on County services and programs and direct client impacts.

Performance Measure(s):

Measure

FY 2009-10
Actual

FY 2010-11
Projected

Federal/State Measures analyzed and acted on

57

50

FISCAL IMPACT:

The FY 2011-12 State Budget trailer bills will result in an estimated loss of $16.3 million in funding for County programs and services. The expiration of the temporary increase in Vehicle License Fees on June 30, 2011 will result in a loss of $5.3 million in revenues dedicated to public safety programs. Collectively these losses will result in a reduction of $21.6 million to County programs and services. Preliminary estimates for the cost of public safety realignment are $27.2 million to house low-level offenders, but costs for the supervision of adult parole offenders and juvenile offenders are unknown.