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COUNTY OF SAN MATEO
Inter-Departmental Correspondence
County Manager’s Office
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DATE:
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May 25, 2011
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BOARD MEETING DATE:
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June 7, 2011
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SPECIAL NOTICE/HEARING:
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None
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VOTE REQUIRED:
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Majority
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TO:
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Honorable Board of Supervisors
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FROM:
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David S. Boesch, County Manager
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SUBJECT:
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County Manager’s Report #5
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Analysis of the FY 2011-12 Governor’s Budget, May Revision
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RECOMMENDATION:
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Accept this report.
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BACKGROUND:
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On May 16, the Governor released his May Revision for the 2011-12 budget year. The proposal provides $10.8 billion in solutions ($2.3 billion in expenditure reductions, $9.3 billion in revenues and $0.75 billion in other solutions) to address a $9.6 billion General Fund deficit. It provides for a reserve of $1.27 billion.
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The deficit number has been reduced significantly since January—when it was estimated to be as high as $27.6 billion. This is due to a $6.6 billion increase in projected revenues combined with $14 billion in budget solutions achieved in the March budget package.
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The May Revision includes a new focus on reducing the state’s budgetary debt obligations estimated at $35 billion. (Money owed to counties by the state includes funds borrowed pursuant to Propositions 42 and 1A, and deferred required payments for pre-2004 mandates.) The Governor has made several proposals to start to pay down state debt, including repaying special fund loans; reducing Proposition 98 deferrals; and limiting new bond issuances. The Governor does, however, continue with the plan to end redevelopment agencies and use some portion of their funding to support Medi-Cal programs and the courts. The May Revision reflects a $3 billion increase in 2011-12 Proposition 98 minimum funding guarantee for schools and community colleges.
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The Governor has modified some of his January revenue proposal in light of the revised revenue forecast and a delay in completing the 2011-12 budget plan. The revenue solutions included in the May Revision are about $2.8 billion less than what was proposed in the January budget. They continue to include maintaining higher tax rates (personal income, sales tax and VLF), which were raised in 2009 for a two-year period, and would be directed to funding realigned public safety programs. The Governor proposes that these revenue extensions be subject to voter approval at a yet-to-be determined date. The May Revision assumes extension of these taxes effective July 1, 2011. The Governor has dropped his plan to eliminate enterprise zones and has replaced it with a more modest reform of the program.
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The May Revision also provides funding and programmatic adjustments to the public safety realignment proposal detailed in the realignment section of this report.
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Finally, the May Revision includes new proposals to change, eliminate, or reorganize elements of state government. These include selling non-essential or under-utilized state properties; developing a comprehensive policy for fairgrounds; and reducing the state workforce by 5,000 positions out of a workforce of 232,690. Changes proposed due to realignment include the elimination of the Department of Mental Health and the Department of Alcohol and Drug Programs, as well as the creation of a Department of State Hospitals.
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While the Governor did not detail a Plan B, the May Revision does provide some potential scenarios if a budget solution is not found. Some of the most notable to counties include further reductions to CalWORKs grants; eliminating domestic and related services for many IHSS recipients; elimination of Adult Protective Services; capping Medi-Cal coverage for prescriptions and other medical supplies; and additional cuts to the courts, which could lead to twice monthly court closures.
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It is unclear whether the Supreme Court’s recent opinion upholding a three-judge panel ruling for the state to reduce its prison population will aid the Governor in securing funding for his public safety realignment plan. The California Department of Corrections (CDCR) plans to use Assembly Bill 109 (Chapter 15, Statues of 2011/Public Safety Realignment) as a vehicle to comply with the court order. It must also submit a report to the three-judge panel on how it plans to reduce the state prison population within a two-year time period. It is expected that CDCR will seek an extension from the three-judge panel, which could give them an additional three years for implementation.
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DISCUSSION:
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The May Revise proposes the following program changes and funding reductions:
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HEALTH SYSTEM—($5.7M)
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San Mateo County Medical Center, Medi-Cal ($5.6M)
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• Intergovernmental Transfers (IGTs)—The Administration is proposing to assess a fee equal to 20 percent of current IGTs to offset state General Fund cost by $34.2 million in 2011-12. The remaining 80 percent would be used to match federal funds to provide Medi-Cal rates increases. The projected loss to the Medical Center is $5.6 million and is in addition to a previously enacted reduction of $10 million by the state for Long Term Care costs.
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In-Home Supportive Services (IHSS) ($130,000)
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The May Revise proposes no additional cuts in services to IHSS beyond the cuts already signed into law in March.
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• IHSS—The Governor proposes to decrease IHSS funding by $6.9 million in 200-11 and $7 million in 2011-12 due to a projected decrease in caseload. Some of the decline in funding is offset by an increase in the cost per IHHS case.
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• Public Authorities—The May Revise proposes to cut an additional $7.5 million for IHSS administration. The estimated loss to the Health System is $130,000, or almost one-third of its funding. The additional funding loss will result in a backlog of unprocessed applications.
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Behavioral Health and Recovery Services (Direct Client Impacts)
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The May Revision proposes a $150 million reduction in funding to CDCR for adult inmate and parole programs. This proposed action will result in a loss of $379,535 for the Bay Area Services Network that provides recovery services to parolees for the division.
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Healthy Families (Direct Client Impacts)
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The Administration is proposing to integrate the Healthy Families Program into the Medi-Cal program for a General Fund savings of $31.2 million in 2011-12 and to comply with federal health care reform. The transition will occur from January to June 2012 and impact 10,000 children in the County. It is likely that an additional 4,000 Healthy Families program children currently enrolled in Kaiser, and which does not participate in Medi-Cal, would instead be enrolled in the Health Plan of San Mateo. Thus, many of these children would receive services at the SMMC.
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HUMAN SERVICES AGENCY—(Unknown)
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Medi-Cal and Healthy Families (Unknown)
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The May Revision would shift children enrolled in the Healthy Families program into the current Medi-Cal program. HSA would be responsible for eligibility determinations and annual redeterminations for these children. The proposal would phase in over a six-month period beginning in January 2012. The department is awaiting more details to determine the fiscal impact.
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Child Welfare Services
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• Foster Care—The Governor proposes to increase foster care funding by $10.7 million in 2011-12 in response to the foster care lawsuit (Foster Parent Association, et al vs. John A. Wagner, et al). This will roll back previous foster care rate cuts and will affect foster family homes and relative caregivers.
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CalWORKs
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The May Revision proposes no additional cuts in services to the CalWORKs program beyond the cuts already signed into law in March.
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• Caseload Adjustment—The May Revision proposes an increase of $14 million in 2010-11 and $80 million in 2011-12 due to increases in caseloads and the cost per case. It is expected that this will result in a slight increase in funding for caseload growth in the County, which increased by 17 percent in the month of March.
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Supplemental Security Income (SSI)/State Supplementary Payment (SSP)
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The Governor proposes no additional cuts to payments for recipients beyond the cuts already signed into law in March of this year.
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FIRST 5—Informational
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While the Legislature adopted the Governor’s proposal to transfer $1 billion in California Children and Families (Proposition 10) dollars to fund health services for children, the May Revision does not include the proposed $1 billion in savings, due to ongoing litigation. So even though the Proposition 10 revenues were eliminated from the budget, County First 5 Commissions are still legally required by Assembly Bill 99 to send the funding to the state by June 30, 2012. This shift represents a loss of $15.5 million to San Mateo County First 5.
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EXPIRATION OF VEHICLE LICENSE FEES (VLF) ($5.15M)
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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.
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Sheriff’s Office ($1.15M)
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The Sheriff’s Office is expected to lose $1.15 million in LSPA funding for the following services:
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• $545,488 in State Booking Fees
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• $277,057 in COPS funding
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• $327,000 in Cal-MMET funding
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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 will not be authorized to charge Jail Access Fees, which would result in a loss of $50,000 in FY 2011-12. Furthermore, two contract cities, Woodside and Portola Valley utilize COPS funding to pay for additional deputies. If these cities do not receive the subvention, Sheriff staffing levels for these contracts would need to be reduced.
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Probation Department ($4.0M)
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The Probation Department is expected to lose LSPA funding for the following services:
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• $1.7 million in Juvenile Justice Crime Prevention Act funding
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• $2.3 million in Juvenile Probation and Camps funding
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Collectively, these early intervention programs serve approximately 2,500 at-risk youth countywide. The funding covers the cost of 8 mandated supervisor positions in the juvenile hall; partially funds over a dozen positions in juvenile services in the Human Services Department and in Behavioral Health and Recovery Services; and funds $1 million in services offered by community service providers.
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REALIGNMENT PROPOSAL
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The Governor’s May Revision retains most of the revised realignment structure that was adopted by the Budget Conference Committee in March. However, the Governor did make some adjustments to the proposal based on input received from local government officials and other stakeholders. The proposed modifications include:
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Program/Funding Changes
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• Local Public Safety Subvention Changes—The Governor is proposing to reduce funding for realigned programs from $5.9 billion to $5.6 billion. This decrease would be achieved through a 0.1 percent reduction of the current 0.5 percent VLF revenues dedicated for realignment. The 0.1 percent would now be dedicated to the state General Fund. The 1-cent sales tax extension continues as part of the realignment revenue package.
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County Impact: 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.
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• Community Corrections Performance Incentive Grants (CCPIG)—The May Revision includes an additional $30 million in probation incentive funds, pursuant to counties’ demonstrated success in keeping felony adult probationers out of state prison as required by provisions of Senate Bill 678 (Leno, Chapter 608, Statues of 2009). Approximately 6,200 felony probationers have been diverted from state prison statewide as a result of county efforts.
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County Impact: The Probation 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. San Mateo County is expected to receive $1,068,650 in CCPIG funding in FY 2011-12. The Department plans to use $420,000 of these funds to add 3 Deputy Probation Officers to intensive supervision; $280,000 will be kept in trust to offset soon to expire stimulus funds which are currently paying for 2 probation officers; and $300,000 will be used for IT infrastructure systems to provide data to the state regarding County offenders.
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• Court Security—The Governor’s Revision adjusts the court security estimate to $497.8 million, reflecting expected increases in court security costs of $2.5 million associated with a local-level parole revocation process and the application of an inflation factor of 2.2 percent ($10.7 million) to more accurately produce a baseline for FY 2011-12. The Governor’s January budget proposed allocating funding from the Administrative Office of the Courts to counties.
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County Impact: The Sheriff’s Office estimates an allocation of $10.23 million for court securing in the coming fiscal year.
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• Low Level Offenders—The cost assumptions in the January 2011 realignment proposal neglected to provide funding allowances to cover the costs of programming for offenders who are detained in county jail. The May Revision provides an additional $8 million within realignment for local programming.
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• Parole Violators/Revocations—The May Revision provides an estimated $26 million in FY 2011-12 through realignment for costs incurred by the district attorney and public defender offices for their role in the parole revocation process. In addition, $41.8 would be provided to the courts for their costs associated in assuming jurisdiction for parole revocations.
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County Impact: If the proposed revocation process is determined to be a non-judicial and administrative, then there will be no additional costs to the District Attorney’s Office. If it is determined to be judicial with full due-process rights in court, then it is estimated that the office will need approximately $370,000 to cover the salary and benefits costs for 1 Deputy District Attorney and 1 legal secretary.
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• California Department of Corrections and Rehabilitation (CDCR) Reductions—The Governor intends to reduce staffing costs by 25 percent in those state agencies, including CDCR, experiencing workload reductions as a result of the implementation of public safety realignment. Position reductions may not be fully implemented until July 1, 2013, given the time necessary to undertake the required layoff processes.
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Program Eliminations
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• Peace Officer/Correctional Officer Training—The May Revision removes funds administered by the Commission on Peace Officer Standards and Training (POST) and those administered by the Corrections Standard Authority ($40.5 million). Future funding will be provided through the General Fund.
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• Public Safety Mandates—The May Revision proposes removing funding for public safety mandates ($50.9 million) previously included in the February realignment revision. Funding will continue to be provided through the General Fund.
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• Mental Health Services for Education Pupils (AB 3632)—The May Revision proposes that AB 3632 no longer be realigned to counties, but be realigned to school districts, instead. The Administration proposes to fund the program on a one-time basis with $98.6 million in Mental Health Services Act funding (Proposition 63) in 2011-12.
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County Impact: The Health System currently serves 500 children through this program with approximately 30 of these children receiving more intensive services through its Wrap Seriously and Emotionally Disturbed program. The departments do not know much funding they will receive in FY 11-12, but all unfunded expenses would be the responsibility of school districts.
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The May Revise does not propose any changes to juvenile offender realignment. 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.
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Realignment Recap
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With the above noted changes, the May Revision continues to propose a realignment of the following programs beginning in FY 2011-12, except where otherwise noted:
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• Court Security ($497.8M)
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• Local Jurisdiction for Lower-level Offenders and Parole Violators ($302.3M)
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• Adult Parole ($157.9M)
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• Juvenile Justice Programs ($241.5M)
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• Mental Health Services
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• Substance Abuse Treatment ($183.6M)
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• Foster Care and Child Welfare Services ($1.6B)
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• Adult Protective Services ($55M)
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• Juvenile Justice ($97.1M)
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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.
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Performance Measure(s):
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Measure
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FY 2009-10
Actual
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FY 2010-11
Projected
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Federal/State Measures analyzed and acted on
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57
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50
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FISCAL IMPACT:
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The FY 2011-12 State Budget May Revision would result in an estimated loss of approximately $5.7 million in funding for County services. This reduction is in addition to a previously adopted reduction of $15.73 million as part of the March budget package. The expiration of the temporary increase in Vehicle License Fees on June 30, 2011 will result in a loss of $5.15 million in revenues dedicated to public safety programs. Collectively these losses will result in a reduction of $26.58 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.
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