County Manager’s Office
July 15, 2011
BOARD MEETING DATE:
July 26, 2011
Honorable Board of Supervisors
David S. Boesch, County Manager
County Manager’s Report #7
Analysis of the FY 2011-12 State Budget
Accept this report.
On June 30, 2011, Governor Brown signed the final pieces of the FY 2011-12 State Budget Act to solve the remaining $9.6 billion gap. Enacted on a majority vote, the $86 billion budget reflects a 6 percent reduction from 2010-11.
Based on a preliminary analysis of available information, it is expected that the County will loose an additional $6.5 million in funding for heath and human service programs. These cuts are on top of an estimated $15.73 million in state reductions approved in March. An additional $11.3 million in cuts that could impact services at the Medical Center are subject to federal and court approval. The County is expected to receive $6.9 million in new state funding for the implementation of the first year of public safety realignment.
After failing to secure Republican support for the temporary tax extension to fund public safety realignment, the Governor negotiated a revised budget plan with the Democratic leadership. The main elements of the plan include:
• $15 billion in program reductions (includes $8.2 billion enacted in March);
• $900 million in targeted revenue increases;
• $2.9 billion in “other” solutions;
• $8.3 billion in improved state tax revenues.
Importantly, the budget realigns some health and human service programs to counties and redirects $5.5 billion in state sales taxes and Vehicle License Fees to fund them. It also increases the basic vehicle license registration fee by $12 to fund the Department of Motor Vehicles administrative functions and then redirects $500 million for local public safety programs previously funded through a temporary increase in the state sales tax and the VLF. Unfortunately, the budget does not provide counties with the constitutional protections they had sought for realignment. Details of the adopted Realignment Program are provided in the Realignment sections of this report.
The State Budget specifies that up to $2.6 billion in additional reductions will be triggered on January 1, 2012, if the Director of the Department of Finance determines that 2011-12 revenues do not meet targets. The reductions would be implemented in three tiers as follows:
• Tier 0—No reductions if the state receives $3 billion to $4 billion in additional revenue;
• Tier 1—$600 million in reductions to the state universities, In-Home Supportive Services, child care, public safety, if the state receives $2 billion to $3 billion; and
• Tier 2—$2 billion reduction to education, plus Tier 1 reductions, if the state receives less than $2 billion.
The final State Budget makes the following program changes and funding reductions, pending the outcome of court challenges or federal approvals in some cases:
San Mateo County Medical Center, Medi-Cal ($17.2M)
Medi-Cal Managed Care Plan Reduction ($11.6 M)—The adopted State Budget makes the following reductions to services provided by the Medical Center:
• A 23 percent reduction in the rate paid for skilled nursing services ($7.6 million);
• Limits Medi-Cal patients to seven doctor’s visits annually, regardless of their condition ($2.6 million);
• A 10 percent reduction in fees paid to Medi-Cal providers ($400,000);
• A reduction in fees paid to providers equal to new co-pays to be paid by Medi-Cal patients for services, but which SMMC staff anticipate will be difficult to collect in some cases ($732,000);
• A reduction in the reimbursement for medications provided to Medi-Cal patients ($300,000).
All of these reductions, except for the pharmacy reduction, are subject to federal government or court approval. Intense lobbying is occurring at the federal level to prevent approval and the California Association of Hospitals has filed a lawsuit to prevent the changes from occurring.
Intergovernmental Transfers (IGTs) ($5.6M)—The State Budget also assesses a 20 percent fee on IGTs for Medi-Cal managed care plans. The Medical Center estimates that this action would result in a loss of $5.6 million in funding and that the state will need to seek federal government approval before enacting the fee.
Behavioral Health and Recovery Services—The State Budget proposes to give counties full responsibility for administration and funding for mental health Medi-Cal managed care services and Medi-Cal Early and Periodic Screening, Diagnosis and Treatment (EPSDT) programs. More than $861 million in Mental Health Services Act (Proposition 63) funds have been redirected, on a one-time basis, to pay for these services in FY 11-12. It is anticipated that BHRS may receive up to an additional $1 million in state funding for these services. The funding allocation is still under review. In FY 12-13, these services are expected to be funded through a revised realignment allocation.
Healthy Families (Direct Client Impacts)
Although in May the Governor proposed to shift children in the Healthy Families program to Medi-Cal starting in January 2012, the State Budget does not call for this. Any changes to the Health Families program are expected to be made in a bill through the policy committee process. Any change to the program would impact approximately 10,000 children in the County and would also impact the Human Services Agency as it would be responsible for eligibility determinations and annual redeterminations.
HUMAN SERVICES AGENCY—($600,000)
Medi-Cal Administration—The Department anticipates that their Medi-Cal administration allocation will remain flat for FY 11-12. This is the fourth consecutive year that the state has suspended the COLA to counties, which this year has increased the department’s Net County Costs by $3.5 million over the prior year.
Child Welfare Services (CWS)
• CWS Allocation—HSA anticipates its allocation will remain flat in FY 11-12. This is after a reduction of $1.6 million in FY 09-10.
• Mental Health Services for Special Education Students, AB 3632—The State Budget includes the Governor’s proposal to eliminate the mandate on counties to provide mental health services to special education students. As of July 1, schools will be responsible for funding mental health services for this population. As a result, HSA will no longer serve this population resulting in NCC savings.
• Foster Care—The State Budget increases funding for foster care family rates in FY 11-12 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.
• Grants—The State Budget provides $90 million in funding to restore a 15 percent cut to grants, adopted in March 2011, for children who have received cash assistance for more than five years.
• Single Allocation Reduction ($600,000)—The State Budget restores $50 million to the CalWORKs Single Allocation. The CalWORKs Single Allocation funds eligibility administration, employment services, CalWORKs Stage One Childcare, and Cal-LEARN. However, because of the adoption of the 48-month time limit and the revised earned income disregard proposal in March 2011, the County’s Single Allocation for FY 11-12 will be reduced by approximately $600,000 in Child Care and Employment Services. It is unclear how these reductions will affect the Welfare-to-Work participation rate mandated by the federal government that imposes penalties on counties that do not comply.
Child Care (Direct Client Impacts)—The State Budget restores $200 million in child care and development program cuts enacted in March 2011. Specific actions include:
• Restoration of the10 percent Standard Reimbursement Rate cut to Title V contracts.
• An 11 percent reduction in child care contracts, rather than 15 percent. The reduction will result in 80 children not receiving child care from the County and 120 children not receiving child care services from our local providers throughout the County.
• Restoration of funding for child care services for 11- and 12-year olds.
• Rescinds the 10 percent family fee increase.
The adopted budget authorizes state General Fund payments to be deferred in July 2011, October 2011 and March 2012. The deferrals include payments to social service programs. This action continues the deferral that is currently in place. The Department does not anticipate any negative program impacts or cash flow issues due to the payment delays as these had been anticipated. This is third fiscal year that the state has imposed deferrals for human service programs to counties.
The State Budget establishes a framework to shift primary responsibility for various public safety, mental health, substance abuse treatment, child welfare services, foster care and adult protective services from the state to counties beginning in 2011-12. Counties will assume responsibility for $5.6 billion in program costs in 2011-12, rising to a projected $6.8 billion in 2014-15. As stated previously, these costs would be funded primarily by transferring revenues from an existing 1.0625 percent state sales tax rate to counties, which is estimated to provide $5.1 billion in 2011-12. In addition, the budget agreement redirects $453 million in existing VLF revenues to fund local costs in 2011-12. It is expected that sending certain low-level felons to counties for supervision will allow the state to comply with a federal court order recently affirmed by the U.S. Supreme Court to reduce the state’s prison population by more than 30,000 inmates over the next two years.
Assembly Bill 117 (Chapter 39, Statutes of 2011) contains changes to implement Public Safety Realignment (AB 109, Chapter 15, Statutes of 2011). AB 109 provides the framework for the adult offender population shifts that include: 1) low level offenders serving sentences in local jails; and 2) a new population served locally under “post-release community supervision” (PRCS) and a local revocation process. It also provides the framework for the supervision of juvenile offenders by counties with an option for counties to contract back with the Division of Juvenile Justice for the most serious offenders.
Key technical and substantive changes contained in AB 117 include:
• Delaying the implementation/operative date of AB 109 to October 1, 2011;
• Delaying the court’s responsibility for handling the parole revocation process for state parolees until July 1, 2013;
• Requiring counties to inform the California Department of Corrections and Rehabilitation (CDCR) by August 1, 2011, as to the designated supervising entity for inmates discharged from prison and placed onto the PRCS program, including the appropriate point of contact;
• Changing the membership of the local Community Corrections Partnership (CCP) executive committee, as established in AB 109, to include the following seven members: 1) chief probation officer as chair; 2) presiding judge or designee; 3) district attorney; 4) public defender; 5) sheriff; 6) a chief of police; and 7) one of the following: the head of the county department of social services, mental health, or alcohol and substance abuse programs, as designated by the board of supervisors;
• Specifying that the executive committee vote on the final AB 109 implementation plan that is to be presented to the county board of supervisors; and
• Providing that the county board of supervisors can reject the AB 109 implementation plan as submitted by the CCP with a four-fifths vote of the board; if the plan is rejected it is referred back to the entire CCP for revision.
AB 117 indicates that the board of supervisors retains exclusive authority for allocating funds, that the role of the CCP and its executive committee is to develop an implementation, not a spending plan, for the adult offender population shift; and makes the CCP and its executive committee subject to provisions of the Brown Act.
The second bill, AB 118 (Chapter 40, Statutes of 2011), converts $5 billion in state sales tax to local sales tax to pay for public safety realignment. It also creates a variety of accounts to fund the realignment programs; and clarifies that allocation formulas apply only to the first year of realignment; methodologies for 2012-13 and beyond are open to review and revision.
• Adult Population Shift—Based on a formula, San Mateo County is expected to receive $4,222,902 in FY 11-12. This figure has been adjusted to reflect nine months of operation given the October 1 start date. These funds are intended to cover all aspects of the adult population shifts: 1) the transfer of low-level felons to the County; 2) the County’s new supervision responsibilities for state prison inmates released to post-release community supervision (PRCS); and 3) sanctions (to include incarceration) for those on PRCS who are revoked.
County Impact: According to the Department of Finance, it is anticipated that at full rollout in the fourth year of realignment, the County would have an additional average daily population of approximately 209 short and long-term inmates in its jail. The postrelease community supervision population is estimated at 351 and the return-to-custody due to release revocation at 33.
• District Attorney/Public Defender Revocation Costs—San Mateo County is expected to receive $151,371 in FY 11-12. These funds, allocated on the same formula as the AB 109 programmatic costs, are to be divided equally between the district attorney and private defender to cover costs associated with revocation hearings.
• AB 109 Start-up Costs—The main budget bill also provides counties with a one-time appropriation of $25 million, distributed using the AB 109 allocation formula, to cover the costs associated with hiring, retention, training, data improvements, contracting costs, and capacity planning pursuant to each county’s AB 109 implementation plan. San Mateo County is expected to receive $297,975 in FY 11-12. Additionally, each county will receive a one-time grant (depending on county size) for purposes of supporting the CCP in developing its implementation plan. The Corrections Standard Authority will administer this grant. Based on its population size, San Mateo County is expected to receive $150,000 in FY 11-12.
Juvenile Justice Realignment
The State Budget plan removes, for the time being, the shift of youthful offenders from the Division of Juvenile Justice (DJJ) to counties. It is anticipated that stakeholders will continue to work through the summer to develop an implementation plan for this population. In the meantime, a provision of the “trigger cuts” would require that counties pay on an annual basis $125,000 per youthful offender committed to a state juvenile detention facility. The County currently has 14 youth committed to the DJJ. Should the state impose this trigger cut, the Department would ask the Court to modify orders to return youth committed to the DJJ to the County where they could be housed at Camp Glenwood or the girls’ unit at the Youth Services Center. A regional solution would be sought for youth over 19 years of age.
Other Aspects of Public Safety Realignment
• Court Security—Funding to support court security ($496.4 million statewide) will come directly to counties through the 2011 realignment, with an expectation of a dollar-for-dollar dedication of resources to support the county sheriff’s service to the courts.
County Impact: The court security allocation for FY 11-12 is $10.2 million, including a $387,612 allocation for two court holding cell deputy sheriff positions included in the June revisions. Revenues in excess of expenditures will be retained as fund balance separate from the operating budget and reserved for court security purposes only. The legislation states that funds in the court security account must be used exclusively to fund trial court security provided by county sheriffs.
• Previously realigned juvenile justice components—Both the Youthful Offender Block Grant and DJJ juvenile parole reimbursement (AB 128, Chapter 729, Statutes of 2010) will be funded using the current allocation methodology through 2011 realignment funding.
County Impact: The Probation Department estimates an allocation of $2.06 million in FY 11-12 for these programs.
• Community Corrections Performance Incentive Grants (SB 678 of 2009)—The State Budget provides an increase of $30 million for a total allocation of $89 million in FY 11-12, for the California Community Corrections Performance Act. The Act established a system of performance-based funding that share State General Fund savings with county probation departments when they demonstrate success in reducing the number of adult felony probationers going to state prison for committing new crimes or violating the terms of probation. The Governor notes that as of May 2011, 6,200 felony probationers were successfully kept out of state prison because of this program.
County Impact: The Probation Department will receive $1.07 million in FY 11-12.
Local Public Safety Subventions
Realignment revenues will also support a number of local public safety programs that have been funded with a temporary 0.15 percent VLF rate since 2009.
• Booking Fees—The Department anticipates receiving $758,000 in FY 11-12.
• Supplemental Law Enforcement Services Funds and Citizens Option for Public Safety (SLESF/COPS) —The Department’s budget for FY 11-12 is $327,567 and it expects to realize the full amount.
• Cal-Multi-Jurisdictional Methamphetamine Enforcement Team (Cal-MMET)—The Department’s budget for FY 11-12 is $327,656 and expects to realize the full amount.
• Juvenile Justice Crime Prevention Act (JJCPA) —The Department anticipates receiving $1.6 million in FY 11-12 versus $1.7 million in FY 10-11.
• Juvenile Probation and Camps Funding (JPCF) —The Department anticipates receiving $2.2 million in FY 11-12 versus $2.3 million in FY 11-11.
Health and Human Services Realignment
Under Realignment, counties will assume full fiscal and operational responsibility for administering various health and human services currently funded and/or administered in part by the state. The following identifies which programs realign in which fiscal year:
Mental Health Managed Care
Community Mental Health (1991 Realignment)
Early Periodic Screening, Diagnosis and Treatment
Adoption Assistance Program
The health and human service realignment is effective July 1, 2011. AB 118 also contains provisions that move the funding for community mental health programs from 1991 realignment into 2011 realignment. The funds that would have otherwise been deposited into the 1991 Mental Health Subaccount are now directed to be deposited into a new Social Services Subaccount. AB 118 specifies that these new funds will be used to pay for an increased county share of CalWORKs grants. The allocations for health and human services programs are based on what the state would have otherwise expended for those programs in 2011-12. The state advanced cash to counties for administration and grants for many of the health and human service programs slated for realignment on July 1. Those cash advances have already been sent to counties.
County Impact: It is unclear how much flexibility counties will have in utilizing this funding source and whether, in economic downtimes, sales tax and VLF revenues will be sufficient to support program costs.
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 Enacted State Budget.
Federal/State Measures analyzed and acted on
The FY 2011-12 Enacted State Budget will result in an estimated loss of approximately $6.5 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 for a total of $22.2 million in state funding cuts in FY 2011-12. An additional $11.3 million in reductions to the Medical Center are threatened, should the state secure federal or court approval.
The County will receive approximately $6.9 million in new funding for the first year of public safety realignment. New funding includes: $1 million in mental health realignment funding, $4.2 million in programmatic funding for adult low-level offenders, $151,371 for DA/PD revocation costs; $297,975 in training/hiring funding; $150,000 in funding to support the CCP; and $1.07 million in CCP Incentive Grant funding. The County will also receive $5.2 million in current Local Public Safety Subventions. This includes: $758,000 in Booking Fees; $332,567 in SLESF/COPS funding; $327,656 in Cal-MMET funding; $1.6 million in JJCPA funding; and $2.2 million in JPCF funding.