CDCAN Report #104-2011  – MAY 16, 2011 – MONDAY

• Says On-Going Budget Deficits Still Serious Despite Higher Than Expected Revenues
• Budget Legislative Language for Developmental Services $174 million State General Fund Savings and Reductions Released
• Governor Proposes Merging Healthy Families Program Into Medi-Cal
• No Major New Cuts to SSI/SSP, Developmental Services, CalWORKS
• IHSS Lower Caseload Projection Could Have Major Impact on IHSS Public Authorities – But No Other Cuts to Services To IHSS
• Proposes Elimination of 43 Boards and Commissions Including Rehabilitation Appeals Board,  Managed Risk Medical Insurance Board, Commission on Status of Women, California Law Revision Commission

SACRAMENTO, CALIF  (CDCAN)  [Last Updated 05/16/2011  12:30 PM] -  Governor Brown released this morning his proposed revisions to his 2011-2012 State Budget that calls for no additional major budget reductions beyond what was either proposed in January or enacted in March, and still proposes – subject to voter approval in a special election – a five year extension of most of the 2009 temporary tax increases.   The Governor plan assumes that the 2009 temporary tax increases will be extended effective July 1^st with voter approval in a special election to follow, possibly in the fall, if the Legislature is able to get the necessary 2/3rds vote in both the Assembly and State Senate. 

The Democratic Governor said he was hopeful in getting the necessary 2 Republican votes in the Assembly and 2 votes in the State Senate, and said he has been talking with several Republican legislators over the past couple of weeks. He declined to name who they were but joked that the number was “more than 4 but less than 10”. 

The stalemate on passing the main budget bill – which the Governor had hoped would have been done four months early in March – is due to opposition from Legislative Republicans who either want additional reforms or proposals in exchange for their votes or are opposed to any proposal to extend the temporary tax increases or for any other new taxes. 

Higher Than Expected Revenues Help Budget Problem – But Doesn’t Solve It Says Governor

With actual revenues flowing into the State treasury higher than expected since April, the Governor’s revised spending plan increased the revenue projection (not including the money from the proposed tax extensions) by about $6.6 billion.  The Governor said that the remaining on-going State budget deficit for 2011-2012 and several budget years beyond that is now projected at $10.8 billion.  The Governor however warned of the still serious on-going budget shortfalls that require what he termed as a budget plan that was “honest” with no “gimmicks” that he said were used to paper over previous budget holes.

The Governor said there was “no plan B” in terms of his budget proposal if the tax extensions are not part of the final budget approved by the Legislature and said that he was not going to give legislative Republicans a “…road map to ruin” by presenting what

 has been termed as an “all cuts budget”. 

Brown said that both Democrats and Republicans in the Legislature had to get out of their “comfort zones” in order to solve the on-going budget problems of the State.  He said that Democrats won’t cut various entitlement programs and Republicans won’t cut tax breaks for the rich and that both would need to revisit and reconsider those positions. 

He said, in response to a reporter’s question, that he would favor a spending cap proposal to be placed on a special election ballot in order to control State general fund spending, and assumes that various pension reform proposals pushed by various groups would also be on the ballot. 

The Governor said that the Legislature approved $13.4 billion in “serious cuts” and other solutions to close the current and on-going budget deficits in March – but that extension of the temporary tax increases is needed to close the remaining on-going gap.

Governor’s Budget Revision Proposals

The Governor however is proposing some major changes that Administration officials says do not represent reductions in services including:

HEALTHY FAMILIES

• Proposes merging the Healthy Families program,  matched by the federal State Children’s Health Insurance Program money, into the State’s Medicaid program (called “Medi-Cal”), that would eliminate the need for the Managed Risk Medical Insurance Board which oversees the children’s health insurance program. 
• The Brown Administration anticipates that the merger of the Healthy Families program and the elimination of the Managed Risk Medical Insurance Board would be completed by the end of the calendar year. 
• The Brown Administration says that every child in the Healthy Program now would continue to receive services after the program is merged.
• Concerns were raised by some advocates regarding new persons enrolling into the program – though State officials said they will work with stakeholders to minimize any problems and harm. 

MENTAL HEALTH

• Governor proposes as part of his overall “realignment” or shifting of some State programs to the counties (as he proposed in January) creating a new Department of Mental Health State Hospitals to oversee the state operated and staffed mental health state hospitals once the State mental health community-based services are shifted to the counties under his plan. 
• No dates were mentioned on implementing the new department. 

ADULT DAY HEALTH CARE

• The Governor proposed in January and the Legislature approved in March the elimination of Adult Day Health Care as an optional Medi-Cal benefit, to take effect 60 days after necessary approval by the federal government.
• The Governor is proposing in his budget revisions released today an allocation of $25 million in State general funds during the 2011-2012 State budget year to provide funding for the transition of recipients in the Adult Day Health Care program into other Medi-Cal services.  This money is not for creation of a new adult day health care program.  The Legislature would need to push forward – either through a separate policy bill or budget related (trailer bill) language that specifically authorizes or requires the Department of Health Care Services to apply for a waiver to the federal government to create a new version of adult day health program. 
• The Governor’s budget revisions makes no appropriation or proposes no new budget related legislation regarding authorizing the Department of Health Care Services to seek a new Medicaid waiver to create a new version of adult day health care services. 
• Department of Health Care Services said today that the effective date of the elimination of the Adult Day Health Care benefit is the first day of the month 60 days after the federal government approves the State’s proposed amendment (to eliminate it) to California’s Medicaid State Plan. 
• The Department of Health Care Services sent the proposed amendment to the federal government last week, on May 12^th and hopes for approval sometime in June – which would mean an effective date of September 1, 2011. 

AB 3632 MENTAL HEALTH SPECIAL EDUCATION SERVICES

• Governor proposes that these services will not be part of his plan to shift or realign certain State services to the counties.

IN-HOME SUPPORTIVE SERVICES

• No other additional cuts to services to recipients or to providers.
• Governor proposes another budget adjustment due to a lower caseload projection (in addition to the lower caseload as projected by the Governor in January) that in turn results in a lower allocation to IHSS Public Authorities. 
• The Governor’s budget revision released today would propose cutting State funding to Public Authorities (due to the lower IHSS caseload projection) by another $7.517million in State general funds on top of the January reduction of $2.476 million (for a total reduction in State general funding of $9.993 million to Public Authorities when compared to the money they received in the current 2010-2011 State Budget.  
• The Department of Social Services, the state agency that oversees the IHSS program, indicated it would work with advocates to find a solution to help to minimize the problems or harm due to the reduction in funding resulting from lower projected IHSS caseloads. 

BOARDS AND COMMISSIONS

• Governor proposes elimination of 43 boards and commission including the Managed Risk Medical Insurance Board (that oversees the Healthy Families program, Access for Infants and Mothers Program, County Health Initiative Matching Fund Program); Rehabilitation Appeals Board (and instead shift appeals to hearing officers); California Postsecondary Education Commission; the Commission on the Status of Women; and the California Law Revision Commission.

REDEVELOPMENT AGENCIES & ENTERPRISE ZONES

• Governor’s budget revisions would still continue to propose elimination of the redevelopment agencies that he proposed in January but which the Legislature has not yet approved but rescinded his proposal for the elimination of the enterprise zone credits and instead will propose a change to the program. 

BUDGET RELATED OR TRAILER BILL LANGUAGE

• Brown Administration officials said today that proposed budget related (trailer bill) language to make any necessary changes to State law to implement the Governor’s new proposals – such as the merging of Healthy Families into the Medi-Cal program, or elimination of the 43 Boards and Commissions, etc will be available in the coming days – though no exact date was mentioned. 
• Budget related language however regarding cuts to developmental services was released as part of the Governor’s budget revisions (see below). 

Developmental Services Budget Related Legislative Language Released With Updated Proposal for $174 Million in State General Fund Savings & Cuts

• As part of the Governor’s  budget revisions, the Department of Developmental Services released proposed budget legislative language that would make the necessary changes to existing State law in order to implement $174 million in State general fund savings and reductions to developmental services. 
• Of that amount, about $79 million in State general fund money would be – if approved by the Legislature – as a result of actual spending reductions to programs under the developmental services budget that includes regional center funded community-based services and supports and also the state owned and operated health facilities known as developmental centers. 
• The $174 million State general fund savings and reductions to developmental services is part of the overall approximately $577 million in savings and spending cuts to developmental services that the  Governor proposed and the Legislature approved in March.
• Attached is the updated version of the Department of Developmental Services 29 page summary that outlines its proposal to achieve the $174 million in State general fund savings and reductions. The document is titled “20110516-DDS Proposals Summary (May 16 2011).pdf”   

The budget related language is available to be viewed on downloaded on the Department of Developmental Services website at http://www.dds.ca.gov/PublicForums/Index.cfm

1. Administrative Efficiency-Electronic Billing Process for All Providers

2. Annual Family Program Fee

3. Benefit Cards

4. Enhancing Community Integration Participation Development Transportation Access Plans

5. Individual Choice Day Services (NOT A DRAFT COPY)

6. Maintaining Consumer’s Home of Choice-Mixed Payment Rates in Residential Facilities with Alternative Residential Model (ARM) Rates

7. Maximizing Resources Behavioral Services

8. Maximize Utilization Generic Resources-Education Services

9. Rate Equity Negotiated Rate Control

10. Supported Living Services-Maximize Resources

11. Transfer Reduced Scope Prevention Program to the Family Resource Centers

Legislature Previously Passed 13 Budget Related Bills That Governor Signed in March – But Never Sent the Main Budget Bill to the Governor

• The Legislature approved 13 budget related bills – referred to as “budget trailer bills” (because they are supposed to follow or trail the main budget bill) on March 17, which the Governor signed into law on March 24^th.  
• Those budget trailer bills included changes to State law in order to implement reductions to Medi-Cal, SSI/SSP (Supplemental Security Income/State Supplemental Payment grants), CalWORKS, developmental services (regional centers and developmental centers), and higher education. 
• While the Legislature – controlled by Democrats – did pass on a majority vote the main budget bill for 2011-2012 on March 17^th, it did not send that bill to the Governor yet because there was no agreement reached on the Governor’s proposals regarding extending for five years the 2009 temporary tax increases that are scheduled to end June 30, 2011.  The Governor and Legislative Democrats at the time were hoping to place the issue – through the Legislature – on a June special election ballot for voters to ultimately decide. 
• Legislative Democrats will pull back the main budget bill is passed in March (but never sent to the Governor), revise it (or another bill) to reflect the latest actual budget spending and revenue numbers and projections for 2011-2012 – and also revise to reflect how they want to extend the 2009 temporary taxes -  and then send the revised main budget bill and any additional budget “trailer bills” to the Governor with a target date of June 15^th – the deadline in the State Constitution for the Legislature to send a budget bill to the Governor. 
• That deadline, which has rarely been met in previous years, is more significant this year (and beyond) due to the passage in November 2010 of Proposition 25, which not only allows for approval of a State budget by majority vote in both the Assembly and State Senate (providing there are no tax increases – which would still require 2/3rds vote) but would impose penalties on each legislator if a budget is not passed and presented to the Governor by June 15^th.  For every day it is not passed and presented to the Governor, each legislator loses permanently their pay and living/travel expenses.  That new incentive could help provide the means to break a budget stalemate from continuing for weeks or months on end. 

NEXT STEPS

• Legislative Analyst Office – the Legislative Analyst, the non-partisan office that analyzes and reviews budget issues for the Legislature will issue this week their review of the Governor’s proposed budget revisions, including their own projections on spending and revenues, based on actual numbers. 
• Legislative Budget Subcommittee Hearings – Both the Assembly and State Senate Budget subcommittees will likely hold public hearings – and take in public comment – on the Governor’s new proposals, likely the week of May 23^rd and the week of May 30^th (not including the Memorial Day holiday).  [CDCAN will issue an Action Alert and Reports as information on these hearings are announced]
• Budget Conference Committee – though it is not certain how the Legislature will actually proceed beyond their subcommittee hearing process – in a normal budget year the Budget Conference Committee would hold hearings (no public comment taken) in early June to resolve any different actions taken by the Assembly and State Senate.  The Budget Conference Committee this year is chaired by Assemblymember Bob Blumenfield (Democrat – Van Nuys – 40^th Assembly District) and would finish up before June 15^th to allow both houses to vote on a final budget package. 
• Assembly and State Senate on or just before June 15^th, vote on the main budget bill for 2011-2012 and any additional budget trailer bills.  Because the main budget bill would likely contain proposals to extend the 2009 temporary tax increases (or contain other new revenue increases) it would require 2/3rds vote in both houses (54 in the Assembly and 27 in the State Senate, meaning if all Democrats vote for it, at least 2 Republicans in both houses would also be needed to pass it) .
• 2011-2012 State budget year – different from the federal budget year – begins July 1, 2011 and ends June 30, 2012.  Nearly all of the reductions passed by the Legislature and approved by the Governor in March take effect either on July 1^st or sometime during the 2011-2012 State budget year that begins on that date.