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UDW State Budget page
Overview
Though the State’s economic outlook has improved since the January Budget, the slow pace of recovery continues to exact a punishing toll. A confluence of factors confounded January predictions and, as a result, a forecasted budget shortfall of $9.2 billion has since ballooned to $15.7 billion ($6.9 billion in the current fiscal year and $8.8 billion in FY 12-13). This increase is largely a result of the following factors:
- Drastically lower than expected tax revenue – $4.3 billion
- Increases in mandatory education spending (“Prop 98[1]”) – $2.4 billion
- Prior cuts that could not be implemented due to Federal and Court actions – $1.7 billion
The May Revision proposes to collect $93.2 billion in revenue (once the current year shortfall is paid off) while spending $91.4 billion[2]. The difference is allocated toward state reserve funds.
State General Fund (GF) revenue is largely collected from three main sources: the Personal Income tax (63%), Sales and Use Taxes (21.5%), and Corporation Tax (8.9%).
State GF spending is largely focused on three main areas: K – 14 education (52.3%), Health and Human Services (28.4%), and Corrections and Rehabilitation (9.7%).
Proposed Budget Solutions
The Governor now proposes the following actions to account for the $15.7 billion shortfall (this includes setting aside funds for the state’s reserve accounts):
Increased Revenue
| Governor’s Tax Initiative | $5.6 billion |
| All other | $339 million |
| Total | $5.9 billion (35%) |
Spending Reductions
| Health and Human Services | $2.5 billion |
| Education | $2.3 billion |
| All other | $3.5 million |
| Total | $8.3 billion (50%) |
Other
Loan extensions, Fund transfers, etc. $2.5 billion (15%)
Governor states that his budget proposal, if approved, will resolve ongoing structural deficits, resulting in future balanced budgets beginning next year.
In Home Supportive Services (IHSS)
When Federal and County funds are taken into account, total spending on IHSS in FY 12-13 is $5.699 billion. This represents a substantial increase from the final appropriation for IHSS in last year’s budget:
| FY 11-12 Final Allocation | |
| State GF | $1.380 billion |
| Total | $5.049 billion |
| FY 12-13 Proposed May Revision | |
| State GF | $1.502 billion |
| Total | $5.699 billion |
This increase in cost is largely attributable to the elimination of the IHSS provider fee (described below) and overstated or unrealized savings estimates of prior budget actions.
State GF spending of $1.502 billion can be broken down into spending on:
| Services | $1.293 billion |
| Administration | $140 million |
| CMIPS[3] | $69.7 million |
Proposals Impacting IHSS Services
The May Revision proposes the following:
- Elimination of Domestic and Related Services for certain recipients in the IHSS program ($125.3 million)
This proposal would impact approximately 310,000 recipients in shared living arrangements and is scheduled to implement on October 1, 2012.
It would eliminate domestic and related service hours for consumers who live in any type of shared living arrangement in which D&R services can be “met in common” with other household members. Domestic and related services include: meal preparation and clean-up, housekeeping, laundry, food shopping, shopping and errands. Currently, when a consumer lives with a roommate, the assessment of need for domestic and related services is prorated and reduces the number of hours approved for these services.
This proposal would not apply to consumers who live only with other consumers. If a recipient needs domestic and/or related services due to fact that other members of the household, or their parents if applicable, have a medically verified condition, they may request to keep authorized hours for these services. This request would then be assessed by the County.
- 7% across-the-board reduction in service hours ($99.2 million)
This proposal would decrease authorized hours for all IHSS recipients by 7% effective August 1, 2012. Recipients would be able to direct the manner in which the reduction is applied to their authorized services. There is no proposed sunset date for this reduction.
- 20 % across-the-board reduction in service hours ($22.3 million)
This proposal assumes that the 20% across-the-board reduction in IHSS service hours that was “triggered” by the Department of Finance in December 2011[4] will be implemented on April 1, 2013. This cut is currently blocked by a preliminary injunction that was granted by a federal court in January 2012. The State has appealed this action to the Ninth Circuit Court of Appeal[5]. It is important to note that the state has set aside the amount it projects to save through this cut should pending litigation not turn out in its favor. Thus, the 20% “trigger” cut is a cost-neutral proposal.
- Shift to Medi-Cal Managed Care ($663.3 million[6])
In January, the Governor has proposed a Coordinated Care Initiative, which contains two major components: 1 – the Dual Eligible Demonstration, which would financially and administratively integrate the full range of medical and long term care services for individuals who are eligible for both Medicare and Medi-Cal, and 2 – the inclusion of all long term supports and services (LTSS) as mandatory managed care benefit for all Medi-Cal recipients. The CCI would significantly impact the IHSS program, as IHSS would then be administered as a managed care benefit.
The May Revision makes several changes to the CCI from the proposal first introduced in the January budget:
- It would phase in implementation for both the Duals Demonstration and LTSS Integration according to the same geography and timeline
- It would reduce the number of counties participating in Year One from ten to eight
- It would delay implementation from January 1, 2013 to March 1, 2013
The May Revision also indicates the Governor’s intent to eventually transition collective bargaining in IHSS from the county to the state level. No details are provided regarding this matter.
- Lower caseload spending ($237.3 million)
This proposal assumes a decrease in General Fund spending for social services programs (including IHSS) as a result of decreased caseload projections. Based on actual caseload data received since the November 2011 estimate, forecasts have been revised downward as follows:
| Projected Caseload | FY 11-12 | FY 12-13 |
| November 2011 estimate | 444,854 | 459,647 |
| May 2012 estimate | 440,223 | 452,438 |
- Program Integrity Cost Avoidance ($151.6 million)
This proposal assumes that savings will be achieved as a result of various program integrity activities first initiated in the Budget Act of 2009. These include: County District Attorney (DA) activities, County Investigations, Related activities, and Provider exclusions. It is important to note that, beginning in FY 11-12, state funding of County DAs ($10 million) was eliminated as a result of AB 121 (Chapter 41, Statutes of 2011). A county must now fund DA activities on its own if it chooses to continue with these activities.
- Elimination of IHSS Provider Fee
This proposal would eliminate the proposed IHSS Provider Fee, which is currently pending approval by the Federal Centers for Medicare and Medicaid Services (CMS). The Provider Fee is an application of the state sales tax to all service hours provided through the IHSS program. This fee would be used to draw down additional federal matching funds. The amount of the fee would be returned to IHSS providers as a supplementary payment.[7]
This proposal would result in a loss of $152.7 million in state funds for both FY 11-12 and FY 12-13.
- Expiration of current 3.6% across-the-board reduction
This proposal assumes that the current 3.6% across the board reduction in service hours[8] will expire on June 30, 2012, as per existing state law.
Governor’s Tax Initiative
State GF Revenue for FY 12-13 is estimated at $95.7 billion. The largest sources of revenue include the Personal Income tax (63%), Sales and Use Taxes (21.5%), and Corporation Tax (8.9%).
The Governor continues to propose a November 2012 ballot initiative to temporarily increase select income tax rates and the Sales and Use tax rate. The content of the tax initiative changed substantially since January as a result of negotiations with stakeholder groups. It now entails the creation of three new tax brackets for taxable incomes beginning at $500,000 (joint household) with rates of 10.3%, 11.3%, and 12.3% for a period of seven years. It also includes a sales tax increase of 0.25% for a period of four years.
As proposed in the January budget, if the Governor’s Tax Initiative is not approved by the voters in the November election, it will trigger $6.1 billion in further spending cuts to education and public safety. The Governor has not proposed that there would be any additional impact to IHSS as a result of this trigger.
[1] Proposition 98 was passed by voters in 1988. It requires a minimum level of state spending on K – 14 education based upon a complex formula.
[2] Notably, approximately 41% of spending – $37.7 billion – is for K-14 education.
[3] Case Management Information & Payrolling System
[4] The 20% “trigger” cut was enacted in SB 73 (Chapter 34, Statutes of 2011).
[5] See case of Oster v. Lightbourne.
[6] Of that amount $495 million is reimbursed back to IHSS.
[7] This fee was enacted in AB 1612 (Chapter 725, Statutes of 2010).
[8] This cut was enacted in AB 1612 (Chapter 725, Statutes of 2010).
The day after Governor Brown released his May budget revision, home care providers and care recipients rallied at the State Capitol to declare that home care cuts are off the table in the coming budget year. The effort was part of the “Let’s Get Healthy at Home” campaign to advance a smarter, more compassionate alternative to the $225 million in budget cuts proposed for In-Home Supportive Services (IHSS), SB 1503.
The following statement was made by Doug Moore, executive director of the 65,000 member UDW Homecare Providers Union/AFSCME Local 3930, in response to Governor Brown’s May Budget Revise:
CALIFORNIA DISABILITY COMMUNITY ACTION NETWORK
