As a reflection of the state’s priorities, the budget, more than anything else, shapes the future of California. Through advocacy and education efforts, we can ensure that the budget represents our priorities and invests in the programs that we value most, including our critical health and social services, unique higher education system, and beautiful state parks. You can find more updates on the budget on our Voices for Change blog.
Governor’s Budget Continues Funding for Medi-Cal and Safety Net Amidst Federal Uncertainty
On Tuesday, January 10th, Governor Jerry Brown released his proposed $177.7 billion dollar state budget for fiscal year 2017-2018. The budget maintains the state’s commitment to the Medi-Cal program which is expected to cover 14.3 million Californians, over one-third of the state’s population, and continues funding for all children regardless of immigration status. The Governor’s proposal acknowledges that “a complete repeal of the Affordable Care Act, without a companion replacement program, would not only affect millions of Californians’ health benefits, but would also disrupt the private insurance market.” California stands to lose as much as $17.3 billion dollars in federal funding for the state’s expanded Medi-Cal program in 2017-18.
The budget also continues the promise to provide additional revenue to low-income Californians through the repeal of the Maximum Family Grant (MFG) and the implementation of California’s new minimum wage requirements. Despite technical difficulties raised by advocates, the Administration is moving forward with a proposal to transition the recent legal immigrant expansion population currently enrolled in Medi-Cal into Covered California.
Moving forward, CPEHN anticipates the Governor’s budget will change drastically in response to federal threats to discontinue funding for the ACA and Medi-Cal. Additional state revenues from voter-approved Proposition 56 (Tobacco Tax) and other health related initiatives will help to offset these potential losses but will not be enough to absorb billions in cuts to federal funding.
To view the full revised budget proposal, visit the Department of Finance's website. CPEHN will continue to monitor and weigh in on the proposed budget to ensure the Governor is adequately prioritizing the health of our most vulnerable communities.
Highlights of the FY 2017-18 Revised Budget Proposal:
- Allocates Additional funds for Medi-Cal Caseload Increases ($1.3 billion): The budget assumes increased Medi-Cal spending due to a combination of health care cost inflation, program expansions, and caseload growth. After accounting for Proposition 56 funds (Tobacco Tax), Medi‑Cal General Fund spending is projected to increase 7 percent from $17.8 billion at the 2016 Budget Act to $19.1 billion in 2017‑18.
- Includes funding for Children’s Health Insurance Program (CHIP) Reauthorization ($536.1 million). The CHIP program is a partnership between the federal government and states and territories to help provide low-income children, not otherwise eligible for Medi-Cal, with health insurance coverage. The program is only authorized by the federal government through September 2017. To extend the CHIP program beyond September 2017, Congress must pass legislation. Given the uncertainties surrounding potential congressional actions, the Budget assumes the program is reauthorized, but at the non‑enhanced, federal‑matching percentage of 65 percent effective October 1, 2017, and includes General Fund costs of $536.1 million to reflect this assumption.
- Continues the Health4All Kids initiative ($279.5 million): This funding continues the state’s commitment to providing full-scope Medi-Cal coverage to approximately 185,000 children under 19 years of age. SB 75, approved in 2015, became effective in May 2016. Of concern however is a related proposal to eliminate state-only eligibility for Child Health and Disability Prevention (CHDP) Services. The Administration’s justification is that these children are now covered through the Health4All Kids expansion. However families that find the Medi-Cal premium unaffordable, would no longer be able to rely on CHDP for access to preventive care.
- Eliminates funding for Newly Qualified Immigrants in Medi-Cal ($48 million): The Governor’s budget assumes savings by requiring immigrants here less than five years to transfer from full-scope Medi-Cal to a Covered California Qualified Health Plan with premium and cost-sharing assistance paid by Medi-Cal effective January 1, 2018. Efforts to implement this program have revealed significant challenges that could result in lost coverage or having to repay subsidies. This proposal also fails to acknowledge the federal uncertainties due to threats to continued ACA funding.
- Assumes savings from extension of Hospital Quality Assurance Fees - Proposition 52 ($1 billion). Approved by California voters in November 2016, the funds are used to provide supplemental payments to private hospitals, grants to designated and non-designated public hospitals, and increased capitation payments to managed health care plans. Revenues also fund health care coverage for children and the program’s administrative expenses.
- Assumes savings from passage of Tobacco Tax Initiative – Proposition 56 ($1.2 billion). The California Healthcare, Research and Prevention Tobacco Tax Act of 2016 requires 82 percent of funds remaining after specified allocations be transferred to the Healthcare Treatment Fund to support new growth in Medi-Cal expenditures.
- Allocates $4.5 million in additional funds to implement Federal Medicaid Managed Care regulations: These funds will be used to implement the Medicaid Managed Care regulations as well as the Medicaid fee-for-service access standards and monitoring. Aspects of the regulations could negatively impact California’s current financing structure for Medi-Cal.
- Assumes county savings ($546.2 million) due to reduced county costs for indigent care following implementation of the ACA. These savings are redirected to county CalWORKs expenditures, pursuant to Chapter 24, Statutes of 2013 (AB 85). Beginning January 1, 2017, this included the repeal of the Maximum Family Grant (MFG) rule.
- Abolishes the Major Risk Medical Insurance Fund. Prior to the ACA, the Major Risk Medical Insurance Program, California’s high-risk health insurance pool, provided individuals who were unable to purchase private insurance coverage due to denials or unaffordability with the option of purchasing coverage. The ACA prohibited individuals from being denied coverage due to pre-existing condition and reduced the need for this program. However, if the ACA and the individual mandate penalty are repealed, Californians may once again rely on programs such as the high-risk pool.
- Begins expanded services under the Drug Medi-Cal Organized Delivery System (DMC-ODS). In 2015 California began implementation of the Drug Medi-Cal Organized Delivery System (DMC-ODS), following approval of a federal waiver by CMS. This program allows counties to “opt-in” to expand the continuum of substance use benefits available to Medi-Cal beneficiaries, to include care coordination, rehabilitation, and an expansion of residential treatment. The Budget projects that 6 counties will begin offering expanded services in 2016-17 and an additional 10 counties will be offering expanded services in 2017-18.
- Fails to include funds to expand access to health care for all, including undocumented adults: The budget includes no new funding in a year of great uncertainty to provide health coverage to the over one million undocumented immigrant adults ineligible for Medi-Cal due to immigration status.
- Estimates $1.9 billion available for county mental health services. The Mental Health Services Act (MHSA), passed by voters in 2004, imposes a 1% tax on personal income tax over $1 million. For 2016-17 and 2017-18, the Budget estimates MHSA revenues of $1.9 billion. These funds are used to support mental health programs, primarily through county services. MHSA funds are used to provide services to Medi-Cal beneficiaries and the remaining uninsured.
- Establishes a county-jail based Admission, Evaluation, and Stabilization Center, The Department of State Hospitals is responsible for the care of individuals who are referred from local courts as Incompetent to Stand Trial (IST). There has been a significant growth in the number of individuals waiting for placement at DSH in recent years. The Budget proposes to establish a county-jail based Admission, Evaluation, and Stabilization Center for 60 patients, and to transfer responsibility for 1,100 beds currently operated by DSH within California Department of Corrections and Rehabilitation (CDCR) facilities to CDCR.
- Includes significant reductions for developing children’s crisis services. In 2016-17, $30 million was allocated to a grant program for children’s mental health crisis services. The Budget includes a significant reduction in funds available to develop crisis intervention teams, and crisis stabilization, crisis residential, and family respite facilities. These services have not yet been developed.
Other Health Programs:
- Discontinuation of the Coordinated Care Initiative (CCI). Governor Brown has proposed the discontinuation of the Coordinated Care Initiative (CCI), citing cost effectiveness challenges. However, several components of CCI will be continued, including Cal MediConnect, mandatory enrollment into managed care of individuals who are dually eligible for Medi-Cal and Medicare, and the integration of long-term services and supports (LTSS) into managed care. LTSS will not include In-Home Services and Supports (IHSS). Cal MediConnect provides for dually eligible beneficiaries to receive coordinated care for medical, behavioral health, long-term institutional, and home-and community-based services.
Public Health & Prevention
Tobacco Tax Increase (Proposition 56)
- An additional $2 per pack of cigarettes and on all other tobacco products will be collected as excise tax: This is a result of the 2016 voter passed proposition that is meant to reduce the use of tobacco related products in the future, while generating increased funding in the present.
- Due to passage of Proposition 56, $1.2 billion in new funding will be transferred to the Healthcare Treatment Fund: This will aid in supporting new growth in Medi-Cal expenditures.
- Provides $223.5 million and 57 positions for Public Health’s dental, law enforcement, and tobacco prevention programs for 2017-18: These funds will help to protect and promote the health and well-being of all Californians.
- Provides $29.9 million to support tobacco and nicotine prevention and reduction programs at K-12 schools: After other allocations from the proposition are accounted for, 2 percent of the remaining revenue is to be used for programs that prevent and reduce the use of tobacco products by youth.
Human Services Programs
- Includes Minimum Wage Increase ($26.4 million) for IHSS workers and a decrease in CalWORKs expenditures of $5.3 million as a result of the new state minimum hourly wage from $10.50 to $11.00, effective January 1, 2018.
- Provides CalWORKs funding for Repeal of the Maximum Family Grant (MFG) ($198.2 million), a discriminatory provision of CalWORKs that denied assistance to any child born into a CalWORKs family household that received benefits 10 or more months after the child’s birth.
- Assumes additional savings from County Indigent Health ($265.9 million) as a result of more Californians being able to access the state Medi-Cal program thanks to the ACA.
- Decreases IHSS funding by $626.2 million as a result of IHSS changes related to the Coordinated Care Initiative. The Governor is proposing to discontinue the state program and shift responsibility for collective bargaining to the counties.
- Includes SSP Cost-of-Living Adjustment ($73.2 million) to reflect the full-year costs of the 2.76% cost-of-living increase to the SSP portion of the grant, effective January 1, 2017.
- Halts implementation of the Housing and Disability Advocacy Program ($45 million), a county run program that assists homeless Californians with disabilities to increase participation among individuals who may be eligible for disability benefits programs, including Supplemental Security Income/State Supplementary Program for the Aged, Blind and Disabled (SSI/SSP), the Cash Assistance Program for Immigrants, and veterans benefits.
- Anticipates increase in adult prison population by 1,000 individuals per year, continuing the mass incarceration of people of color. Proposition 57 was passed in November and makes changes to sentencing laws. Proposition 57 should result in a prison population reduction of 2,000 in 2017-18, but the budget still predicts an overall increase in the prison population.
- Estimated $42.9 million in savings from Proposition 47 during the previous year. Proposition 47 passed by voters in 2014, reform sentencing laws and redirected savings to community programming. The Budget estimates savings for 2016-17 to be $42.9 million. These funds are used for K-12 truancy and drop‑out prevention programs, victim services grants, and mental health and substance use disorder treatment services.
Affordable Housing and Homelessness
- Includes continuous appropriations for the Affordable Housing and Sustainable Communities Program (AHSC). The budget will allocate $300 million to the Affordable Housing and Sustainable Communities grant program, as part of the continuous funding from the Cap and Trade program. Further details on Cap and Trade funding in the next section.
- Implementing “No Place Like Home” Initiative. The budget notes the recent legislative action which authorized $2 billion in bond funding to go toward addressing homelessness for individuals with mental health needs. The Governor’s budget proposes $262 million allocation in this budget.
- Resistance toward relying on bonds or the General Fund for affordable housing needs and addressing housing shortages. Despite rising housing costs, lack of affordable housing, and displacement, the budget plan states the Governor’s resistance toward using bonds or relying on the General Fund for addressing the state’s growing housing needs.
Transportation and Climate Change
- $16.8 billion plan for the state’s transportation needs, with $4.2 billion in proposed new revenue
- Reintroduction of transportation funding package. For the past two years, the Governor has introduced transportation funding plans to address California’s infrastructure needs. This budget again proposes another transportation funding package. To fund the new revenue, Governor’s proposal includes much needed reforms to the way the state calculates its various fuel taxes and fees and plans on cost savings through improvements Caltrans efficiency. However, it also includes an increase in the vehicle license fee and other taxes.
- Proposes additional $2.2 billion expenditures for Cap and Trade Program. The budget calls for an additional $2.2 billion spending plan for Cap and Trade program. This includes an additional $100 million for the Active Transportation Program, with at 50% of the funds directed to benefit disadvantaged communities (DAC). The spending plan is in addition to continuous appropriations already guaranteed in statute, including $300 million for the Strategic Growth Council’s Affordable Housing and Sustainable Communities grant program.
- Ties any new Cap and Trade funding to ongoing legislative authorization of the program. While the additional expenditures in the Cap and Trade Program are welcome, the budget calls for the legislature to continue authorization of the program before the additional $2.2 billion are allocated. This attempt to stabilize the future of the program would require a 2/3 vote of the legislature, and funding would remain reliant on the outcomes of future auction.
- $73.5 billion provided to K-12 education funding: Despite slowed growth in the General Fund tax revenue, Prop 98 continues an upward trend thanks to an extension of a tax on the top three personal income tax brackets that was passed under Proposition 55 in 2016.
- $3,900 more will be spent per student in California than last year: The Governor has shown commitment to funding the public school system. The $73.5 billion funded for K-12 is less than the 2016-17 projection, however, it is still higher than the last fiscal year. This was due to a decision to fund K-12 at the minimum funding formula amount.
- Provides $31.9 billion for higher education: Despite lower than expected revenue growth, this administration is committed to investing in higher education and has stated the need to continue to make higher education affordable for all Californians.
- Provides $150 million one-time Proposition 98 General Fund for grants to support community college efforts to institute “guided pathways” programs: These programs are aimed at improving completion rates, reducing time to degree, and improving employment opportunities for California’s students.