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State Budget

State Budget

Track the budget process with news about the latest proposals and their impact on California’s communities of color.

Updated 1/10/2018

Governor Brown's Budget Prioritizes Savings Despite Surplus, Misses Opportunity to Strengthen Health and Safety Net Programs

Today, Governor Brown released a budget plan that continues the status quo for health and safety net programs. California has seen a turnaround in its economy and, in turn, brighter budgets and now a healthy Rainy Day Fund. But that alone is not enough to put us on track to improving the well-being of all Californians.

Since voters passed Proposition 2, every state budget that has included a contribution to the Rainy Day Fund has also been accompanied with critical investments in health and human services. We expanded Medi-Cal coverage to all children, regardless of immigration status. We repealed the Maximum Family Grant Rule that denied assistance to children and families. And, despite federal uncertainty last year, we delivered critical investments in Medi-Cal, including the restoration of adult dental benefits.

While the ramifications of federal policies and proposals remain to be seen, now is the time to act. We must strengthen our safety net, invest in public health and prevention, extend #Health4All to all Californians, including immigrants, and ensure all Californians have access to quality, affordable health care coverage.

To view the full 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. Follow our full analysis see below. 

Highlights of FY 2018-2019 Budget:

Overview

  • Total Budget: $190.3 Billion
    • General Fund Spending: $131.7 Billion
  • Total Spending for Health & Human Services: $61.1 Billion
    • General Fund Spending for Health & Human Services: $23.7 Billion
  • Rainy Day Fund: Governor proposed an additional $3.5 billion, bringing total fiscal year contribution to $5 billion. The Rainy Day Fund will total $13.5 billion, reaching its constitutional limit for this fiscal year. 

Key Items

  • Fails to include funds to expand access to health care for all, including undocumented adults: The budget includes no new funding to provide health coverage to the over one million undocumented immigrant adults ineligible for Medi-Cal due to immigration status, despite a budget surplus.
     
  • Children’s Health Insurance Program (CHIP) Reauthorization ($961.9 million). The Budget includes funding for CHIP reauthorization despite continued federal uncertainty over the timeline for final reauthorization. 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. Congress passed legislation in late December 2017 to temporarily fund CHIP at 88-percent federal share for the first several months of 2018. The state Budget assumes the program continues at a lower 65-percent federal share effective January 1, 2018. As such, the May Revision will reflect a savings of approximately $150 million General Fund. Congress has until January 19 to reauthorize CHIP funding for 2018. If CHIP funding is not reauthorized, states will have to find savings elsewhere to cover the cost of covering CHIP enrollees as federally mandated. Coverage for approximately 32,000 pregnant women and children is at risk if CHIP funding is not provided beyond March 2018 because they do not qualify for federally funded, full-scope Medi-Cal.
     
  • Restoration of the Medi-Cal Dental Benefit ($79.5 million): The Budget includes $212.2 million in 2018-19 to restore full dental services for adult beneficiaries in the Medi-Cal program, effective January 1, 2018. This includes all pregnant women, regardless of immigration status, who are eligible for pregnancy-related Medi-Cal with full benefits. CPEHN and our partners advocated last year for the restoration of these critical benefits. For more information on restored dental services, check out CPEHN’s new multi-lingual Dental Restoration fact sheets.
     
  • 2020 Census ($40.3 million): The decennial Census is a crucial tool to make decisions regarding funding, electoral representation, and public policy. It is a massive undertaking and relies on robust community participation for an accurate count of Californians. However, statements and funding cuts from the federal administration have caused concern regarding the ability to obtain and complete and accurate count, particularly of immigrants, limited English proficient communities, and other historically underserved populations. Therefore, the Governor’s proposed Budget allocates $40.3 million for statewide outreach and other activities related to the 2020 Census.
     
  • Fails to raise SSI/SSP recipients out of poverty: The Governor's Budget includes federal increases but does nothing to restore state funding cuts dating back to 2011, leaving 1.3 million Californians in poverty. Effective January 1, 2018, the maximum SSI/SSP grant levels are $910 a month for individuals and $1,532 per month for couples. The maximum SSI/SSP monthly grant levels will increase by approximately $20 and $29 for individuals and couples, respectively, effective January 2019 due to the federal cost-of-living adjustments (2% for 2018 and 2.6% projected for 2019). The Cash Assistance Program for Immigrants (CAPI) benefits are equitable to SSI/SSP benefits, less $10 per month for individuals and $20 per month for couples.

Medi-Cal

The budget reflects increased expenditures in the Medi-Cal program of approximately $543.7 million General Fund over the 2017-2018 state budget. The increase is primarily attributable to retroactive payments of drug rebates to the federal government and a higher estimate of Medi-Cal managed care costs.

  • Medi-Cal Cost Increases ($1.6 billion): The budget assumes increased Medi-Cal spending due to a greater state share of cost for the ACA expansion population in 2018 (6 percent) and 2019 (7 percent). After accounting for Proposition 56 funds (Tobacco Tax), Medi-Cal General Fund spending is projected to increase 30% percent from $17.7 billion in 2017-18 to $22.9 billion in 2018-19. DHCS assumes the Medi-Cal caseload will remain even at about 13.5 million individuals, a sign that the state may be reaching enrollment thresholds for the program.
     
  • Children’s Health Insurance Program (CHIP) Reauthorization ($961.9 million). The Budget includes funding for CHIP reauthorization despite continued federal uncertainty over the timeline for final reauthorization. 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. Congress passed legislation in late December 2017 to temporarily fund CHIP at 88-percent federal share for the first several months of 2018. The state Budget assumes the program continues at a lower 65-percent federal share effective January 1, 2018. As such, the May Revision will reflect a savings of approximately $150 million General Fund. Congress has until January 19 to reauthorize CHIP funding for 2018. If CHIP funding is not reauthorized, states will have to find savings elsewhere to cover the cost of covering CHIP enrollees as federally mandated. Coverage for approximately 32,000 pregnant women and children is at risk if CHIP funding is not provided beyond March 2018 because they do not qualify for federally funded, full-scope Medi-Cal.
     
  • Restoration of the Medi-Cal Dental Benefit ($79.5 million): The Budget includes $212.2 million in 2018-19 to restore full dental services for adult beneficiaries in the Medi-Cal program, effective January 1, 2018. This includes all pregnant women, regardless of immigration status, who are eligible for pregnancy-related Medi-Cal with full benefits. CPEHN and our partners advocated last year for the restoration of these critical benefits. For more information on restored dental services, check out CPEHN’s new multi-lingual Dental Restoration fact sheets.
     
  • Supplemental Provider Payments and Rate Increases in Medi-Cal through Proposition 56 ($649.9 million) The Budget allocates $649.9 million in 2018-19, an increase of $232.8 million, for supplemental provider payments and rate increases. Of the additional amounts, approximately $163 million is for physician payments and $70 million for dental payments. DHCS plans to analyze the impact of these payment changes and may modify or revise the payment methodologies if these payments do not lead to improved access to services for Medi-Cal beneficiaries as promised.
     
  • State Oral Health Program through Proposition 56 ($30 million) The State Oral Health Program was established at the California Department of Public Health in 2014 and is statutorily guaranteed $30 million annually from Proposition 56 revenues in order to address oral health needs and conduct education regarding dental disease across California. The Budget continues this funding.
     
  • Diabetes Prevention Program (DPP) for Medi-Cal Enrollees ($600,000) In 2017, Governor Brown signed Senate Bill 97 to require the Department of Health Care Services (DHCS) to establish the Diabetes Prevention Program (DPP) as a Medi-Cal benefit within the fee-for-service (FFS) and managed care delivery systems. The DPP is a lifestyle change program designed to prevent or delay Type 2 diabetes among people who have prediabetes and women with a previous diagnosis of gestational diabetes. The program consists of core sessions, core maintenance sessions, and ongoing maintenance sessions and is projected to begin January 1, 2019.
     
  • Medi-Cal County Administration ($54.8 million): Chapter 244, Statutes of 2013 (SB 28) requires DHCS to develop and implement a new budgeting methodology for Medi-Cal county administration base costs no sooner than 2015-16. As an interim methodology, the Budget proposes an increase of $54.8 million ($18.5 General Fund) in 2018-19 based on adjusting the existing level of funding by the California Price Index. A similar increase will be applied for two years as the county eligibility systems move to a single Statewide Automated Welfare System.
     
  • Home Health Rate Increase ($64.5 million): The budget includes additional funds in part as a result of Proposition 56 funds for a 50 percent rate increase and associated increases in utilization for home health providers that provide medically necessary in-home services to children and adults in the fee-for-service system or through home and community-based services waivers. These increases would go into effect July 1, 2018 pending approval of federal financial participation by CMS.
     
  • 340B Drug Reimbursement within the Medi-Cal Program: The Budget proposes to restrict the use of federal 340B Drug Pricing Program reimbursements within the Medi-Cal program, effective July 1, 2019 in order to decrease administrative burdens and state costs. This is in response to a 2014 report produce by the Department of Health Care Services' Office of the Inspector General, which raised concerns about the integrity of the program.
     
  • Hospital Quality Assurance Fee Extension: On November 8, 2016, voters passed Proposition 52, which amends the state Constitution to permanently extend the existing Hospital Quality Assurance Fee. The Budget assumes General Fund savings of $852 million in 2017-18 and $885 million in 2018-19 from the hospital fee. This reflects a decrease of approximately $168.7 million General Fund compared to Budget Act due to federal changes to upper payment limit requirements.
     
  • School-Based Medi-Cal Administrative Activities and Local Education Agency Billing Option Program ($163.4 million): The Budget includes funds for repayments to the federal government resulting from overpayments of federal funds to local education agencies. To the extent a local education agency has an outstanding balance owed to the federal government, the Administration proposes applying one-time discretionary funding appropriated to those local education agencies in the 2018-19 fiscal year toward the outstanding balance owed to the federal government to repay the state General Fund.
     
  • 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.

Mental Health and Substance Use Disorder Services

  • Mental Health Services Act (MHSA): In 2004, California voters approved Proposition 63, the MHSA, which imposes a 1% tax on personal incomes over $1 million to fund mental health services. In 2017-18 the revenues from this tax are expected to grow to over $2 billion and are forecasted to continue to grow in 2018-19. The majority of the funds are distributed to counties for local mental health services programs, which are meant to be informed by local community needs.
     
  • Drug Medi-Cal Organized Delivery System Pilot ($209 million): The Budget includes funds for the five-year pilot program for participating counties using an organized delivery system to provide substance use disorder services to eligible Medi-Cal beneficiaries. A total of 15 counties are expected to implement the waiver in FY 2017-18 with an additional 20 counties anticipated to begin implementing the waiver in 2018-19.
     
  • Managed Care Mental Health Parity ($3 million): The Budget includes funds for counties to comply with the 2016 federal Mental Health and Substance Use Disorder Parity Final Rule for Medicaid and Children's Health Insurance Program, which establishes that restrictions or limits on mental health and substance use disorder services cannot be applied more stringently than current medical/surgical services.
     
  • County Mental Health Innovation Planning ($2.5 million): The Budget includes funding from the Mental Health Services Fund to contract with a consulting company to review, coordinate, and support the development of counties' mental health innovation plans.
     
  • Incompetent to Stand Trial Admissions ($117.3 million): The Budget increases funds to community alternatives to increase diversion of mentally ill offenders and decease county IST referrals to state hospitals. The goal is to strengthen existing local mental health treatment efforts, develop or enhance robust diversion programs, and reduce IST referrals by up to 30 percent

Other Health Programs:

  • Includes Funds to Improve Care in Skilled Nursing Facilities ($2 million): The Budget includes additional funds to support expansion of training slots for the certified nursing assistance workforce to support facilities in meeting new requirements to increase the minimum number of direct care service hour in skilled nursing facilities from 3.2 to 3.5 hours per patient day effective July 1, 2018.

Human Services Programs:

  • Minimum Wage Increase for In-Home Supportive Services (IHSS) Workers ($119.4 million): Due to the state minimum wage increase, IHSS workers will receive a wage increase and there will be a corresponding decrease in CalWORKs expenditures ($1.2 million) to reflect the impact of the increase in the state minimum hourly wage from $11.00 to $12.00, effective January 1, 2019.
     
  • Continuum of Care Reforms ($238.2 million): The budget includes additional funds for the transition of foster youth from group homes to Short-Term Residential Therapeutic Programs. In 2018-19, county child welfare and probation departments will be working to increase the availability of home-based family care and determining the local need for Short-Term Residential Therapeutic Programs as group homes and other residential placements decline.
     
  • Assumes additional savings from County Indigent Health ($530.5 million) as a result of more Californians being able to access the state Medi-Cal program thanks to the ACA. Pursuant to state law, these additional county savings are redirected to the CalWORKs program to offset General Fund costs.
     
  • Includes funds for Home Visiting Initiative for Young Parents ($26.7 million):  The Budget includes funds for a voluntary Home Visiting pilot program for young, first-time parents in the CalWORKs program through 2021. The goal of the program is to help young families reach self-sufficiency.
  • Increases IHSS funding ($27.8 million) in 2018-19 for county IHSS administrative costs to reflect revised workload and budget assumptions. as a result of IHSS changes related to the Coordinated Care Initiative.
     
  • Includes funding for IHSS Provider Paid Sick Leave ($29.9 million): to reflect implementation of eight paid sick leave hours for IHSS providers beginning on July 1, 2018.
     
  • Fails to raise SSI/SSP recipients out of poverty: The Governor's Budget includes federal increases but does nothing to restore state funding cuts dating back to 2011, leaving 1.3 million Californians in poverty. Effective January 1, 2018, the maximum SSI/SSP grant levels are $910 a month for individuals and $1,532 per month for couples. The maximum SSI/SSP monthly grant levels will increase by approximately $20 and $29 for individuals and couples, respectively, effective January 2019 due to the federal cost-of-living adjustments (2% for 2018 and 2.6% projected for 2019). The Cash Assistance Program for Immigrants (CAPI) benefits are equitable to SSI/SSP benefits, less $10 per month for individuals and $20 per month for couples.
     
  • Regional Center Services ($4.1 billion): Regional centers provide intake, assessment, eligibility determination, resource development and case management services. The Budget includes increased funding for regional centers primarily attributable to the increased state minimum wage.

Education

  • Local Control Funding Formula (LCFF): The Governor’s Budget proposes $3 billion to fully implement the LCFF, a school funding mechanism enacted in 2013 to prioritize funding for students and school districts with higher needs. Fully funding LCFF now fulfills this commitment two years ahead of schedule. The LCFF has two core tenets: first, to prioritize funds for low-income, limited English proficient, and foster youth, and second, to provide local communities and districts with independence and flexibility in how their funds are spent. Concerns have been raised about the extent to which districts are creating strategies that meet the needs of their student populations through this process. Therefore, the Budget commits to continuing to increase accountability and transparency.
     
  • Career Technical Education and Workforce Development: In 2016, the Strong Workforce Program was created to expand the availability of Career Technical Education (CTE) and workforce development programs in community colleges. Funding for the program was increased in the 2017-18 Budget. The Governor’s Budget expands eligibility for the program to include K-12 students and school and funds this expand with an additional $200 million. California has a significant need to develop health and mental health career pathways, particularly for communities of color and bilingual individuals. CTE historically includes a range of health professions and training programs.
     
  • California Community Colleges: The Governor proposes to change the funding structure for California’s Community Colleges to align with the Vision for Success, a strategic plan adopted by the CCC Board of Governors in July of 2017. Although no campus will receive less funding than currently allocated, funding would no longer be based primarily on enrollment. Rather, the formula would account for additional support needed for historically underserved students as well as timely completion of degrees and certificates and other success metrics. 2.1 million California students are currently served by the Community Colleges.

Public Safety

  • 2011 Public Safety Realignment: The Governor’s Budget estimates that approximately $8 billion will be sent to local governments next year as a result of the policy and financing changes implementing in 2011, which shifted responsibility for some public safety programs to local governments and provided requisite funding. Much of this funding is subject to local policymaking processes and outcomes have been controversial. In fact, while the state prison population has been reduced by more than 20% and county jail populations have likewise decreased, the majority of funds continue to be allocated to law enforcement functions rather than community health and human services programs.

Climate Change

  • Cap and Trade Funding: Last year, the Legislature extended the Cap and Trade Program through 2030. For FY 2018-19, auction proceeds have resulted in $1.25 billion in revenues available for appropriation. Governor Brown will discuss plans for these funds during the Annual State of State Address on Thursday, January 25th.

Additional Significant Proposals

  • 2020 Census: The decennial Census is a crucial tool to make decisions regarding funding, electoral representation, and public policy. It is a massive undertaking and relies on robust community participation for an accurate count of Californians. However, statements and funding cuts from the federal administration have caused concern regarding the ability to obtain and complete and accurate count, particularly of immigrants, limited English proficient communities, and other historically underserved populations. Therefore, the Governor’s proposed Budget allocates $40.3 million for statewide outreach and other activities related to the 2020 Census.
     
  • Proposition 64: In 2016, California voters legalized the personal use and sale of recreational marijuana for adults over the age of 21. In 2017, the Budget Act established a regulatory framework for medicinal and recreational marijuana and allocated funds for regulatory activities, including licensing, quality assurance, enforcement, and environmental. The Governor’s proposed Budget continues funding for these activities, which will be reimbursed to the General Fund once revenues are generated by the excise tax placed on sale of marijuana. There is no projection for revenues provided, but these are expected to be available beginning in 2019-20. In addition to regulatory expenses, the future tax revenues are dedicated to research and to programs that support substance use disorder treatment and prevention, mitigation of the environmental impacts of cannabis cultivation, and law enforcement. Despite a recent announcement by Attorney General Jeff Sessions challenging the ability of state’s to legalize marijuana, state officials have vowed to Proposition 64, as approved by voters.