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California State Budget

* LEGISLATIVE ANALYST: STATE HEADED FOR $10 BILLION DEFICIT

* GOVERNOR'S BUDGET NEXT YEAR LIKELY TO HAVE MAJOR CUTS

* MAJOR IMPACT TO PEOPLE WITH DISABILITIES, SENIORS, POOR

 

SACRAMENTO (CDCAN) -  California budget crisis will grow dramatically worse by June 2008, with a total budget shortfall that will grow over $10 billion unless there is "corrective action" taken by the State that could include proposals for major increases in revenues and massive spending cuts next year, says a report released this morning by the Legislative Analyst Office (LAO), the non-partisan agency that reviews budget issues for the State Legislature.  [The full report is available on the CDCAN website at www.cdcan.us].  

 

The report, released by Legislative Analyst Elizabeth Hill [pictured left]  who is widely respected by both parties in the Legislature, confirms what others have been claimed for the past several weeks that California is now facing the most serious budget crisis since 2003 that will have major impact especially on health and human service programs, including those critical to children and adults with disabilities and other special needs, seniors and low income families.  At a time when policymakers are focused on major health care reform in California, the budget areas especially vulnerable include Medi-Cal, In-Home Supportive Services, SSI/SSP (Supplemental Security Income/State Supplemental Payment), Developmental Services (regional center funded community-based services, and developmental centers), mental health services, affordable and accessible housing and transportation. 

 

Legislative Analyst Hill, who said that California's budget situation has deteriorated significantly, underscored however that her report is a "projection" of what would happen if changes are not made to the state budget - and not a prediction of what the Governor and Legislature will end up adopting in terms of changes in law and spending cuts or increase in revenues.  She however urged policymakers to take action - including those that will impact the current year budget.

 

 

[Note: CDCAN is planning a series of CDCAN Townhall Telemeetings in the coming weeks focusing on the budget crisis and related issues, with the first scheduled November 27th, between 1 and 2:30 PM featuring Department of Developmental Services officials. Subsequent telemeetings will be scheduled focusing on other budget areas including Medi-Cal, In-Home Supportive Services and SSI/SSP, Special Education, Employment, Affordable and Accessible Housing and Transportation]

 

Governor Orders Agencies To Submit Plans for Major Spending Cuts

Budget Crisis Combination of Shortfalls This Year and Next

The massive budget deficit, according to the Legislative Analyst report, is the combination of a $2 billion shortfall projected for this year's State budget passed last August by the Legislature and signed by the Governor and in addition to that number, another shortfall of over $8 billion projected for the entire budget year that begins on July 1, 2008. 

 

The budget shortfall of $2 billion for the current budget year comes despite a budget reserve of $4.1 billion - which the Legislative Analyst Office says will be gone by June 30, 2008, because of a dramatic drop in revenues and increases in spending that outstrip what the State brings in.  With revenues expected to grow by 4.6% and spending to grow by 7%, barring a major improvement in the State's economy resulting in a dramatic increase in state revenues, or "corrective action" by the Governor and Legislature resulting in new taxes or other revenues and/or massive spending reductions, the Legislative Analyst report projects that the State will face an additional $8 billion shortfall for the July 1, 2008 to June 30, 2009 state budget year when, if nothing is changed.  That adds up to a gap of over $10 billion when the two numbers are combined. 

 

 

The report projects that the huge shortfall - barring any action by the Governor and Legislature, will continue into the July 1, 2009 to June 30, 2010 budget year, with a deficit estimated at $8 billion. The report suggests that after that the deficit will drop to about $3 billion in large part because the cost of paying off loans that were made to help balance the budget in previous years would have be fully paid off in 2010. 

Budget Shortfall Could Grow Worse Depending on Pending Lawsuits
* The budget shortfall could grow even worse depending on the outcome of several lawsuits against the State, including those involving use of transportation funds to balance this year's budget. 

* Transportation Funding Shift - In September, advocates for public transportation filed a law suit against the State claiming that the shift of $1.3 billion in transportation funds to other budget areas in order to balance the State budget for 2007-2008 was illegal.  Of that total amount, $400 million was meant to be an on-going, permanent transfer to other budget areas, with the remaining $900 million in transportation funds shifted to other budget areas - including health and human service programs - for this budget year only. 

The case, expected to be heard at the end of this month, and if the State loses, it could result in up to $1.3 billion added to the $10 billion shortfall next year. 

* Other Lawsuits - Other additional costs due to lawsuits and legal actions against the State relate to the prison health care system, tax laws regarding limited liability companies, unclaimed property program. 

 

Legislative Analyst Urges Legislature To Consider "Numerous Options"

The Legislature, says the Legislative Analyst report "...will need to develop a budget plan that provides almost $10 billion in solutions" and that a "...substantial portion of the current budget problem needs to be addressed through ongoing solutions" and that even "with such an approach, the state would still need to come up with billions of dollars in additional solutions of a more limited duration to get through the worst of the upcoming budget years—2008–09 and 2009–10"

 

The Legislative Analyst report says that there are "numerous options available" to put in place ongoing budget solutions, though "almost all of them involve making tough policy choices" for legislators and the Governor.  This options, listed by the Legislative Analyst report include:
* Slowing program growth by reducing or eliminating cost–of–living adjustments (COLAs).
* Rolling back recent program expansions or reducing the level of program benefits.
* Eliminating duplicative or ineffective programs and restructuring program delivery methods.
* Shifting costs to special funds or to user fees.
* Eliminating tax credits and tax expenditure programs.
* Increasing efforts to enforce existing tax laws and ensure compliance.
* Raising tax rates.

 

Legislative Analyst Urges Mid-Year Action on Current Budget

The Legislative Analyst report also strongly recommends that the Governor and Legislature take action early next year to address the shortfall in the current year budget by making mid-year reductions that could include:

* Reducing Proposition 98 spending to the minimum guarantee in 2007–08 would result in about $400 million in savings that year and allow roughly the same amount of savings to be achieved in 2008–09.

* Delay or suspend COLAs, it may require action prior to July 1, 2008. For example, the 2007–08 Supplemental Security Income/State Supplementary Program COLA is due to go into effect on June 1, 2008, and the Legislature would need to act this spring if it wished to suspend it and generate $250 million in ongoing savings beginning in 2008–09. In the end, any improvement that the state can make in its 2007–08 year–end balance will make it that much easier to balance the 2008–09 budget.
* Suspend the Budget Stabilization Account (BSA) Transfer

 

Summary Highlighted Program In the Legislative Analyst Office Report:
The Legislative Analyst Report briefly covered several program areas that provided estimates on current and future spending and growth. 

 

MEDI-CAL
* The Medicaid Program - called Medi–Cal in California,  provides health care services to recipients of CalWORKs or SSI/SSP grants, and other low–income persons who meet the program’s eligibility criteria (primarily families with children and the elderly, blind, or disabled). The state and federal governments share most of the program costs on a roughly equal basis.
* Current Year (2007-2008) State Budget:  State funds for Medi-Cal will total $14.3 billion in the current year, about the same amount actually appropriated in the 2007–08 Budget Act.
* 2008-2009 State Budget: The Legislative Analyst Office report says state funding for Medi-Cal will grow to about $15 billion in 2008–09, a 5.2% increase, largely due to increases in costs and usage of medical and health services as well as the implementation of a new managed care rate–setting methodology. By the end of the State Budget year for 2012–13, the Legislative Analyst report estimates that State spending for Medi–Cal will reach $18.7 billion, an average annual increase of 5.5%.

* Caseload Trends: The Legislative Analyst report estimates that the caseload for Medi-Cal will be relatively flat overall, but the caseload for those persons who have disabilities and seniors will grow faster than that for families and children through the period of 2007 to 2013. 

SSI/SSP (SUPPLEMENTAL SECURITY INCOME/STATE SUPPLEMENTAL PAYMENT)
* The SSI/SSP program  provides cash assistance to eligible persons with disabilities, seniors and the blind. There are two parts of the grant: SSI is funded only by federal dollars and the SSP part is state funds only.  
* Current Budget Year: State spending for SSI/SSP is estimated to be over $3.6 billion in 2007–08, an increase of 3.4% compared to the prior budget year.

* 2008-2009 State Budget Year - Legislative Analyst report estimates that State spending for developmental services will grow to more than 2.8 billion in state funds, an increase of about 7.7% from 2007-2008. 
* Between 2007–08 and 2012–13, the Legislative Analyst report estimates that State spending for the developmental services will grow by $1.4 billion and reach a total of $4 billion in State spending every year, due mainly to increased spending by the 21 regional centers on community–based services. The Legislative Analyst report  assumes that Public Transportation Account funds will continue to be used to pay for regional center transportation related services - an assumption that could change as a result of a pending lawsuit. 
* Spending for the 5 developmental centers and 2 smaller facilities is projected to remain relatively flat from 2007 through 2013 State budget years.  
* Caseload Trends: The report reflects historical yearly increases of 3.8% in caseload (persons receiving services) and in the average cost increase of 7% of serving each person receiving regional center funded services.

 

HEALTHY FAMILIES PROGRAM
* In 1997, the federal government enacted the State Children’s Health Insurance Program (SCHIP) which in California funds several programs - the largest being "Healthy Families"  which provides health insurance coverage to eligible children in families with incomes below 250% of the federal poverty level.  The federal program provides $2 of federal money for every $1 in state funds. 

* The federal government has also authorized the use of federal funds to cover children up to age two in families with incomes below 300% who have transferred to the Healthy Families Program from the state’s Access for Infants and Mothers program.

* Current 2007-2008 State Budget Cost: The Legislative Analyst Office report estimates that overall State spending for Healthy Families will be about $390 million in 2007–08, about $10 million less than what was actually  provided in the 2007–08 Budget Act. This estimated decrease is due to slower caseload growth than previously projected.  They further estimate that overall State spending for the program will increase to almost $445 million by 2008–09 and that by 2012–13 the program will have an annual State spending cost of almost $570 million or a average increase in spending of about  7.8% each year through 2013.

* Federal State Children's Health Insurance Program Reauthorization. Funding for SCHIP has been authorized by Congress only through November 16, 2007 at the 2007 Federal budget level.  The Legislative Analyst Office report  assumes that Congress and the President will reauthorize SCHIP funding the same level of roughly two–to–one federal/state matching basis and at a level necessary to support existing caseloads as well as projected growth for all programs that use SCHIP funds. If Congress does not reauthorize funding for SCHIP at a level necessary to support the growing caseloads, the Legislative Analyst  projects about a $3 billion shortfall in federal funds over the next five years for California. 
* SB 437 [Chapter 328, Statutes of 2006] implementation that establishes presumptive eligibility for the Healthy Families Program and an accelerated enrollment program and establishes a process by which Healthy Family Program applicants can self–certify income at the time of their annual eligibility review. The Governor vetoed funds appropriated by the Legislature to implement SB 437 in 2007–08 and indicated in his veto message his intent to delay implementation by one year.  The Legislative Analyst Office report assumes that implementation will begin in 2008–09 with full implementation of these changes occurring in 2009–10, which accounts for the gradual increase in caseload resulting from this legislation.

 

* Current Budget 2007-2008 Year:  The Legislative Analyst report says that spending for the CalWORKs program is estimated to be $1.5 billion in 2007–08, a $480 million decrease from the previous budget year.

* 2008-2009 State Budget Year:  The report projects that spending for CalWORKS will  increase by about $180 million in 2008–09, and through 2013, increase by over $80 million each year.]
Caseload Trends: The Legislative Analyst Office report says that the CalWORKS program caseload reached its peak in March 1995 and reached its low point in July 2003, declining by 49% to about 475,000 cases. This decline  in caseload, according to the report, is due to a number of factors including the strong economy of the late 1990s, annual reductions in the teen birth rate, and CalWORKs program changes which emphasized welfare–to–work services. For the next 18 months, the caseload grew very slowly to a total 493,000 cases in December 2004. Since then, the caseload has once again been in a slow decline, falling to 455,000 as of July 2007. Because the rate of decline has slowed significantly during the past year, the Legislative Analyst report is projecting the caseload will remain relatively flat during the forecast period.

 

IMPACT TO PEOPLE WITH DISABILITIES, SENIORS & OTHERS

With a shortfall of projected of over $10 billion, the health and human services budget - which contains programs and funding for nearly all the major programs impacting children and adults with disabilities, mental health needs, seniors, the blind, persons with traumatic brain and other injuries and disorders including Alzheimer's and MS, seniors and low income families and direct care and IHSS workers,  is the budget area most vulnerable for significant major cuts and reductions next year.   

 

 

Beyond possible spending reductions and other proposals that could impact hundreds of thousands of children and adults with disabilities, mental health needs, seniors and low income families and workers across California, the growing budget crisis also has or will impact the following major issues:

* Health Care Reform: While the budget crisis worsens, at the same time the Governor and the Legislature are trying to come to agreement on major health care reforms that would be impacted - and have impact on the budget shortfall. How health care reform is put together and if it passes - has major impact on children and adults with disabilities, seniors and low income families and workers. 

* Autism Commission Report Proposals: many of the recommendations by the Blue Ribbon Legislative Commission on Autism require changes in existing state laws or new state laws and possibly significant resources in funding. 

* Olmstead Implementation - further progress in the State's implementation of the landmark 1999 US Supreme Court "Olmstead Decision" that requires, under the federal Americans with Disabilities Act, for  the states to take measures, to avoid the "unjustified institutionalization" of persons with disabilities and seniors, could be impacted.  Some advocates have been sharply critical of what they say is "extremely slow" progress in moving persons with disabilities and seniors out of institionalized settings into integrated community settings.  The budget crisis could impact state funding for health services and supports needed to support people in community-based settings, and also funding for other services and supports including accessible transportation, housing, employment and education. 

NEXT STEPS

The Legislature is currently in special session on health care and also on water - though neither house is meeting on a regular basis on either issue.  [Note: the Assembly Health Committee is meeting today to consider proposals regarding health care reform, and the full Assembly could meet after Thanksgiving, followed by the State Senate in early December to possibly approve a health care reform package and send it to the Governor.].  The regular session of the Legislature is scheduled to reconvene on January 7th (this is the regular session where the budget for 2008-2009 and  bills from the 2007 session, with exceptions, are carried forward for further action)

 

BUDGET FOR JULY 1, 2008 - JUNE 30, 2009

* The State Constitution requires the governor to submit a proposed balanced budget to the Legislature on January 10th.  Governors give hints of what that budget proposal will contain in their annual "State of the State" address to the Legislature a week or a few days before that. 

* The Governor - on November 5th, ordered all state agencies to present to him plans for reductions in state spending of 10% - most of which would likely require changes in state law that need approval by the Legislature to be considered for inclusion in the budget that the Governor will submit on January 10th.  It doesn't mean those proposals will be included in the budget  proposal he submits on January 10th - but it is a clear signal that he intends to look at spending reductions as one of the major ways to address the $10 billion budget gap. 

* The Legislative budget committees and subcommittees in both houses usually schedule hearings to review major parts of the Governor's proposed budget as early as late February through May.

* Governor releases in early May changes or revisions to the proposed budget he had submitted on January 10th. These changes or revisions - referred to as the "May Revise" or the "May Revision" often contain new major proposals that previously were not announced. 

* The Legislative budget subcommittees in both houses will usually hold a final round of hearings to review new proposals contained in the revised version of the proposed budget

* After that the budget proposal heads to the floors of both houses, then for review and action by a special joint committee - called a budget conference committee, composed of 3 members each from the Assembly and State Senate to resolve differences between the actions taken by both houses.

* Budget proposal then heads for final action on both floors of the Legislature - though in reality outstanding issues are left to the Democratic and Republican legislative leaders and Governor to resolve. 

MID-YEAR CUTS AND REDUCTIONS

* In previous major  budget crisis - including 2002 and 2003, then Governor Davis in the fall of 2002 and in the fall of 2003, the new incoming Governor Schwarzenegger proposed mid-year cuts and reductions, meaning proposals that would cut spending and make other changes in the current year's budget. Both called special sessions of the Legislature to approve such cuts - though in both cases, the Legislature refused to enact any of the proposed mid-year major cuts meant for the current budget year.  However the Legislature in 2003 and 2004 did agree to modified versions of cuts for the new budget year that begins on July 1. 

* As of now, the Governor has not proposed such mid-year reductions - which would require approval by the Legislature. * However, all that could change in the coming months, especially if the State's economic picture gets worse and the Governor declares a "fiscal emergency", triggering provisions of Proposition 58, the Balanced Budget Initiative passed by voters in March 2004.  [see below]

PROPOSITION 58 IMPACT

* Unlike in 2002 and 2003,  Proposition 58, passed by voters in March 2004 by 71-29%, gives the Governor special (though limited) authority  to declare a "fiscal emergency" should he or she determines that the state is facing substantial revenue shortfalls or spending increases (resulting in going over budget) that would force the Legislature to act.  In theory, the Governor could make such a declaration now. 

* After declaring a "fiscal emergency" the Governor would then be required to propose legislation to address the problem, and call the Legislature into special session to consider his proposals and address the problem. If the Legislature fails to pass and send to the Governor legislation to address the budget problem within 45 days, the Legislature  would be prohibited from acting on any other bills or adjourning until such legislation is passed.

* It is not certain what happens if the Legislature passes legislation that the Governor does not believe addresses the budget problem or what actually defines, and adjourns the special session and moves forward on regular session bills.  Almost every year in the past decade the Legislature has failed to meet the constitutional deadline of passing a State budget by June 15th each year, or pass a budget by the beginning of the State budget year without any penalty against them. 

 

Please: Contributions Urgently Needed!

Advocacy Without Borders 
Advocacy Without Borders: Connecting People With Disabilities, Mental Health Needs, Seniors, Traumatic Brain & other injuries, People with MS & other health needs, including People of color, different languages, cultures,  Families, Workers, Providers, & Organizations to Rights & Unified Action. This report - and the CDCAN townhalls, and other events and projects are for all of them and for promoting advocacy without borders toward unified action.  We are one community. 
To respond to this report reply to: Marty Omoto at martyomoto@rcip.com    CDCAN website: www.cdcan.us
To continue the CDCAN website, the CDCAN News Reports.  sent out and read by over 45,000 people and organizations, policy makers and media across California and to continue the CDCAN "Advocacy Without Borders Townhall Telemeetings" which since December 2003 have connected thousands of people with disabilities, seniors, mental health needs, people with MS and other disorders, people with traumatic brain and other injuries to public policy makers, legislators, and issues. Please send your contribution/donation (make payable to "CDCAN" or "California Disability Community Action Network):

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The CDCAN Townhall Telemeetings are partially funded by a small grant from the USC UCEDD, Grant #90DD0540 from the Administration on Developmental Disabilities. (note: the opinions expressed or content in these reports do not necessarily reflect the views or opinions of the USC UCEDD. 
MANY THANKS to Manteca CAPS, Training Toward Self Reliance, UCP, California NAELA, Californians for Disability Rights, Inc (CDR) including CDR chapters, CHANCE Inc, Parents Helping Parents, Arriba, Strategies To Empower People (STEP), Parents Helping Parents, Asian American parents groups, Resources for Independent Living and many other Independent Living Centers, several regional centers, People First chapters, IHSS workers, other self advocacy and family support groups, developmental center families, adoption assistance program families and children, and others across California.