LAO Report
June 19, 2015

Health and Human Services

Major Budget Changes Included in the Budget Package

In the Health and Human Services policy areas, the 2015‑16 budget package reflects these major changes.

Establishes New Earned Income Tax Credit. The budget package includes $380 million General Fund for a new Earned Income Tax Credit, designed to increase the after–tax income of the state’s workers with the lowest incomes.

Provides Medi–Cal Coverage to Undocumented Immigrant Children. The budget package includes $40 million General Fund to provide full–scope Medi–Cal benefits to children who are otherwise eligible for those benefits but for their immigration status.

Restores In–Home Supportive Services (IHSS) Service Hours From Prior–Year 7 Percent Reduction. The budget package includes $226 million General Fund, on a one–time basis, to restore IHSS services hours that had been reduced by 7 percent in a prior–year budget action. The Legislature and the Governor have stated their intent to continue this restoration of service hours beyond 2015‑16 with the use of an alternative funding source.

Provides Contingent Funding for Delayed Implementation of New Federal Labor Regulations Affecting IHSS and the Department of Developmental Services (DDS). As of June 2015, the legal validity of new federal regulations requiring the payment of overtime and other payments in IHSS and DDS is being challenged in the courts. The budget package provides funding for IHSS and DDS to comply with these regulations—contingent on the legal validity of the regulations being upheld—and assumes a delayed effective implementation date of October 1, 2015.

Establishes New Immigration Assistance Program. The budget package includes $15 million for a new program to provide (1) legal services to individuals eligible for deferred action under the President’s executive action on immigration and (2) naturalization assistance.

Provides Funding to Implement President’s Executive Action on Immigration. The budget package includes $26 million General Fund for increased benefit and administration costs in Medi–Cal, the California Work Opportunity and Responsibility to Kids (CalWORKs) program, IHSS, and the Cash Assistance Program for Immigrants (CAPI) due to the President’s executive actions on immigration that allow certain undocumented immigrants to request deferred action status and employment authorization.

Provides Increased Funding for High–Cost Drugs. The budget package increases funding for high–cost drugs in the Department of Health Care Services by $61 million General Fund (on top of a base budget of $65 million General Fund) and the Department of State Hospitals by $6 million General Fund.

Provides Funding for Continuum of Care Reform. The budget package includes about $22 million General Fund to increase foster family agency social worker rates and improve foster parent recruitment, retention, and training.

The final 2015‑16 budget package included some, but not all, of the Health and Human Services–related legislative augmentations included in the Conference version of the 2015‑16 budget bill passed by the Legislature on June 15, 2015 (AB 93, Weber). Legislative General Fund augmentations not in the final 2015‑16 budget package include, among others, funding to repeal the Maximum Family Grant (MFG) policy in CalWORKs, for rate increases for community–based services and regional center operations in DDS, for restoration of certain Medi–Cal benefits, and to repeal certain Medi–Cal provider payment reductions. (The final budget package does repeal Medi–Cal payment reductions for dental providers only, using managed care organization (MCO) tax revenues to offset General Fund costs.) As discussed below, the Governor has called a special session to consider legislation necessary to enact permanent and sustainable funding in some of the programmatic areas that were the subject of legislative augmentations not agreed to by the Governor.

Governor Calls for Special Session on Medi–Cal, IHSS, and DDS Financing

On June 16, 2015, the Governor called a special session to consider and act upon legislation to enact permanent and sustainable funding from a restructured MCO tax and/or alternative fund sources to achieve a number of goals. These include:

  • Providing at least $1.1 billion annually to stabilize General Fund Medi–Cal costs, similar in amount to what has been provided by the current MCO tax that sunsets at the end of 2015‑16. (The existing structure of the MCO tax has been found inconsistent with federal Medicaid law and regulations and would thus need to be restructured for the state to continue to draw down federal funds after 2015‑16.)
  • Providing sufficient funding to continue the 7 percent restoration of IHSS service hours beyond 2015‑16 (the 2015‑16 budget package provides one–time funding from the General Fund for this restoration).
  • Providing sufficient funding for additional rate increases for providers of Medi–Cal and developmental disability services.