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The 2016-17 Budget

California Spending Plan

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Human Services

Overview of Spending. The spending plan provides nearly $13 billion from the General Fund for human services programs. This is an increase of $1.2 billion, or about 10 percent, compared to the revised prior–year spending level, as shown in Figure 22. This is largely the result of higher spending in the Department of Developmental Services (DDS) and the In–Home Supportive Services (IHSS) program, reflecting increased funding related to special session actions for developmental community services, caseloads, costs per consumer, and labor costs. Figure 23 shows the major policy changes adopted by the Legislature as part of the 2016–17 spending plan. These changes are discussed in more detail below.

Department of Developmental Services

Under the budget plan, General Fund spending for DDS will increase from about $3.5 billion in 2015–16 to nearly $4 billion in 2016–17, or by about 14 percent. This year–over–year increase primarily reflects the impact of (1) rate increases for various community services providers and other augmentations authorized by special session legislation, (2) increased community services spending due to new policy changes as well as caseload increases and utilization changes, and (3) other workload–related adjustments.

Significant Community Services Budget Augmentations Due to Special Session Actions. The spending plan provides a total of $293 million General Fund ($481 million total funds) for DDS to implement Chapter 3 of the 2015–16 Second Extraordinary Session (AB2X 1, Thurmond), which was signed by the Governor in March 2016. (In June 2015, the Governor convened a special legislative session to address various health and human services issues, including the provision of sufficient funding for rate increases for community service providers serving individuals with developmental disabilities.) Assembly Bill 2X 1 and the budget act collectively appropriated General Fund monies to implement AB2X 1—primarily for salary and/or benefit increases for community service providers that devote most of their time to providing direct care to consumers and other rate increases. The spending plan provides $3 million one–time General Fund for the community services rate study that AB2X 1 requires DDS to submit to the Legislature by March 2019. (Additional details regarding special session actions related to the developmental services system can be found in The 2016–17 Budget: Analysis of the Department of Developmental Services Budget.)

Other Community Services–Related Spending Changes. In addition to the special session–related augmentations, the spending plan also includes $52 million General Fund (about $80 million total funds) for the following key spending changes related to the community services system:

• $26 million General Fund ($46 million total funds) to implement a new rate for Alternative Residential Model rate facilities serving four or fewer individuals.
• $13.4 million General Fund (about $17 million total funds) to support compliance of DDS, regional centers (RCs), and community providers with new federal rules for home– and community–based services, including resources for 21 program evaluator positions within each RC and four permanent positions at DDS headquarters.
• $13 million General Fund ($17 million total funds) to support additional RC service coordinator positions to improve coordinator–to–consumer caseload ratios.

New Fiscal and Program Research Unit. The spending plan provides $630,000 General Fund ($923,000 total funds) and seven permanent positions to establish a Fiscal and Program Research Unit. The budget also includes $300,000 General Fund to develop and implement a plan to monitor, evaluate, and improve the quality of community–based services through a “performance dashboard.”

Developmental Center (DC) Closure–Related Funding. On October 1, 2015, DDS submitted to the Legislature for approval a plan for the closure of Sonoma DC and on April 1, 2016 submitted plans for the closure of Fairview DC and the general treatment area at Porterville DC. The spending plan provides resources as well as reflects related policy changes to move forward with these DC closures, as follows:

• $73.8 million one–time General Fund ($78.8 million total funds) for the Community Placement Program (CPP) to support accelerated transitions for individuals moving out of Sonoma, Fairview, and Porterville DCs related to planned closures. (This is in addition to $68 million in total “base” CPP funding that has historically been provided.)
• $20.1 million one–time General Fund for retention incentives for DC staff to help maintain continuity of services during the closure process. (This funding is subject to the collective bargaining process.)
• $10.1 million ongoing General Fund ($15 million total funds) through the DC closure process for resolution and settlement of remaining workers’ compensation claims.
• $5.3 million one–time and ongoing General Fund ($7.1 million total funds) for other closure–related activities, including: (1) inventory and archiving of clinical and historical records as well as relocation of residents and their personal belongings at Sonoma DC, (2) independent monitor contracts at all three DCs, and (3) a contracted property site assessment at Sonoma DC.

Required Reporting on Backfill Needed for Lost Federal Funding. Budget–related legislation requires DDS to report quarterly to the Legislature on the estimated General Fund backfill costs due to lost federal funds (estimated to be $32.4 million in 2016–17) from the decertification of the intermediate care facilities (ICFs) at Sonoma DC and failure to comply with federal settlement terms to continue funding. This legislation also requires similar quarterly reporting for Fairview and/or Porterville DCs if the ICFs at these DCs also lose federal funding related to decertification. The budget act also authorizes up to $32.4 million General Fund for the operation of ICFs at Sonoma DC upon 30–day notice to the Legislature prior to expenditure.

Porterville DC Capital Outlay and Deferred Maintenance. The spending plan includes an increase of $8.3 million General Fund in one–time funding to replace the secure treatment area personal alarm locating system, as well as for the construction phase to upgrade the fire alarm system, at Porterville DC. In addition, the spending plan includes $18.2 million for deferred maintenance projects at Porterville DC, including $10.1 million General Fund for replacement of the boiler system and related projects.

In–Home Supportive Services

The spending plan includes $3.5 billion General Fund for IHSS in 2016–17, an increase of $452 million (15 percent) over revised estimates for 2015–16. The majority of the year–over–year increase is due to growth in caseload, hours per case, and provider wages and benefits. The spending plan also reflects two key cost drivers—(1) the General Fund restoration of service hours associated with the IHSS 7 percent reduction in service hours for as long as the newly–passed MCO tax is in place, and (2) a full year of Fair Labor Standards Act (FLSA) implementation, including newly defined provider exemptions to the workweek cap. We describe these factors in more detail below.

Restores IHSS Hours From 7 Percent Reduction With General Fund Tied to MCO Tax. The spending plan includes $266 million General Fund to restore the service hours associated with the IHSS 7 percent reduction in service hours with General Fund for as long as the recently passed MCO tax is in place. The 2015–16 budget provided one–time General Fund support of $241 million to restore these hours. The MCO tax—which was approved by the federal government in May 2016—is expected to be effective through 2018–19. (We note that budget–related legislation states that if the federal government rescinds its approval of California’s MCO tax for any reason, the General Fund support for the service hours associated with the IHSS 7 percent reduction in service hours will be eliminated.)

Provides Full–Year Funding for Implementation of New Federal Labor Regulations Affecting IHSS Providers . . . The 2016–17 budget includes $437 million General Fund for compliance with new federal labor regulations, an increase of $188 million (75 percent) over revised estimates for 2015–16. This increase reflects a full year of funding for compliance in 2016–17, compared to five months in 2015–16. The state implemented the new regulations for IHSS providers on February 1, 2016 following delays due to federal court action. The new regulations require states to (1) pay overtime compensation—at one–and–a–half times the regular rate of pay—to IHSS providers for all hours worked that exceed 40 in a week, and (2) compensate IHSS providers for time spent waiting during medical appointments and traveling between the homes of IHSS recipients. Figure 24 compares the full–year costs in 2016–17 to the partial–year costs in 2015–16 for each component of FLSA implementation.

. . . Including Funding for Administratively Established Provider Exemptions to Workweek Cap. As shown in Figure 24, the IHSS budget includes $22 million General Fund in 2016–17 for exemptions to the 66–hour workweek cap for certain providers with multiple recipients. The Department of Social Services (DSS) administratively established two types of exemptions in response to federal guidance asking states implementing workweek caps for IHSS–like providers to institute exemptions in situations where the caps could lead to increased risk of institutionalization for the consumer. The first exemption applies to IHSS providers who are—as of January 31, 2016—the parents of (or have a parent–like relationship with) two or more IHSS consumers with whom they live. DSS estimates that 1,200 providers are eligible for this exemption in 2016–17. The second exemption is applied on a case–by–case basis for providers who work for two or more recipients for whom certain circumstances outlined by DSS (for example, a language barrier) prevent the recipient from hiring another provider. DSS estimates that 5,000 providers will be approved for this exemption in 2016–17. Both exemptions allow providers to work up to 90 hours per week (not to exceed 360 hours per month).

Supplemental Security Income/ State Supplementary Payment (SSI/SSP)

The 2016–17 budget includes $2.9 billion General Fund for SSI/SSP, an increase of $95 million (3.4 percent) over revised expenditure estimates for 2015–16. This increase is largely the result of two policy changes included in the 2016–17 budget—(1) a 2.76 percent increase to the state–funded SSP portion of the SSI/SSP grant, and (2) one–time funding of $45 million to establish the Housing and Disability Income Advocacy Program.

Increases State Portion of SSI/SSP Grants by 2.76 Percent. The spending plan includes six months of funding ($37 million) from the General Fund to increase SSP grants by the California Necessities Index—2.76 percent in 2017—beginning January 1, 2017. The annual cost of this increase is estimated to be approximately $74 million General Fund. Figure 25 displays how maximum monthly grants for individuals and couples will change in 2017 under the SSP grant increase.

Establishes Limited–Term State Matching Funds for County Housing and Disability Income Advocacy Program. The spending plan provides $45 million General Fund in 2016–17 on a one–time basis—available to be spent over three years—to establish the Housing and Disability Income Advocacy Program. Under this program, state funding will be awarded to counties that provide county matching funds to establish or expand programs that help homeless individuals with disabilities apply for disability benefit programs, including SSI/SSP. These county–run programs (sometimes called “SSI advocacy programs”) perform outreach to individuals who may be eligible for disability compensation, and assist them in navigating the application and appeals process. Budget–related legislation also requires participating counties to establish or expand housing assistance programs for individuals receiving these services.

California Work Opportunity and Responsibility to Kids (CalWORKs)

The spending plan provides a total of $5.4 billion from all funds to support the CalWORKs program, a decrease of $130 million (2 percent) relative to estimated spending in the prior year. This year–over–year decrease primarily reflects the net effect of roughly $180 million in costs from new augmentations and roughly $310 million in savings largely related to declining caseloads. Within the total funding amount, the spending plan provides $705 million from the General Fund to support CalWORKs, an increase of $5 million (less than 1 percent) over the prior year. Major changes in CalWORKs funding and policy included in the 2016–17 spending plan are described in greater detail below.

Grants Increased by 1.43 Percent. Effective October 2016, budget legislation increases maximum monthly CalWORKs grants by 1.43 percent. The cost of additional cash assistance resulting from this increase—$35 million in 2016–17 and roughly $47 million ongoing—is to be paid from the Child Poverty and Family Supplemental Support subaccount (hereafter “child poverty subaccount”), a special fund dedicated to providing CalWORKs grant increases. Under current law, grant increases are automatically provided in years for which the DOF estimates that sufficient funds are available in the subaccount to fully cover the costs of an increase. Aside from cash assistance costs covered with child poverty subaccount funds, the spending plan includes $1 million from the General Fund to pay for program administration and services costs for a small number of families projected to remain assisted in CalWORKs longer than they otherwise would because of the grant increase.

As displayed in Figure 26, the grant increase is estimated to result in up to $10 in increased cash assistance per month for a family of three with no other income. For many households, this increase will be partially offset by a small reduction in the family’s CalFresh food benefit (relative to what the food benefit would have been without the grant increase) because the CalWORKs grant is counted as income for purposes of determining CalFresh benefit amounts.

Maximum Family Grant (MFG) Policy Repealed. Since 1997, families receiving CalWORKs assistance have not received an increase to their monthly grant to reflect the birth of any child born after more than ten months of continuous assistance (with some limited exceptions), pursuant to a provision of state law known as the MFG policy. (In general, larger families receive larger CalWORKs grant amounts to reflect greater basic needs, such that a family affected by the MFG policy receives less assistance than it would if the child had been born before ten months of continuous assistance.) Budget legislation repeals the MFG policy effective January 2017. When this action takes effect, it will provide increased cash assistance to an estimated 126,000 children in 93,000 families, at a total cost of $109 million (all funds) in 2016–17 and roughly $225 million annually thereafter.

Budget legislation specifies that, when funds are available, the costs of repealing the MFG policy will be paid for from the child poverty subaccount—the same subaccount used to fund grant increases, as described previously. When subaccount funds are not sufficient to cover the full costs of repealing the MFG policy, the state General Fund will make up the difference. In 2016–17, an estimated $12 million is available from the child poverty subaccount to fund the repeal of the MFG policy, leaving $97 million to be borne by the General Fund. The General Fund contribution to the cost of repealing the MFG policy is expected to increase in 2017–18 as the repeal will be in effect for a full year. In subsequent years the General Fund costs of the repeal are expected to decline as child poverty subaccount funds grow, until the ongoing costs of the repeal are fully supported by the child poverty subaccount and General Fund support is no longer required.

Child Care Reimbursement Rates Increased. The spending plan includes $19 million from the General Fund to pay for the partial–year costs in 2016–17 of certain rate increases in Stage 1 child care. The full–year costs for the rate increases are about $39 million. For more information on these rate increases and their broader effect on the state budget, see the “Child Care and Preschool” write–up in the “Education” section of this report.

Homeless Assistance Expanded. The spending plan includes increased funding for two actions related to assistance for homeless families in the CalWORKs program. First, the spending plan increases funding for the Housing Support Program (HSP), which provides a capped amount of funding for interested counties to provide housing assistance to CalWORKs families who are homeless or at imminent risk of homelessness. The Governor’s January budget proposed to continue funding HSP at $35 million (all funds) in 2016–17, the same level of funding provided in the prior year. The spending plan includes an additional $12 million from the General Fund to increase total funding for HSP to $47 million in 2016–17.

Second, budget legislation increases the availability of certain payments that CalWORKs families may receive under current law to obtain temporary shelter for up to 16 days and/or to obtain or maintain permanent housing. Currently, with a few exceptions, families may access such assistance only once per lifetime. Effective January 2017, families will be able to receive this assistance once annually. The spending plan includes $2 million from the General Fund to pay for additional assistance costs and automation system changes resulting from this action in 2016–17. Full–year costs of the action are estimated to be roughly $3 million.

Immigration Assistance

One–Time Augmentation for Federal Immigration Assistance Program. The 2015–16 budget package created the Federal Immigration Assistance program, which provides grants to qualified nonprofit organizations in the state to assist individuals applying for naturalization, deferred action, and other immigration remedies, and to conduct outreach and education in immigrant communities relative to these remedies. The Governor’s January budget proposed to fund the Federal Immigration Assistance program at $15 million (all funds) in 2016–17, the same level as in the prior year. The spending plan maintains this funding level and additionally includes $15 million from the General Fund to augment the program on a one–time basis.

Child Welfare Services (CWS)

Provides Funding for the Implementation of the Continuum of Care Reform (CCR). In 2015, the Legislature passed legislation implementing CCR. The law, Chapter 773 of 2015 (AB 403, Stone), made significant changes to the way the state cares for children who have been removed from their home and placed into the state’s foster care system. Principally, CCR aims to increase the foster care system’s reliance on family–like settings rather than institutional settings like group homes. To achieve this, CCR ends group home placements for most foster children and creates a new placement type, Short–Term Residential Therapeutic Programs, for children whose elevated behavioral and mental health needs require temporary placement in a therapeutic residential environment before they can successfully transition into home–based family placement settings. In conjunction, CCR makes changes to ensure that (1) foster children receive medically necessary mental health services, (2) supportive services are accessible within home–based family settings, and (3) placement and supportive service decisions are made using a child and family–centered approach. Implementation of CCR’s many different components is currently underway at the state, county, and provider levels in anticipation of many of AB 403’s changes taking effect on January 1, 2017. The administration expects that CCR implementation will require additional state funding in 2017–18 before anticipated CCR–related county savings reduce the amount of state resources that must be provided in 2018–19 and beyond.

The 2015–16 budget provided $21.5 million General Fund as initial funding for CCR implementation, the majority of which went to foster parent recruitment, training, and support. The 2016–17 spending plan includes $130 million General Fund ($170 million total funds) for CCR implementation with the funds going to county child welfare, probation, and mental health departments; DSS; and DHCS. The major spending components for 2016–17 are:

• Additional Funding for Foster Parent Recruitment, Training, and Support. Recognizing that new foster parents are needed for CCR to meet its goal of eventually ending most group home placements, the 2016–17 spending plan provides $43 million in General Fund devoted to recruiting, training, and supporting foster parents. This is $26 million more than was provided in 2015–16.
• Funds New Rates Paid to Foster Parents and Providers. Assembly Bill 403 gave DSS the authority to develop new monthly foster payment rates that will take effect in January 2017. The new rate structure generally increases the monthly payments foster parents and providers will receive under CCR and varies the specific payment amount by a child’s assessed level of need, rather than by age as is done under the existing rate structure. The spending plan includes $33 million from the General Fund to fund six months of the costs of the new rate structure in 2016–17.
• Remaining CCR Funding Largely Aimed at Improving Placement and Service Decisions. The remaining $54 million in General Fund included in the 2016–17 spending plan for CCR generally goes toward improving placement and supportive service decisions for foster youth, such as through the use of multidisciplinary case planning teams and standardized assessment tools.

Funds Development of Child Welfare Services–New System (CWS–NS) Project. The CWS–NS Project will replace the existing Child Welfare Services/Case Management System (CWS/CMS), which is the statewide case management system currently supporting the state’s CWS program. CWS workers throughout the state rely on CWS/CMS for access to child, family, and other case–related information to make timely decisions, perform effective case management, and ultimately keep children safe and families intact. The existing system is out of compliance with state and federal requirements.

In November 2015, DSS and the Office of Systems Integration (OSI) announced a shift from a traditional IT project development approach to an “agile” development approach for the CWS–NS Project. Under the traditional approach, implementation of a new IT system does not begin until all phases of the project are complete (it often takes several years to reach this point). In contrast, the agile approach is built incrementally from the start of the project and deployed module by module. In April 2016, the California Department of Technology approved a revised project plan—known as special project report (SPR) 2 for the CWS–NS Project based on the new agile development approach. This SPR estimates a total project cost of $421 million ($210 million General Fund) and full implementation by December 2019. The revised cost and full implementation date are roughly the same as the prior plan. The differences between the plans are in the approach and timing of specific activities throughout the project. The 2016–17 spending plan provides $55.5 million ($30 million General Fund) and 58 positions to continue the CWS–NS Project as proposed in SPR 2. We note that the 2016–17 budget also includes budget–related legislation that (1) allows for limited flexibility in the event the project moves faster than currently anticipated and (2) requires DSS and OSI to provide regular updates on the project to the Legislature and stakeholders.

Augments Funding for the Commercially Sexually Exploited Children (CSEC) Program. The CSEC program was established in 2015 to provide prevention and intervention activities and services to children who are victims, or at risk of being victims, of commercial sexual exploitation. Federal law requires certain CSEC activities—for example, social worker training and notification of law enforcement—for missing and potentially exploited youth. Other activities, such as specialized child welfare services for CSEC youth, are optional at the county level. Currently, 38 counties participate in the optional portion of the CSEC program. The spending plan includes a $5 million General Fund augmentation on top of $14 million General Fund provided in 2015–16 for the CSEC program. The $5 million augmentation is intended to extend county–optional CSEC services to additional counties and expand CSEC services, case management, and social worker training in participating counties.

Increases the Foster Care Infant Supplement. Currently, a supplemental monthly foster care payment, known as the infant supplement, is available for foster youth who themselves have dependent children. In 2015–16, the infant supplement augmented parenting foster youths’ monthly foster care payments by $411. The 2016–17 budget provides $4 million in General Fund to increase the infant supplement to $900 per month, making it roughly equal to the payments foster parents will receive for the foster children in their care in 2016–17.

Establishes State Grant Program to Prevent Homelessness Among Child Welfare–Involved Families. The spending plan includes $10 million in ongoing General Fund for DSS to establish a competitive grant program known as Bringing Families Home to combat homelessness among child welfare–involved families. Participation in the program is optional for counties, which must apply to receive the funding and offer a one–to–one county match. The funding is expected to support local services such as housing search assistance, rental assistance payments, and long–term supportive housing.

Reporting Rules for Child Near Fatalities. The state was previously out of compliance with federal requirements for reporting on child near fatalities, which are defined as cases where a child is in serious or critical condition as a result of abuse or neglect. To continue receiving $4.8 million in federal child abuse prevention funds, the state had to return to compliance with federal near fatality reporting requirements. As part of the 2016–17 budget, the administration proposed reporting rules that would fulfill federal requirements and preserve the $4.8 million in federal funding. The Legislature rejected the administration’s proposal and in August passed an alternative proposal in budget–related legislation that establishes a statewide child near fatality reporting policy, brings the state into compliance with federal law, and ensures continued federal funding. Although the policy had not been adopted when the 2016–17 Budget Act was passed in June, the June budget package assumed the continuation of federal funding and provided $115,000 General Fund for DSS state operations, which DSS will utilize to implement the reporting policy adopted by the Legislature.

Department of Aging

The budget provides $36 million General Fund for the Department of Aging in 2016–17, an increase of $2 million General Fund above 2015–16. This increase represents a one–time augmentation of $2 million for home–delivered meals to seniors and people with disabilities, estimated to result in approximately 270,000 additional home–delivered meals in 2016–17. The spending plan also includes $1 million (one time) from the State Health Facilities Citation Penalties Account for the Long–Term Care Ombudsman program. This maintains total funding for the Long–Term Care Ombudsman program at 2015–16 levels ($11 million total funds). In 2015–16, the budget also included a one–time increase of $1 million for the Long–Term Care Ombudsman program from this account.

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