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November 22, 2021

The 2021-22 California Spending Plan

Human Services

Department of Developmental Services (DDS)

Overview of DDS Spending Plan

The spending plan provides $10.9 billion from all fund sources for DDS, an increase of 10.6 percent over revised 2020‑21 expenditures ($9.9 billion). Of the total 2021‑22 DDS budget, $10.46 billion is for the regional center (RC) system, $330.1 million is for the state-operated facilities program, and $150.8 million is for DDS headquarters staff and activities.

The General Fund—which comprises nearly 62 percent of the total DDS budget—provides $6.7 billion in 2021‑22, up $899 million, or 15 percent, over revised 2020‑21 General Fund expenditures ($5.8 billion). While General Fund spending is increasing by $905 million for the RC system and by $31 million for DDS headquarters, these increases are offset slightly by declining costs of $36 million in the state-operated facilities budget (due primarily to spending less in 2021‑22 on coronavirus disease 2019 (COVID-19) surge capacity than in 2020‑21).

About three-quarters of the growth in General Fund spending is due to caseload growth (and any changes in use of services), costs associated with scheduled increases to the state minimum wage, and maintaining service provider rate increases that took effect in 2019 and 2020. The remaining one-quarter of year-over-year General Fund growth is the result of numerous new or expanded activities, which are discussed in greater detail below, but broadly speaking include: (1) service provider rate reform, (2) activities that aim to improve the quality of services provided by RCs and service providers, and (3) activities that aim to improve consumer access to services and equity in service provision. A number of these initiatives will have significant increases in spending in subsequent budget years, which we note in each case. In addition, DDS will receive federal funding—as described in the nearby box—to pursue some other complementary activities. Taken together, the activities approved for DDS in 2021‑22 (whose total 2021‑22 cost is about $220 million General Fund) and subsequent years include numerous efforts intended to reform and improve the system and by 2025‑26 reach an ongoing cost of nearly $1.5 billion General Fund.

Enhanced Federal Funding Facilitates Program Enhancements

American Rescue Plan (ARP) Act Provides Additional Federal Funding for Home- and Community-Based Services (HCBS). The ARP Act allows states to draw down enhanced federal funding for HCBS funded through the Medicaid program, provided that states spend the additional federal funding on HCBS program enhancements. Under this provision of the ARP Act, California is eligible to draw down an estimated additional $3 billion in federal Medicaid funds. Budget-related legislation authorizes the state to draw down this additional federal funding and places parameters on how the state may spend the additional funding on HCBS program enhancements. Subsequent to legislative enactment of the 2021‑22 budget package, the administration developed and then submitted an HCBS spending plan to the federal government for its approval. More information about the HCBS spending plan—which spans services provided by numerous departments including the Department of Developmental Services (DDS)—is available here.

A Number of DDS Activities Proposed in the HCBS Spending Plan Already Were Included in the 2021‑22 Budget Package. California’s HCBS spending plan includes several initiatives across multiple departments that were part of the 2021‑22 budget package approved by the Legislature and the administration. For DDS, this includes funding for the rate reform and quality incentive program plan (discussed next in this post); language access resources; and restoration of social recreation services, camp services, educational services, and nonmedical therapies.

Two New Service Activities Included in the HCBS Spending Plan. California’s HCBS spending plan includes two additional service initiatives in the DDS system: coordinated family supports for consumers who live in the family home and integrated recreational opportunities for children and adolescents. The former is a pilot program to increase support—such as through the provision of services similar to “supported living services” which currently are available only to individuals living outside the family home—for consumers who live with their families. The latter will provide grants to community-based organizations to provide integrated recreational opportunities for children and adolescents. These activities must include children/adolescents with and without developmental disabilities.

HCBS Spending Plan Also Supports Planning for DDS Information Technology (IT) Upgrades. California’s HCBS spending plan also includes funding to support planning for the replacement of two outdated DDS IT systems—the uniform fiscal system (which supports invoicing and payment of service providers) and the consumer records management system.

Caseload Estimates. The spending plan assumes that RCs will serve 386,431 individuals in 2021‑22 (53,966 infants and toddlers under age 3 and 332,465 consumers ages 3 and older), up 9.7 percent from 2020‑21. The robust growth assumption assumes DDS and RCs will not only resume growing at pre-pandemic rates, but also pick up many of the infants and toddlers who did not enter the system during the first year of the pandemic. The spending plan assumes that state-operated residential and community facilities will serve 322 individuals in 2021‑22, the same as in 2020‑21.

Service Provider Rate Reform With Focus on Outcomes

Budget and Associated Legislation Enact Five-Year Rate Reform Plan. The spending plan and associated budget legislation lay out a five-year plan to reform service provider rates and rate-setting. The plan will phase in funding to support rate models developed in a 2019 rate study (updated to 2021‑22 levels). The plan also will phase in a quality incentive program, which is meant to reward providers for reaching certain performance and outcomes-based targets.

Highlights of the five-year plan include:

  • Year 1. In 2021‑22, $89.9 million General Fund is provided to increase service provider rates beginning April 1, 2022. Rate increases will equal one-quarter of the difference between a provider’s current rate and what the fully funded rate model (as of 2021‑22) would be according to the rate study.

  • Year 2. In 2022‑23, $346.1 million General Fund will be provided to annualize the previous year’s rate increases and to implement the first stage of the quality incentive program.

  • Year 3. In 2023‑24, $678.6 million General Fund will be provided to increase service provider rates beginning July 1, 2023. The cumulative total of this rate increase and the previous increase will equal one-half of the difference between the provider’s rate as of March 30, 2022 (before the first rate increase took effect) and the fully funded rate model. Additional funding will be provided for the quality incentive program.

  • Year 4. In 2024‑25, $706.1 million General Fund will be provided to sustain the previous years’ changes.

  • Year 5. In 2025‑26, $1.2 billion General Fund will be provided to complete the phase in of rate reform and the quality incentive program. Rate models will be fully funded beginning July 1, 2025 as follows: A service provider’s base rate will equal 90 percent of its rate model, while up to 10 percent of its rate model will be available as incentive payments if the provider achieves its performance and outcomes targets.

Rate Reform Relies on 2019 Study for Its Foundation. The rate reform plan implements rate models that were developed in the statutorily required (2019) rate study. Each service category’s rate model takes into account the cost of direct care worker wages and benefits, indirect costs such as operations and administration, and regional cost differences. The recently approved plan will phase in these rate models (at the 2021‑22 level) over the five-year period. As rate models are phased in, providers whose current rate exceeds the 2021‑22 rate model level will not receive a rate increase, however, their rate also would not be reduced to the rate model level until July 1, 2026.

Adds Quality Incentive Program. Beginning in 2022‑23, providers will be eligible to receive a quality incentive payment based on their performance. Performance metrics will evolve from being more process-related, such as meeting time lines, to include outcomes measures, such as whether individual consumers were able to achieve their goals. Metrics and benchmarks will be established with input from stakeholders through public meetings and 30-day public comment periods. DDS also will seek input from subject matter experts. The first set of metrics will be provided to the Legislature and made available to the public by April 1, 2022 for implementation in the 2022‑23 budget year. In subsequent years in which DDS proposes additional or revised metrics and benchmarks, these must be made available by April 1 for implementation July 1.

Considers Home- and Community-Based Services (HCBS) Final Rule. Budget-related legislation requires an interim update from DDS to the Legislature by March 1, 2022, which will identify any other statutory, regulatory, or departmental policy changes needed to implement rate reform and the quality incentive program. In addition, this update must include information about service providers’ progress toward achieving compliance with the federal HCBS final rule, which promotes community-based and integrated programs and services of consumers’ choosing. (Providers must achieve compliance by March 2023.) This information must identify service categories that are unlikely to ever achieve compliance due to the structure of their service. For example, work activity programs (also known as sheltered workshops) likely will not be compliant with the final rule, because by definition, they are site-based, non-integrated programs.

Augmentations Focused on Improving Service Quality and Outcomes

The 2021‑22 spending plan includes a variety of initiatives that aim to improve the quality of services provided to DDS consumers and, ultimately, to improve consumer outcomes. We highlight several of these initiatives below.

RC Performance Incentive Program and Support for Service Coordinators. The spending plan includes $4 million General Fund in 2021‑22 and $61 million in 2022‑23 and ongoing to implement an RC performance incentive program and for the hiring of new RC service coordinators beginning in 2022‑23. DDS is required to convene a workgroup of experts and stakeholders to develop the performance indicators and benchmarks that will be used to assess RC performance. DDS is required to provide the Legislature an update about the performance incentive program by January 10, 2022 with release of the Governor’s 2022‑23 budget proposal and a second update with the Governor’s revised 2022‑23 budget proposal in May. In any fiscal year in which funding is provided for new service coordinators (such as 2022‑23), RCs must hold a public meeting to discuss its hiring plan and submit a report to DDS by October 10 and March 10 with the number of new service coordinators hired and data on current service coordinator caseloads.

Outcomes and Quality Improvement Pilot Project. The spending plan provides $10 million one time for a pilot program to test a method for measuring and reporting consumer outcomes and service provider quality improvements.

Direct Service Professional (DSP) Training and Certification. The spending plan provides $2.9 million General Fund in 2021‑22, which ramps up to $51 million General Fund by 2023‑24 and ongoing, for the training and certification of DSPs and associated increases in DSP wages. Initial funding will be used to design the program, while the bulk of funding in later years will pay for wage increases for DSPs who underwent the training and received certification. While DDS may develop new curriculum or use existing curriculum, budget-related legislation stipulates that training should promote services that are person-centered and culturally and linguistically appropriate and that improve consumer outcomes.

Self-Determination Program (SDP) Supports. The spending plan provides $7.8 million General Fund in each of 2021‑22, 2022‑23, and 2023‑23, and $3.2 million General Fund in 2024‑25 and ongoing, to support administration of the SDP. The SDP became available to all interested consumers of the DDS system on July 1, 2021 after an initial three-year phase-in period during which enrollment was capped at 2,500. (The program was rolled out more slowly than anticipated; consequently, enrollment only reached 625 participants at the end of the three years.) In addition, $1 million of the available funding is for the creation of a new Office of the SDP Ombudsperson. Budget-related legislation calls for the Director of DDS to appoint the SDP Ombudsperson (who will serve a four-year term) to run the independent and autonomous office within DDS. The office will assist consumers and their families in understanding their rights in the SDP and compiling and reporting relevant data to the Legislature.

Employment Grants and Changes to Employment Incentives and Paid Internships. The spending plan provides $10 million General Fund one time to DDS and $10 million General Fund one time to the Department of Rehabilitation (DOR) for a consumer employment-related grant program. DDS and DOR will award grants to entities, such as businesses, chambers of commerce, and community colleges, with the aim of increasing competitive integrated employment among individuals with developmental disabilities. Grants may be provided to employers to incentivize the hiring of DDS consumers or to support the training of managers and human resources staff and funding also may be used for technical assistance and marketing campaigns.

In addition to this funding for a new grant program, budget-related legislation made some adjustments to the current employment incentive and paid internship programs. First, the amount of the incentive payments provided to service providers who successfully place a DDS consumer in a competitive integrated employment position were increased. Second, incentive payments were added for service providers who successfully place consumers in paid internship positions. Third, funding provided to compensate consumers participating in internships was restructured. Rather than capping the amount a consumer could receive in wages for an internship in a single year (which was based on the minimum wage from a number of years ago), statute now caps the total number of hours the consumer intern may work in a single year (at 1,040 hours) and allows funding to cover all required employer-related costs (such as benefits). Because DDS has not come close to spending its annual appropriation ($20 million General Fund) related to competitive integrated employment and paid internships, the spending plan assumes the costs associated with these new changes can be absorbed within the existing allocation and does not provide additional funding.

Augmentations Focused on Improving Equity and Increasing Access to Services

The 2021‑22 spending plan includes several initiatives—described below—that aim to improve equity in DDS programs and increase consumer access to services.

Implicit Bias Training for RC Staff. The spending plan provides $5.6 million General Fund ongoing for implicit bias training for RC service coordinators as well as RC staff who set policy for an RC.

Targeted Service Coordination for Consumers Who Currently Receive Few Paid Services. Individuals who enter the DDS system can receive two kinds of services—case management services that are delivered by the RC and direct services (such as residential, day programs, respite, or transportation services) that are coordinated for the consumer by RC service coordinators and delivered by service providers and their DSP staff. Some consumers in the DDS system currently receive only case management services from the RC, either because the RC did not authorize any direct services for them to receive or because they have not used the services authorized for them by the RC. Annual data compiled by RCs and reported to DDS indicate that the consumers who do not receive direct services or whose total cost for direct services is low tend to be disproportionately people of color or individuals whose first language is not English. The spending plan provides $10 million General Fund annually to establish lower caseloads (up to 40 consumers per service coordinator) for the RC service coordinators who work with consumers who currently have no direct services or whose direct service costs are low.

Resources for Language Access and Cultural Competency. The spending plan provides $10 million General Fund ongoing to improve language access (such as by providing translation to non-English speaking families) and culturally competent orientations and outreach.

Streamlined Health and Safety Waiver Process for Underserved Consumers. If the health or safety of a consumer is at risk, the DDS director may waive the current set rate for the consumer’s service provider and approve a rate increase. For example, the service provider may need additional staff or additional staffing hours to ensure the health or safety of the consumer. The 2021‑22 spending plan provides $3 million General Fund ongoing to support a more streamlined waiver application and approval process for underserved consumers who are non-English speaking.

Lanterman Act Provisional Eligibility for Individuals Ages 3 and 4. The spending plan provides $23.8 million General Fund ongoing to provide provisional eligibility for services under the Lanterman Developmental Disabilities Services Act (Lanterman Act) to children ages 3 and 4 who meet certain criteria. Previously, when a toddler receiving services through DDS’s Early Start program reached age 3, an assessment was made to determine whether the child was eligible to receive services under the Lanterman Act that requires the disability to be substantial and indefinite. Because determining whether a child has a substantial and indefinite developmental disability sometimes can be difficult at age 3, this new change allows RCs to provide services to children ages 3 and 4 who meet some, but not all, of the Lanterman Act criteria, and reassess them at age 5.

Community Navigators. The spending plan provides $3.2 million General Fund ongoing for DDS to contract with the state’s Family Resource Centers to facilitate having families help families—by providing information and assistance—navigate the DDS system and access other public programs. The first year of funding will also support an evaluation of grants that have been provided to RCs and other organizations since 2016‑17 to reduce racial/ethnic and other disparities in spending in the RC system.

Supports for Consumers Who Are Deaf. The spending plan provides $1.8 million General Fund ongoing to provide extra resources and supports for consumers who are deaf. Funding will allow DDS to hire a specialist and for RCs to hire coordinators to expand RC staff training and support an expansion of resources and services for individuals who are deaf.

Outreach to Tribal Communities About the Early Start Program. The spending plan provides $500,000 General Fund ongoing to conduct outreach to tribal communities about DDS’ Early Start program for infants and toddlers under the age of 3 who exhibit a developmental delay or who are at risk of having a developmental disability.

Bonus Pay for Bilingual Service Provider Staff. The spending plan provides $2.2 million General Fund in 2021‑22, $4.3 million General Fund in 2022‑23, and $6.5 million General Fund in 2023‑24 and ongoing to support wage bonuses for DSPs who are bilingual—including in American Sign Language—and can support the estimated 90,000 consumers who speak a primary language other than English. Funding will not only support the wage bonuses, but also the costs to develop a process for verifying the DSPs’ competency in another language.

Other Spending Plan Provisions

Expansion of Crisis Services. The spending plan provides $8 million General Fund in 2021‑22 and $11 million General Fund in 2022‑23 and ongoing to support the expansion of the Systemic, Therapeutic, Assessment, Resources and Treatment (START) training model at additional RCs. The START program provides a model of crisis prevention and intervention for individuals with both developmental disabilities and mental health conditions.

Emergency Preparedness Resources. The spending plan provides $4.3 million General Fund one time to provide emergency preparedness materials in multiple languages, outreach training for RC staff and service providers, emergency kits for consumers who live alone, and backup generators and batteries for consumers who rely on life-sustaining equipment.

Emergency Coordinators at RCs. The spending plan provides $1.4 million General Fund ongoing for each RC to have an emergency coordinator.

Restoration of Social Recreation and Camp Services. In 2009‑10 when the state faced a significant budget deficit, the following services for DDS consumers were suspended: social recreation services, camp services, educational services, and nonmedical therapies. The 2021‑22 spending plan provides $19 million General Fund in 2021‑22, $31.6 million General Fund in 2022‑23, and $36.8 million General Fund in 2023‑24 and ongoing, to restore these services. The budget assumes services will not be fully ramped up again until 2023‑24.

Elimination of Potential Funding Suspensions. The 2019‑20 and 2020‑21 budgets provided rate increases for most service providers, but these increases were subject to potential suspension on December 31, 2021 if General Fund revenues did not meet a certain threshold. Similarly, an unenforced statutory policy referred to as the “Uniform Holiday Schedule,” which prohibited service provider payments for services on 14 set days per year, was subject to potential reinstatement after December 31, 2021. The spending plan and associated legislation eliminate the potential suspension of rate increases and repeal the Uniform Holiday Schedule policy.