The 2023-24 Budget

Health Workforce Budget Solutions

Summary. As part of a series of solutions aimed at addressing the state’s budget problem, the Governor proposes delaying or reducing a number of limited-term health workforce initiatives adopted in last year’s budget. This post provides background on the state’s health workforce and last year’s package of initiatives, describes the Governor’s proposed budget solutions, and offers our assessment and recommendations. Generally, turning to limited-term initiatives for delays and reductions is a reasonable approach to addressing the state’s budget problem. That said, we recommend the Legislature weigh the Governor’s proposed health workforce budget solutions against other possible approaches, such as by targeting a different mix of health workforce initiatives for solutions or scaling back last year’s very broad package. We also recommend the Legislature keep apprised of health workforce issues and their impact on broader state health policy efforts in the coming years.

Background

In this section, we provide background on the state’s health workforce, as well as the state’s package of health workforce initiatives adopted in the 2022-23 budget.

California’s Health Workforce

California Has Sizable Health Workforce. In 2021, around 2 million Californians worked as physicians, nurses, health care technicians, home health workers, behavioral health counselors, epidemiologists, and many other related health occupations. Based on data from the Employment Development Department (EDD), we estimate health occupations comprised 13 percent of the state’s overall workforce in 2021.

Health Workforce Education, Training, and Development Is Supported From Many Sources. Both public and private institutions educate, train, and develop California’s health workforce. The state departments that play a key role in health workforce development include the Department of Health Care Access and Information (HCAI), the state’s workforce development departments, and the state’s higher education segments, among others. Though estimates of total spending across all fund sources in California are not readily available, a likely substantial portion of health workforce education, training, and development is supported by nonstate sources at both public and private programs. For example, the University of California’s medical schools rely on a mix of state support, student tuition and fee revenue, and faculty clinical revenue to support their operations.

Three Key Issues Regarding California’s Health Workforce. In recent years, researchers and stakeholders have identified a number of issues regarding the state’s health workforce. Below, we describe three key issues.

• Inadequate Statewide Supply for Certain Occupations. Past research suggests the supply of workers in some health occupations may not keep pace with demand for their services in future years, whereas supply and demand for other health occupations may be more balanced. For example, past studies have projected statewide shortfalls of primary care and behavioral health providers over the next several years in California. By contrast, recent research estimates an existing shortfall of nurses in California, but projects that statewide supply will align with demand over time due to anticipated increases in higher education nursing enrollments. For some health occupations, limited data make it difficult to fully quantify supply and demand. For example, the number of graduates with public health degrees has grown considerably over the last few decades, but we are not aware of research that fully quantifies how this trend will impact future supply and demand for public health employees in California.

• Regional Disparities. The supply of providers relative to population varies considerably across the state. For example, the relatively wealthy coastal regions (such as the Bay Area) tend to have higher numbers of providers per population relative to less wealthy inland regions (such as the Central Valley and the Inland Empire). The federal government has designated hundreds of areas in California (for the most part, small subdivisions of counties) as having shortfalls of primary care, mental health, and dental providers. The state also has designated 38 out of 72 areas in California as having high or medium shortfalls of nurses.

• Disparate Representation in Certain Occupations. The composition of many health occupations does not match the demographics of the state. For example, relative to their share of California’s population, Latinos are underrepresented among physicians, nurses, and many other providers, but overrepresented among certain health support occupations.

Recent COVID-19 Pandemic Created New Workforce Issues. During the initial months of the pandemic, overall employment in the health care industry fell, though the decline was less severe than it was for overall employment in the state. Of those health care workers that remained employed during this period, many experienced furloughs and reduced hours. At the same time, many hospitals faced worker shortages during periods of surging COVID-19 cases. The recent pandemic experience also may have caused longer-term impacts on the state’s health workforce. For example, many health stakeholders nationally and in California report employee “burnout” from the stresses of working during the pandemic. Experts are still studying the extent and magnitude of these longer-term impacts.

Health Workforce Initiatives in 2022-23 Budget Package

State Recently Enacted Multiyear Package of Health Workforce Initiatives. In recent years, ongoing state spending on health workforce development has been in the tens of millions of dollars annually at HCAI and focused primarily on grants to primary care postgraduate training programs. Notably expanding upon these past efforts, the 2022-23 budget enacted a $1.5 billion package over four years supporting various workforce initiatives focused on health and home care, behavioral health care, primary care, public health, and reproductive health care. HCAI was tasked with implementing most of the initiatives. Other affected departments included the California Department of Public Health (CDPH), EDD, and the California Community Colleges, among others. Figure 1 summarizes this package. (Appendix Figure 1 at the end of this post provides more specific initiative-level detail on the package.)

Proposed Funding Delays and Reductions

Governor Proposes Delays and Reductions to Last Year’s Health Workforce Package. As part of a package of solutions to address the state’s budget problem, the Governor proposes funding delays and reductions to several health workforce initiatives adopted in the 2022-23 budget. (We describe the state’s overall budget problem and the complete package of proposed solutions in our recent publication The 2023-24 Budget: Overview of the Governor’s Budget.) As Figure 2 shows, relative to last year’s package, the proposed solutions would reduce General Fund spending in 2022-23 and 2023-24 but increase General Fund spending in the following two years to implement delayed rounds of funding. Below, we describe the proposed delays and reductions at each affected department. (Appendix Figure 2 at the end of this post provides initiative-specific information on these delays.)

Delays Certain HCAI Workforce Initiatives. Within HCAI’s budget, the Governor proposes delaying a portion of enacted spending in 2022-23 ($68 million) and most planned spending in 2023-24 ($329 million) into the following two years. The bulk of the proposed delays affect a package of health and home care initiatives focused on community health workers, nurses, and social workers. The remaining delays affect grant initiatives for nursing and behavioral health programs.

Reduces Spending on CDPH Workforce Initiatives. Within CDPH’s budget, the Governor proposes leaving the department’s workforce funding for 2022-23 unaffected, but replacing $5 million General Fund with federal and other fund sources. The Governor’s budget eliminates all remaining funding planned for five initiatives for the following three years ($45 million across the three years). The five initiatives are focused on various public health workforce issues, such as increasing the number of public laboratory directors at local public health departments under the Lab Aspire Program.

Reduces Spending on EDD Workforce Initiative, Subject to Trigger Restoration. Within EDD’s budget, the Governor proposes to partially reduce planned spending on one health workforce initiative focused on increasing the number of emergency medical technicians in California. The Governor’s budget leaves funding for the initiative in 2022-23 unaffected, but reduces the remaining funding by half (from $40 million over two years to $20 million over two years). The Governor also proposes including this reduction in a package of solutions subject to trigger restoration language. Under the language, reduced baseline funding for the package of initiatives would be restored in a future year if the administration determines sufficient resources exist in the budget.

Assessment

Governor’s Focus on Budget Solutions in Limited-Term Initiatives Is Prudent. Given the state’s current budget problem, the state will have to identify budget solutions that increase revenues, reduce spending, or both. The Governor’s focus on delaying or reducing multiyear, limited-term initiatives, including those related to health workforce, is one reasonable approach to accomplish this objective. As we note in our recent publication The 2023-24 Budget: Overview of the Governor’s Budget, reducing or delaying funding for recent limited-term initiatives has the potential to not directly impact ongoing services and to cause relatively limited disruption to program operations. Our budget overview publication lays out the criteria we recommend the Legislature use to evaluate whether recent augmentations should be maintained in light of the state’s budget problem. These criteria include, for example, assessing whether the augmentation targets a well-defined policy problem that is a priority of the Legislature to address.

Alternatives Exist to Target Health Workforce Budget Solutions. According to the Department of Finance, the administration selected delays and reductions to health workforce initiatives that yielded adequate General Fund savings and minimized programmatic disruptions. While this approach to identifying budget solutions from within the 2022-23 health workforce package is a reasonable starting point, the Legislature may wish to consider a different mix of initiatives to target and/or a different mix of delays versus reductions, based on its budget and policy priorities. We discuss these options for the Legislature in the following sections.

Identifying Solutions That Minimize Program Disruptions. While the administration’s proposal targets a sizable portion of last year’s workforce package, it also leaves some multiyear initiatives—such as loan repayment initiatives for psychiatrists and grants to primary care physician residency training programs—unaffected. On the basis of attempting to minimize program disruptions, we think that there are alternatives to the mix of initiatives targeted in the administration’s proposal. For example, some of the initiatives unaffected by the administration’s proposal, such as the loan repayment initiatives, are still in the initial stages of implementation and could be delayed or reduced with minimal programmatic disruption. On the other hand, some proposed solutions would disrupt initiatives already in progress. For example, under the CDPH Lab Aspire Program, cohorts of professionals are expected to receive leadership training over multiple years in preparation to direct local public health labs. The Governor’s proposed solution, however, would only leave funding for the first year of training for one cohort, creating uncertainty as to how the cohort’s remaining years of training would be supported.

Identifying Solutions That Minimize Disruptions to Broader State Efforts. In recent years, the state has sought to reform and bolster Medi-Cal through the California Advancing and Innovating Medi-Cal initiative and provide foundational support to the state’s public health system. Though the Governor’s budget protects funding for these major reforms, some of the proposed health workforce budget solutions could delay or disrupt their implementation. For example, delaying funding to increase the number of community health workers could disrupt the state’s existing effort to incorporate community support benefits into Medi-Cal managed care, to the extent managed care plans face heightened difficulty in accessing needed providers. In addition, the recent COVID-19 pandemic exposed several weaknesses in the state’s public health system, including the lack of adequate staffing levels to carry out core functions. Reductions to public health workforce initiatives could work counter to the state’s broader efforts to bolster its public health system. The Legislature could weigh these potential impacts when evaluating proposed budget solutions.

Considering Opportunities to Scale Back the Health Workforce Package, Focusing on Highest Legislative Priorities. The Governor’s package of health workforce budget solutions focuses primarily on delays, with a relatively small portion of solutions reducing overall spending. This approach helps to address the budget problem in 2023-24 while preserving most of the initiatives adopted in last year’s budget. Given our office’s projections of a state budget shortfall in future years, however, the Legislature is likely to face pressure to further delay or forego the restoration of funding of initiatives delayed under the administration’s proposal. As an alternative to a package of budget solutions focused on delays of funding (that may or may not be restored), the Legislature might take strategic action today to scale back the very broad 2022-23 package of workforce initiatives to focus on policy areas of legislative priority. In particular, the Legislature could prioritize areas where there is a clear problem definition of the workforce issue, there is a particularly acute need, and where proposed solutions have a proven track record. Where an initiative appears to be a promising solution to a workforce issue but is untested, the Legislature might consider scaling back the initiative by converting it to a smaller-scale pilot. Were the Legislature to take this approach, it likely would want to adopt reporting requirements and other oversight measures to assess the pilots’ outcomes.

Recommendations

Consider Health Workforce Budget Solutions, but Weigh Alternative Approaches Against Governor’s Proposals. Given the state’s existing budget shortfall, delaying and reducing recent temporary augmentations warrants consideration. To this end, we recommend the Legislature consider adopting health workforce budget solutions and weigh different approaches to the Governor’s proposal. For example, the Legislature might consider a different mix of workforce initiatives to target for reduction because of its concerns with the level of program disruption that would occur under the administration’s proposal. The Legislature also may wish to consider scaling back the 2022-23 health workforce package, such as by converting some initiatives to smaller-scale pilots to test promising, but untested, workforce strategies. Overall, the Legislature likely will want to focus on preserving initiatives that have a good likelihood of addressing urgent state health workforce issues and can be implemented within the budget year.

Keep Apprised of Workforce Issues in the Coming Years. While uncertain, the risk of health workforce solutions disrupting broader Medi-Cal and public health reforms merits legislative attention. We therefore recommend the Legislature incorporate workforce issues into its oversight of major health-related reforms, such as including workforce items in any future informational hearings. To the extent the Legislature uncovers concerning trends in future years, it could revisit its enacted budget solutions and resume funding for high-impact initiatives that address urgent health workforce issues.