Future of Public Health Budget Solution

Summary

The proposed elimination to the Future of Public Health funding very likely would adversely impact the ability of the California Department of Public Health (CDPH) and local health jurisdictions (LHJs) to maintain the effort to improve public health made since the pandemic. The Legislature might consider whether there is a middle ground between fully eliminating and fully maintaining the Future of Public Health funding. In considering an amount of funding to maintain, the Legislature could consider, for example, such factors as whether the funding serves to advance legislative priorities (such as the reduction of health disparities) and whether it would minimize disruption to already hired public health workforce. We note that any reduction to the size of the public health budget solution would however require a budget solution of an equivalent amount elsewhere in the budget.

Background

CDPH Funding Historically Stagnant and Included Little Flexible Funding. Since 2007‑08, when CDPH became a standalone department, funding remained relatively flat at around $3 billion annually until the COVID-19 pandemic. The majority of funding for CDPH has been from federal and state special funds, which typically specify, and therefore limit, the particular activities the department can support from these funds. For example, federal grants fund health facility certification for Medicare and Medi-Cal or prevention and response for specific diseases (like HIV/AIDS). Historically, the General Fund—a flexible funding source—has been a very small source of support (3 percent to 5 percent of the department’s total budget) that actually declined between a pre-Great Recession peak ($361 million) and the onset of the COVID-19 pandemic ($167 million in 2018‑19). General Fund support typically ebbed and flowed year-over-year based on one-time appropriations for specific activities.

Majority of CDPH Budget Supports LHJs. The majority of CDPH’s budget goes to LHJs—mostly county health departments that carry out many of the state’s public health programs. In addition to receiving support from the CDPH budget, LHJs also receive funding from 1991 health realignment. Local governments have some discretion over how health realignment funds are spent. In addition, they can supplement state funding for public health from other local sources of funding and may handle and define public health functions somewhat differently from one another. Consequently, the state currently does not have comprehensive statewide data on each LHJ’s total public health spending.

“Future of Public Health” Funding First Major Ongoing General Fund Support for Public Health Services. The COVID-19 pandemic highlighted the critical role of the public health system and exposed gaps in its capacity. In response to the pandemic, CDPH was appropriated $3 million and formed the Future of Public Health Workgroup in 2021 to develop a plan for investment in public health system. The workgroup included state and local officials and stakeholders and established a number of priorities based on data and input collected from across the state. The goal was to “right size” the historically stagnant CDPH budget—both in terms of state and local support. Beginning in 2022‑23, the Legislature approved $300 million in ongoing General Fund support for the department, which included $100 million for CDPH state operations and $200 million for LHJs. The purpose of the funding was to address shortfalls identified by the workgroup in the state’s existing public health infrastructure. The state operations portion focused primarily on workforce development and emergency preparedness and response and included 404 positions in its spending plan. The funding for LHJs was distributed based on population and equity measures and at least 70 percent of funding is required to be spent on workforce (LHJs plan to hire about 1,300 new positions with the funding). LHJs are required to submit spending plans to the state to demonstrate how the funding will be used in support of their regular health planning efforts.

May Revision

Eliminates $300 million in Ongoing Future of Public Health Funding. The Governor proposes eliminating $300 million in ongoing Future of Public Health funding beginning in 2024‑25. The proposal also reverts $52.4 million in 2023‑24 from unspent funds, with $41.4 million being reverted from state operations and $11 million being reverted from local assistance.

Assessment

Elimination of Future of Public Health Funding Would Result in Loss of Core Services, Affecting Efforts to Mitigate Negative Trends in Health Outcomes. The recent augmentation to public health funding was intended to address gaps in the public health system. The funding was intended help the state better prepare for public health emergencies and to address public health challenges like the rise in STIs, deaths from certain types of heart disease, and incidences of Alzheimer’s in California’s aging population. Even though the Future of Public Health funding is a relatively recent augmentation, the CDPH and LHJs have completed the majority of planned hiring and service-related activities are underway. Absent this funding, CDPH and LHJs would have to rely on their existing funding sources, which generally are dedicated to specific, directed activities. As a result, recent efforts to address public health needs more broadly likely would end. The administration has not yet detailed which specific centers within CDPH would be most impacted by the elimination of funding and it is unclear how CDPH will continue to meet the recommendations of the work group with the elimination of funding.

Recent Public Health Workforce Hiring Would Be At Risk. The majority of the $100 million state operations funding is for hiring public health staff to support the recommendations of the Future of Public Health workgroup. LHJs are also required to spend at least 70 percent of funding on workforce. There are about 400 state positions and 1,300 local positions supported by Future of Public Health funding, and approximately 80 percent of hires have been made to date. Given the limited flexibility of the CDPH’s funding and the number of state hires made, the state likely would be unable to use existing vacancies in other programs to fully mitigate the elimination of the Future of Public Health funding. Although the administration has not stated an intent to initiate layoffs, they could become necessary. The layoff process is lengthy and would likely take several months, eroding the state’s potential savings. Whether counties would be able to use any other funding sources to support these positions is unclear.

COVID-19 Highlighted Disparities in Public Health Outcomes and Solution May Worsen Trend. The Future of Public Health funding also included specific funding for CDPH and LHJs to address disparities in health outcomes. In part, this is because during and after the pandemic, disparities in certain health outcomes worsened. For example, death rates from drug overdoses had been steadily increasing prior to the pandemic, but increased dramatically during the pandemic and have remained higher than pre-pandemic levels. This increase was greatest among Latino and Native Hawaiian/Pacific Islander populations, whose death rates more than doubled between 2019 and 2022. American Indian/Alaskan Native populations had the highest death rate due to drug overdoses prior to the pandemic and this has persisted with the recent rise. Eliminating funding may hinder CDPH and LHJ efforts to reduce disparities in health outcomes.

Legislative Considerations

Weighing Tradeoffs in Reductions to Ongoing Funding. Given the size of the budget deficit, the Governor has proposed a number of budget solutions that reduce ongoing funding for core services in addition to this budget solution. (While there is no single definition of “core services,” we use this term to refer to the ongoing spending level committed to by the Legislature.) The proposed elimination to the Future of Public Health funding very likely would adversely impact the ability of CDPH and LHJs to maintain the effort to improve public health made since the pandemic.

While other proposed budget solutions involve ongoing reductions to core services, this proposal is somewhat unique in that it eliminates the entirety of the recent ongoing augmentation. The Legislature could consider whether there are additional options to reduce one-time or temporary spending elsewhere in the budget to continue some or all of the Future of Public Health funding for another year and have time to fully weigh the tradeoffs of eliminating the funding. In weighing the tradeoffs of the public health budget solution against those of other proposed budget solutions involving core services, the Legislature might consider whether there is a middle ground between fully eliminating and fully maintaining the Future of Public Health funding. (Any reduction to the size of the public health budget solution would however require a budget solution of an equivalent amount elsewhere in the budget.) In considering an amount of funding to maintain, the Legislature could consider, for example, such factors as whether the funding serves to advance legislative priorities (such as the reduction of health disparities) and whether it would minimize disruption to already hired public health workforce.