The 2024-25 California Spending Plan

Health

Overview

General Fund Spending on Health Programs Essentially Declines Across the Board. As Figure 1 shows, the spending plan provides $40.1 billion General Fund for health departments in 2024-25, a decrease of $3.8 billion (9 percent) over the revised 2023-24 level. Of this spending level, the majority (87 percent) is for Medi-Cal, California’s Medicaid program. The year-over-year decline in General Fund support for Medi-Cal is 6 percent. Spending decreases on a year-over-year basis for nearly all health departments—the exception being the California Health and Human Services Agency (CalHHS). (The substantial year-over-year growth at CalHHS reflects the shift of grants to the agency’s Office of Youth and Community Restoration [OYCR] from the Board of State and Community Corrections [BSCC].) While the spending plan includes a handful of modest augmentations in health programs, the bulk of the major actions help to address the significant General Fund budget problem. These augmentations and budget solutions are described below.

Early Action Package Included Billions in General Fund Savings From Health Programs. In April 2024, the Legislature and Governor agreed to an initial package of budget solutions meant to partially address the state’s sizable General Fund budget problem. The health-related actions in this early action package are detailed in Appendix Figure 1. Most notably, the package included billions of dollars of savings related to the managed care organization (MCO) tax package, $533 million from withdrawing the scheduled end of a two-week deferral in fee-for-service payments in Medi-Cal, and a $500 million loan from the AIDS Drug Assistance Program Rebate Fund to the General Fund.

Final Budget Package Includes Billions More in General Fund Savings. The spending plan adopted in June includes many additional budget solutions in the health program area, detailed in Appendix Figure 2. On top of the MCO tax-related savings achieved in the early action package, the June budget includes $6.6 billion of additional MCO tax-related savings through 2025-26. Across the same period, the spending plan reflects over $1 billion in savings from behavioral health programs at the Department of Health Care Services (DHCS). Workforce programs at the Department of Health Care Access and Information (HCAI) are also reduced by over $700 million through 2025-26.

Medi-Cal

This section describes the major actions and adjustments in Medi-Cal in the budget package. It first provides an overview of Medi-Cal’s budget. It then summarizes the MCO tax package, other actions to help address the state General Fund budget shortfall and a few other notable budget actions.

Overview

Medi-Cal Spending From All Fund Sources Grows Modestly in 2024-25. As shown in Figure 2, overall Medi-Cal spending across all fund sources is estimated to be $161 billion, up slightly from the revised 2023-24 level. This overall increase is the net result of a $5.8 billion (4.8 percent) increase in federal and other funds spending, partially offset by a $2.2 billion (5.8 percent) decline in General Fund spending.

Decrease in General Fund Spending Driven by Budget Solutions. The spending plan includes $1.3 billion in 2023-24 and $6.6 billion in 2024-25 in budget solutions for the Medi-Cal program. Without these budget solutions in place, General Fund spending on Medi-Cal would have grown by billions of dollars in 2024-25. Around 80 percent of solutions in the budget window are related to the MCO tax package, described further below. The year-over-year decrease in General Fund spending is partially offset by various other factors including higher General Fund spending on base program costs.

MCO Tax Package

Changes Last Year’s MCO Tax Package. The MCO tax is a tax on health plan enrollment that the Legislature has enacted for limited periods of time. As part of the 2023-24 budget, the state renewed the MCO tax and extended it through 2026. The net revenues from the tax were to help offset General Fund spending in Medi-Cal and to increase funding for Medi-Cal and other health programs. The 2024-25 spending plan changes this package in a number of ways in response to the state’s budget problem. Below, we describe each key change.

Increases Tax on Medi-Cal Enrollment. This year’s spending plan includes a larger MCO tax than the version that was enacted last year. (The tax is still in effect through 2026.) This larger tax comes from increasing the tax rate on Medi-Cal enrollment. Increasing this tax rate provides a fiscal benefit to the state at no direct cost to health plans. This is because Medi-Cal—which is in part supported by federal funds—covers the cost of this tax for the health plans. The much smaller tax on commercial enrollment (which has a direct cost on health plans) remains unchanged from last year’s package. As Figure 3 shows, the tax rate was first increased as part of early action legislation (Chapter 6 of 2024 [SB 136, Committee on Budget and Fiscal Review]), and then further increased in final budget trailer legislation (Chapter 39 of 2024 [AB 160, Committee on Budget]). As a result of these actions, the spending plan includes $7.1 billion more net revenue from the MCO tax through 2026-27 to help address the budget problem. Both tax increases require federal approval to go into effect.

Shifts Funds Out of Provider Payment Reserve. Last year’s budget placed some of the money raised by the MCO tax into a new account called the Medi-Cal Provider Payment Reserve Fund. This reserve account was to support augmentations in Medi-Cal and other health programs. The 2024-25 spending plan shifts substantial funds out of this account—$7.7 billion through 2026-27. In taking this action, less money supports augmentations than assumed in last year’s budget, thereby helping to address the budget problem.

Includes Four Key Changes to Planned Augmentations. Only a few augmentations in the MCO tax package were adopted in last year’s budget. For the rest of the funds in the reserve account, trailer legislation enacted last year established a conceptual framework beginning in 2025 and required the administration to develop a more detailed plan. Trailer bill legislation in this year’s budget package (Chapter 40 of 2024 [SB 159, Committee on Budget and Fiscal Review]) revises this framework in four key ways, described below.

• Changes List of Planned Augmentations. Last year’s conceptual framework included a list of specified Medi-Cal services and other health programs for augmentations. As Figure 4 shows, this year’s spending plan changes this list in a number of ways. For example, fewer facility-based services will receive rate increases than originally planned. The spending plan also adds services, such as certain long-term supports, to the list.

• Provides Basis for Augmentations. This year’s spending plan provides a more defined basis to implement the augmentations. For example, some Medi-Cal rates are set as a defined percent (ranging from 80 percent to 100 percent) of what is paid in the federal Medicare program. In other cases, increases are to be set so that the annual cost is equal to a defined amount of money.

• Delays Certain Increases to 2026. Whereas last year’s framework envisioned all augmentations to begin in 2025, this year’s spending plan pushes back the start date of some increases to 2026.

• Triggers Off Augmentations if Proposition 35 Passes. The trailer legislation generally triggers off these augmentations if Proposition 35, which is scheduled to be on the November 2024 state ballot, passes. Proposition 35 makes the MCO tax permanent under state law and creates new rules on how to spend the associated tax revenue. If the ballot measure passes, the new rules would determine which Medi-Cal services and health programs receive augmentations.

Allocates One-Time Funds to Help Backfill Proposition 56. Proposition 56 (2016) increased taxes on tobacco products and allocated most of the associated revenue to Medi-Cal. In Medi-Cal, the funds support rate increases for certain providers. In recent years, program cost has exceeded available Proposition 56 funding, requiring a backfill from the General Fund to sustain the rate increases. This year’s spending plan continues to backfill declining Proposition 56 funding, but covers $145 million of this cost in 2024-25 from the MCO tax package.

Provides Substantial Budget Solution to the State. As a result of increasing the size of the MCO tax and decreasing planned augmentations, substantially more money from the MCO tax is being used to offset General Fund spending in Medi-Cal. As Figure 5 shows, this results in a substantial budget solution, totaling $6.3 billion through 2024-25 and nearly $15 billion through 2026-27.

Other Budget Solutions

Behavioral Health Bridge Housing (BHBH) Reductions and Fund Shifts. First, the early action package delayed $235 million General Fund for BHBH from 2024-25 to 2025-26. Then, the June budget shifts $265 million in Mental Health Services Fund (MHSF) support for BHBH in 2024-25 to the General Fund due to insufficient MHSF revenues, and reduces General Fund for BHBH by $133 million in 2024-25. In 2025-26, the spending plan reduces General Fund for BHBH by $118 million and shifts $90 million of General Fund for BHBH to the MHSF. After these reductions, remaining funding for BHBH totals $1.3 billion ($1.2 million General Fund and $90 million MHSF).

Behavioral Health Continuum Infrastructure Program (BHCIP) Reduction. First, the early action package delayed $140 million General Fund for BHCIP from 2024-25 to 2025-26. Then, the June budget reduces General Fund support for BHCIP by $70 million in 2024-25 and $381 million in 2025-26. These reductions result in $30 million remaining for the sixth round of BHCIP grants and $1.8 billion overall from the original allocation in the 2021-22 budget package. In addition (but continuously appropriated and thus not included in the budget), Proposition 1 (2024) allocates $4.4 billion in bond funding to the BHCIP program.

Children and Youth Behavioral Health Initiative (CYBHI) Reductions. The spending plan reduces funding for CYBHI by a total of $197 million across 2023-24 and 2024-25. Specifically, CYBHI is reduced as follows:

• School-Linked Health Partnerships and Grants ($150 Million). The spending plan eliminates General Find for grants to the California Community Colleges ($30 million in 2023-24 and $70 million in 2024-25) and to the California State University and University of California ($50 million in 2024-25).

• Evidence-Based and Community-Defined Behavioral Health Program Grants ($47 Million). The spending plan reduces funding for the grant program by $47 million in 2024-25, leaving $382 million allocated for the program.

Medication Assisted Treatment Elimination. The spending plan ends funding for the program, which funds startup grants for new treatment facilities, for an ongoing savings of $22 million General Fund beginning in 2024-25.

Continues Provider Payment Deferral. The budget package withdraws the scheduled end of a two-week deferral in fee-for-service payments. The deferral, which was initially enacted to help address a budget problem in the 2006-07 budget, was scheduled to end in 2022-23. The 2023-24 budget delayed its end to 2024-25. Withdrawing the scheduled end of the deferral in 2024-25, thereby allowing it to continue, provides $533 million one-time General Fund savings in 2024-25.

Reduces Equity and Practice Transformation Payments. The spending plan reduces funding for the Equity and Practice Transformation Payments Program, resulting in General Fund savings of $43.8 million in 2024-25, $67.5 million in 2025-26, and $168.8 million in 2026-27. Together, these reductions eliminate the remaining $280 million General Fund for the program. The payments were intended to provide grants to providers supporting various activities, including the implementation of electronic health record systems, improved data collection and exchange, and care management systems. DHCS has indicated that it will revise the Cohort 1 program and/or milestones in response to the reduced funding.

Creates New Fee on Public Hospital Intergovernmental Payments. This year’s health trailer bill legislation allows DHCS to charge an administrative fee for processing certain public hospital intergovernmental transfers. These transfers support the nonfederal share of supplemental Medi-Cal payments to hospitals. Currently, the state charges such a fee on a limited number of public hospital transfers. This action expands the fee to other transfers, limited to 5 percent of the total amount. The spending plan assumes this action will provide a $37 million budget solution in 2024-25, with the ongoing amount rising to $74 million in subsequent years. (The administration also states that it intends to increase the size of supplemental payments supported by transfers, resulting in more net funding for public hospitals.)

Eliminates Health Insurance Program for High-Risk Patients. This year’s health trailer bill legislation ends a longstanding state program called the Major Risk Medical Insurance Program (MRMIP). Beginning in 1991, MRMIP provided health insurance benefits to high-risk individuals who could not purchase private insurance. Program enrollment fluctuated over the years, but in more recent years declined to just a few hundred people. This is because high-risk populations have greater access to health coverage following federal enactment of the Patient Protection and Affordable Care Act in 2010. With the end of MRMIP, the spending plan reallocates the program’s funding source—fines and penalties paid by health plans—to help offset General Fund spending in Medi-Cal. This budget solution provides $79 million in General Fund savings in 2024-25. (The spending plan assumes much smaller savings in the out-years.) The trailer bill legislation also sets forth a plan to notify beneficiaries of their terminated coverage and to transition them to coverage in Covered California.

Freezes Statutory Increases in County Administration Funding. State law provides for increases in Medi-Cal county administration funding based on projected growth in the California Consumer Price Index. The spending plan pauses these increases through 2027-28, for a savings of $20.4 million General Fund in 2024-25, growing to a projected $88.8 million in 2027-28.

Health Enrollment Navigators Reduction. The spending plan reduces funding for health enrollment navigators by $18 million one-time General Fund ($36 million total funds) in 2024-25. The program provides funding to counties and community-based organizations for outreach, enrollment, and retention activities.

Reallocates Funds From Managed Care Sanctions. This year’s health trailer bill legislation allocates funds from quality sanctions imposed by DHCS toward the nonfederal share of Medi-Cal costs through 2026-27. These funds, which come from sanctions on managed care plans, county mental health plans, and other contracted entities, are otherwise used to address Medi-Cal workforce and access-to-care issues. This year’s spending plan assumes the state receives a one-time $1 million budget solution in 2024-25 as a result of this action.

Other Actions

Delays Start of New Health Care Minimum Wage Law. Chapter 890 of 2023 (SB 525, Durazo) increased the minimum wage for workers at most health care facilities to $25 per hour. The statute established five phase-in schedules for different kinds of facilities, generally beginning June 2024. (Chapter 12 of 2024 [SB 828, Durazo] later delayed the start by one month, to July 2024.) The wage increase is expected to increase state costs, particularly in the Medi-Cal program. This year’s health trailer bill legislation makes a number of key changes to this law in light of the state’s budget problem. Most notably, it delays the start date, depending whether one of two trigger conditions are met. Under the first condition, the increases would start October 2024 if state cash receipts for the first quarter of the 2024-25 exceed 3 percent of projections. Under the second condition, the increases would start no later than January 2025 if DHCS initiates the data retrieval needed to increase the Hospital Quality Assurance Fee.

Creates New Directed Payment for Children’s Hospitals. This year’s health trailer bill continuously appropriates $115 million General Fund ($230 million total funds) for a new Medi-Cal directed payment to children’s hospitals. The legislation tasks DHCS with determining the methodologies and parameters for the new payment. The legislation also allows the state to reduce this amount by up to $75 million annually if Proposition 35 (2024) passes.

Creates Wellness Coach Benefit. The spending plan includes $9 million ($4 million General Fund), growing to $114 million ($50 million General Fund) over several years, to implement a wellness coach benefit in Medi-Cal. The benefit will be aimed at children and youth with existing and emerging behavioral health needs. The benefit builds on CYBHI funding provided in the 2021-22 budget for HCAI to design and build a wellness coach workforce.

Creates New Directed Payment for Martin Luther King, Jr. Community Hospital (MLK Hospital). Trailer bill legislation enacted in August 2024 (Chapter 999 of 2024 [AB 177, Committee on Budget]) creates a new directed payment methodology for MLK Hospital. The new methodology is to ensure that the hospital’s aggregate managed care payment for inpatient services is at least 72 percent of projected costs. The legislation also requires additional annual funding above this minimum threshold to the hospital of $25 million. Accordingly, August budget bill legislation (Chapter 994 of 2024 [AB 157, Gabriel]) provides $25 million for the directed payment.

Implements Children’s Health Care Transition. The 2022-23 budget authorized DHCS to sunset the California Health and Disability Prevention (CHDP) program, which provided early health screening services for children in the fee-for-service delivery system. The sunset is warranted because most Medi-Cal children now receive these services in the managed care system. The budget also required DHCS to develop a transition plan for certain CHDP services that would continue as stand-alone programs, such as the Health Care Program for Children in Foster Care (HCPCFC). In March 2024, DHCS released its CHDP transition plan. Relatedly, the 2024-25 budget provides $33.9 million—the cost of the original CHDP program—to support HCPCFC and a separate oversight initiative for the California Children’s Services program. Provisional language in this year’s budget also grants counties certain flexibilities to meet HCPCFC’s staffing requirements.

State Hospitals

Overview. Under the spending plan, General Fund spending for the Department of State Hospitals (DSH) is $3.3 billion in 2024-25, a decrease of $276 million, or about 8 percent, from the revised 2023-24 expenditure estimate. This net decrease reflects the end of some temporary funding to address the Incompetent-­to-Stand-Trial (IST) waitlist. Augmentations to the department include additional funding for infectious disease prevention measures that have been established since the end of the COVID-19 public health emergency.

Includes Funding for Infectious Disease Prevention. The spending plan includes $25.9 million General Fund in 2024-25 and $7.7 million General Fund in 2025-26 and ongoing for infectious disease measures. The department received funding during the COVID-19 public health emergency to implement certain infection control protocols to limit the spread of COVID-19 and other communicable diseases. Following the end of the COVID-19 public health emergency in 2023, the department has continued a number of these protocols in accordance with federal and state guidance and this funding supports these continued measures. These protocols include the use of testing, vaccinations, and personal protective equipment to mitigate the spread of communicable diseases. The funding also includes transitioning ten limited-term public health nurse positions into permanent positions.

Updates to IST Waitlist Solutions Funding. Individuals who have been tried with a felony but are deemed by a mental health professional to be IST are referred to DSH for treatment, with the goal of restoring them to competency in order to proceed with their felony trials. In 2022-23, the Legislature appropriated multiyear funding to DSH to implement solutions addressing the state’s growing felony IST waitlist. The spending plan includes one-time savings of $49.9 million General Fund in 2024-25 due to delays in implementation and a shift of $129.5 million General Fund from 2025-26 to 2026-27.

Public Health

Overview. Under the spending plan, total funding for the California Department of Public Health (CDPH) is $5.1 billion ($787 million General Fund) in 2024-25, a decrease of $1 billion, or about 15 percent, from the revised 2023-24 expenditure estimate. This decrease generally reflects the end of some temporary General Fund spending, as well as General Fund spending reductions as part of the package of budget solutions.

Budget Solutions

Reduces Funding for Public Health Infrastructure Investment. In the 2022-23 spending plan, CDPH received $100 million General Fund for state operations and local health jurisdictions received $200 million General Fund—on an ongoing basis—to implement the recommendations of the Future of Public Health workgroup. Most of the funding has been used to supplement current public health services by increasing the public health workforce at CDPH and local health jurisdictions. This year’s spending plan includes an ongoing $8 million General Fund reduction for CDPH and an ongoing $16 million General Fund reduction for local health jurisdictions as a part of a number of budget solutions.

Makes a Number of Special Fund Loans. The 2023-24 spending plan included a $400 million loan from the AIDS Drug Assistance Program (ADAP) Rebate Fund to the General Fund. This year’s spending plan includes another $500 million loan from the ADAP Rebate Fund to the General Fund as a budget solution. There are also $140 million in loans from various other public health special funds to the General Fund, with an anticipated repayment date of 2026-27, as a budget solution.

Includes Other Spending Reductions. In addition to reductions for public health infrastructure, the spending plan includes a number of other General Fund reductions that total $26 million in 2024-25 and $22 million ongoing. These include reductions to CYBHI, certain information technology investments, and community-based clinical education rotations for dental students. A full list of budget solutions in the health program area can be found in Appendix Figures 1 and 2.

Other Actions

Support for Maintenance and Operations of Public Health Reporting System. The spending plan includes $26 million General Fund for the maintenance and operations of the Surveillance and Public Health Information Reporting and Exchange System that was established during the COVID-19 pandemic. The $26 million one-time expenditure is to maintain the data system while the department engages in the procurement of an ongoing maintenance contract.

Continues Funding for Sickle Cell Centers for Excellence. The 2019-20 Budget Act provided a $15 million one-time General Fund to support the Networking California Sickle Cell Care Initiative which established a number of sickle cell disease centers across the state. These centers provide access to specialty care for adults with sickle cell disease and conduct surveillance to monitor the condition. The spending plan includes $5 million one-time General Fund support for the program in 2024-25.

Includes Ongoing General Fund Support for California Cancer Registry (CCR). The CCR is a population-based cancer registry that records incidence of cancer in California and helps researchers analyze demographic differences in cancer incidence, mortality, and survival. The CCR is funded primarily by federal funds and Proposition 99 tobacco tax revenues, the latter of which has been declining in recent years. The spending plan includes $800,000 of one-time funding in 2024-25 and $2 million ongoing General Fund to support CCR and maintain data system integrity.

Health Care Access and Information

Ratchets Down HCAI Spending. In 2024-25, the state is spending $107 million General Fund ($261 million total funds) for HCAI. Overall General Fund spending on HCAI is down in 2024-25 compared to the 2023-24 level. The decline is due to lower levels of one-time and carryover spending. Below, we summarize the major actions.

Health Care Workforce

Notably Reduces General Fund Support for Health Care Workforce Programs. Prior to 2024-25, HCAI administered a large portfolio of General Fund-supported health workforce programs. Many of these programs were supported by one-time funds over a multiyear period. As a budget solution, the spending plan notably reduces General Fund support for these initiatives. As Figure 6 shows, these reductions primarily affect one-time spending.

Reverts Carryover Funds From Previous Years. For many workforce initiatives, HCAI has had the authority to spend funds over many years. As a result, HCAI has accumulated hundreds of millions of dollars in carryover funds. This year’s spending plan reverts a sizable amount of carryover funds in 2023-24—$110 million—as a budget solution. Most of the reverted funds are for behavioral health workforce programs, such as CYBHI, the master’s of social work program grant initiative, and psychiatrist initiatives.

Reduces MHSF for Certain Workforce Programs. As a budget solution, last year’s budget shifted one-time General Fund support for certain behavioral health workforce initiatives to the MHSF. The amount was $196 million in 2023-24. Since that time, the MHSF’s fiscal condition has deteriorated. Recognizing the fund’s now limited capacity, the 2024-25 spending plan eliminates funding for these initiatives.

Reappropriates Unspent Song Brown Funds. The budget act reappropriates $34 million General Fund for the Song Brown program from 2023-24 to 2024-25. HCAI delayed spending the funds as part of the May Revision, when the Governor proposed to pull back the money as a budget solution. Though the funds were not spent in 2023-24, HCAI had publicly awarded these funds as grants to physician residency programs. This action enables HCAI to fund these award commitments.

Expands Staffing for Workforce Development. The spending plan authorizes 16 new positions at HCAI for health care workforce development, bringing its total staffing for this purpose to 97.2 positions. The added positions will support a variety of activities, such as policy analysis, project and program management, and research and data analysis. Existing resources, rather than new funding, will support the cost of the positions (around $2 million in 2024-25).

Other Actions

Revises Spending on Two CalRx Initiatives. Formally established in 2020, the CalRx program is intended to develop, acquire, produce, and/or distribute generic drugs for Californians. Currently, the program consists of two key initiatives, both of which are revised in this year’s spending plan. Below, we describe the revisions in each initiative.

• General Fund Reduction to Biosimilar Insulin Initiative. The 2022-23 budget provided $100 million one-time General Fund for a partnership with a private manufacturer to develop a biosimilar generic insulin product. This year’s spending plan reduces $50 million of this amount (scored in 2023-24) that was to support construction of a new manufacturing facility. According to HCAI, manufacturing initially will occur at an existing facility in Virginia. The administration anticipates construction of a California facility will occur at a later date.

• Opioid Settlements Fund (OSF) Reduction for Naloxone Initiative. The 2023-24 budget provided $30 million one-time OSF to manufacture or procure a low-cost, generic version of a naloxone nasal product. This year’s spending plan reduces this amount by $5 million, bringing the total amount to $25 million. According to the administration, this action is needed because less funding is available in the OSF than originally anticipated.

Borrows From Several Special Funds. As part of the early action package, the General Fund is borrowing $66 million from several HCAI special funds, such as the Hospital Building Fund and the California Health and Data Planning Fund. The spending plan assumes the General Fund will repay these funds in 2027-28.

Brings Office of Health Care Affordability to Full Operations. The 2022-23 budget package created the Office of Health Care Affordability and tasked it with establishing statewide health care cost growth targets, among other activities. In tandem with this action, the budget assumed a multiyear ramp up of the office’s operations as it hires staff. This year’s budget brings the office to full operations, providing $32 million General Fund support in 2024-25.

California Health and Human Services Agency

The spending plan includes $313 million ($296 million General Fund) for CalHHS, a net increase of $216 million ($222 million General Fund) over the revised 2023-24 level. The increase is mostly explained by a shift of $215 million General Fund in grants from BSCC to OYCR under CalHHS, described below. In addition, the budget shifts the Precision Medicine Program ($32 million General Fund) from the Governor’s Office of Planning and Research to CalHHS (covered in the Other Provisions Spending Plan).

Shift of Grants From BSCC to OYCR. The budget shifts $210 million General Fund and $13 million in federal funds related to juvenile justice grants from BSCC to OYCR. The funds are primarily distributed to county governments with some of the funding used for administering the grants. Most of this funding—about $210 million from the General Fund—supports the Juvenile Justice Realignment Block Grant.

Eliminates Health and Human Services Innovation Accelerator Initiative as a Budget Solution. The 2023-24 budget included $42 million General Fund in 2023-24 and $32 million General Fund in 2024-25 for a program intended to accelerate the translation of research and development into innovations that help address disparities and inequities in safety-net programs. The early action package delayed this funding to 2025-26 and 2026-27. The June budget package eliminates the program, for a General Fund savings of $1 million in 2023-24, $42 million in 2025-26, and $32 million in 2026-27.

Covered California

The spending plan includes $187 million in state funds—$167 million from the Health Care Affordability Reserve Fund (HCARF) and $20 million from the General Fund—for Covered California, an increase of $82 million over the 2023-24 level. The increase is due to the full phase-in of state subsidies on the health benefit exchange described below.

Fully Phases-In State Subsidies. The 2023-24 budget included $82.5 million from the HCARF, growing to $165 million ongoing HCARF in 2024-25, to reduce deductibles and the consumer share of other health care costs on the exchange. The spending plan implements the first full year of the ongoing augmentation. Penalty revenues from the individual mandate are deposited into the HCARF to fund health care affordability programs.

Funds Health Care Coverage for Striking Workers. Chapter 695 of 2022 (AB 2530, Wood) created a program to provide health insurance to striking workers. The spending plan includes $2 million HCARF for the program. In addition, to the extent the program becomes oversubscribed, provisional language allows the Department of Finance to increase the appropriation by up to $3 million, subject to availability of funding in the HCARF.

Includes $771 Million in Budget Solutions. The budget package includes substantial General Fund savings derived from three actions relating to the HCARF. First, the budget loans $62 million in 2024-25 from the HCARF to the General Fund. Second, statutory changes accompanying the budget delay the repayment of a $600 million loan from the HCARF to the General Fund from 2025-26 to $200 million in each of 2026-27 through 2028-29. Finally, the budget transfers $109 million from the HCARF to the General Fund on a one-time basis in 2025-26.

Appendix