The budget proposes $1.6 billion from all funds for support of the DDS programs in 1996-97, an increase of 3.1 percent over estimated current-year expenditures. The budget proposes $515 million from the General Fund in 1996-97, which is $48 million, or 10 percent, above estimated current-year expenditures from this funding source. This increase is primarily due to the (1) increased service utilization by existing clients, and (2) the cost of regional center operations and purchase of services associated with a projected increase in clients.
We recommend a reduction of $4.2 million from the General Fund for support of the Early Start/Part H program because federal funds are available to support the program. (Reduce Item 4300-101-0001 by $4,178,000 and increase Item 4300-101-0890 by $4,178,000.)
In 1986, the Congress enacted legislation (Public Law 99-457) that appropriated funds to encourage states to develop comprehensive systems for providing early intervention services for infants who manifest "developmental delays." Early intervention services are designed to address the specific physical, educational, and/or psychosocial needs of infants, toddlers, and their families. Federal law requires that a state's early intervention system includes specific program components, such as a comprehensive method for providing multi-disciplinary assessments.
The budget proposes $109 million from all funds for support of the Early Start/Part H program in 1996-97 (including funds allocated to the State Department of Education). This is an increase of 9.2 percent over estimated current-year expenditures. The budget includes $72 million from the General Fund, which is $7.8 million, or 12 percent, above current-year expenditures. The General Fund increase is due to (1) backfilling for federal funds transferred to the State Department of Education to provide early intervention services, (2) caseload growth, and (3) an increase in average costs per client.
Federal Funds Available. The state has received federal grants under the program since 1988. Grants not expended during the year in which they are received can be spent for up to three additional years.
Our analysis indicates that federal funds are available to replace part of the $7.8 million increase in General Fund support proposed for this program in 1996-97. Specifically, under the budget proposal, $4.2 million in federal funds will be available but not expended in 1996-97. This is summarized in Figure 24.
Early Start/Part H Program
Federal Funds Budget Summary
We see no reason why federal funds should be carried over to 1997-98 when they could be used to offset state funds in the budget year. Accordingly, we recommend that the Legislature appropriate the $4.2 million in federal funds for the program in 1996-97 and make a corresponding reduction in the amount proposed from the General Fund. We note that adoption of our recommendation would not violate the federal maintenance-of-effort requirement for the Early Start Program.
We recommend reducing the General Fund amount budgeted for the Day Training Activity Center (DTAC) Program by $355,000 in 1995-96 and $1 million in 1996-97 to correct for double budgeting of clients being transferred from the Department of Rehabilitation. (Reduce Item 4300-101-0001 by $1,011,000.)
Currently, both the Department of Developmental Services (DDS) and the Department of Rehabilitation (DR) administer Day Training Activity Center (DTAC) Programs for developmentally disabled clients, upon referral by the regional centers. Both departments' programs provide education, training, and support services to develop independent living skills. However, the DR programs place more emphasis on vocational and employment skills and services.
Based on a determination that the clients in the DR program would be more suited to the DDS program, the DR terminated new enrollment in its DTAC program effective July 1995 and began a phased transfer of the clients to the DDS. An estimated 30 clients per month will be transferred from the DR to the DDS in the current and budget years.
The budget proposes $1.7 million from the General Fund in 1995-96 and $4.7 million in 1996-97 for the DDS to support clients transferred from the DR. Our analysis indicates, however, that the budget also includes funds in the DDS budget to cover the state portion of DR's cost of serving these clients, even though the DR will not be serving them. In order to correct for this double budgeting, we recommend that General Fund expenditures be reduced by $355,000 in 1995-96 and $1 million in 1996-97.
The Department of Mental Health (DMH) directs and coordinates statewide efforts for the treatment of mental disabilities. The department's primary responsibilities are to (1) administer the Bronzan-McCorquodale and Lanterman-Petris-Short Acts, which provide for the delivery of mental health services through a state-county partnership and for involuntary treatment of the mentally disabled, (2) operate four state hospitals, (3) manage treatment services at the Camarillo State Hospital and the California Medical facility at Vacaville, and (4) administer seven community programs directed at specific populations.
The state hospitals provide inpatient treatment services for mentally disabled county clients, judicially committed clients, and mentally disordered offenders and mentally disabled clients transferred from the California Department of Corrections (CDC) and the California Youth Authority.
The budget propose $1 billion from all funds for support of DMH programs in 1996-97, which is an increase of 1.9 percent over estimated current-year expenditures. The budget proposes $475 million from the General Fund in 1996-97, which is an increase of $39 million, or 9 percent, above estimated current-year expenditures from this funding source. This increase is primarily due to three budget adjustments: implementation of the Sexually Violent Predator program; an increase in the Judicially Committed/Penal Code patient population in the state hopsitals; and an increase in funding for managed care to reflect changes in the number of beneficiaries and increased costs.
We withhold recommendation on $22 million requested for the Sexually Violent Predator Program until the Department of Mental Health and other state agencies responsible for operation of the program resolve a number of significant implementation issues.
Last year, the Legislature and the Governor enacted Ch 762/95 (SB 1143, Mountjoy) and Ch 763 (AB 888, Rogan), which created the Sexually Violent Predator Program. Under the program, an inmate who has completed a prison term for certain sex-related offenses, who meets other specified criteria, and who otherwise would be released on parole, would instead be committed under provisions of civil law to state custody for an additional two years at a time for treatment of his or her mental disorder. The Governor's Budget proposes $22 million from the General Fund for 389 positions in the DMH in 1996-97 for the screening, evaluation, treatment, and administrative activities for this program. The DMH's responsibilities include determining whether inmates who are being considered for parole are sexually violent predators subject to civil commitment under the program, and treating those committed sexually violent predators.
Based on our review of the implementation proposal for this program submitted by the DMH and two other implementing agencies, the CDC and the Board of Prison Terms (BPT), we make the following findings:
We discuss these concerns in more detail in our analysis of the CDC budget.
Pending resolution of these concerns, we withhold recommendation on the DMH's funding request for implementation of this program.
We recommend deleting the proposed General Fund augmentation of $2.1 million for 53 new peace officer positions at Metropolitan State Hospital because security requirements can be met with existing resources by more efficient use of available space at Patton State Hospital. (Reduce Item 4440-011-0001 by $2,139,000.)
Patton State Hospital (PSH) has a projected population of 1,289 patients in June 1996, consisting primarily of Judicially Committed/Penal Code (JC/PC) patients. These patients are committed through the courts. The majority of the patients are classified as Incompetent to Stand Trial (IST), Not Guilty by Reason of Insanity, or Mentally Disordered Offenders.
The department plans to remodel the "70-Building" at PSH, beginning in March 1997, to meet fire, life safety, and environmental standards. The remodeling will result in a temporary loss of space for 348 IST JC/PC patients at PSH. The department indicates that temporary housing for the 348 patients will be needed for approximately two years, the time it will take to remodel the 70-Building at PSH. Thus, the department proposes to transfer these patients, along with an additional 11 IST JC/PC patients, from PSH to Metropolitan State Hospital (MSH) in 1996-97.
Currently, MSH contains a partially-secured unit with a JC/PC patient capacity of approximately 96. The department estimates that the hospital will be at its capacity for this unit in the current year. For 1996-97, the JC/PC population at MSH is proposed to increase by 368 patients, due to the transfer of 359 patients from the Patton Hospital and 9 new patients.
Proposal to Add Peace Officers. The Governor's Budget proposes to increase the number of hospital peace officers at MSH in 1996-97. Specifically, the budget proposes to establish 53 new positions and purchase two patrol cars to establish security for the additional 368 JC/PC patients. Because these patients require a relatively high level of security, the DMH also proposes that a perimeter security fence system be erected at MSH around the buildings which would house the IST JC/PC population, similar to the fence that exists at the Patton Hospital. The department anticipates that the fence will be completed in August of 1997 (fiscal year 1997-98).
The budget's request for 53 peace officers is based on the number of positions needed to staff the observation kiosks and sally port/visitor center areas in the perimeter security fence system, even though the fence will not be completed during the budget year.
Analyst's Recommendation. As the department recognizes, the budget proposal represents a stopgap measure that will not provide the appropriate level of security for the new JC/PC patients at the Metropolitan facility until 1997-98, when the fence is completed. We believe, however, that there is an alternative which--while not ideal--would be less disruptive for patients, provide the appropriate level of security, and avoid the costs associated with the new positions.
Specifically, we recommend--in our analysis of the capital outlay budget for the DMH--that in lieu of adding the security personnel at MSH, the department keep the patients at Patton and temporarily overcrowd the other housing units at Patton over the two-year period that the 70-Building is being renovated. Generally, this would mean that six patients would occupy a room designed for four patients. The department could reduce this overcrowding level by renovating the 70-Building in two stages--keeping one-half of the building open while the other half is renovated. This staging method was previously used at Patton when the "N-Building" was renovated in the 1980s. We urge the department to immediately evaluate this staging option in order to mitigate any impacts of overcrowding. (We also recommend, in our capital outlay analysis, deletion of the funds proposed for construction of the security fence at Metropolitan in 1996-97.)
This temporary overcrowding at Patton should be less disruptive to patients than moving them to Metropolitan. (We note that the patient living areas at Metropolitan are scheduled to undergo structural upgrading for seismic safety in 1996-97.) In addition, the JC/PC patients will be kept in a secure perimeter rather than being at Metropolitan for a period of months prior to the fence being completed. Finally, this will mitigate the need to install a security fence and hire 53 peace officers at MSH. Accordingly, we recommend deleting the proposed 53 positions, for a General Fund savings of $2.1 million in 1996-97.
The Department of Community Services and Development (DCSD), formerly the Department of Economic Opportunity, administers the Low-Income Energy Assistance Program (LIHEAP) and the Community Services Block Grant (CSBG). In addition, the DCSD plans, coordinates, and evaluates programs that provide services to the poor and advises the Governor on the needs of the poor.
The LIHEAP provides cash grants and weatherization services, which assist low-income persons in meeting their energy needs. The CSBG provides funds to community action agencies for programs intended to assist low-income households.
The budget proposes total expenditures of $116 million for the DCSD in 1996-97. This represents a decrease of $40.6 million, or 26 percent, from estimated current-year expenditures. The budget, however, probably overstates current-year spending and understates budget-year spending. This is because the department typically has significant current-year unexpended balances of federal funds that are shifted into the budget year through a reappropriation.
Of the proposed total expenditures, $108 million are federal funds and $7 million is from the General Fund. The proposed General Fund expenditures are for expansion of the California Mentor Initiative.
In June 1995, the Governor created the California Mentor Initiative through an Executive Order. Under this initiative, the DCSD will contract with local community action agencies to provide mentoring services to youth age 12 and under who are at risk of becoming teen parents, engaging in criminal activity, or requiring public assistance. The goal of the program is to link 250,000 mentors with 1 million at-risk youth by the year 2000. According to the department, the intent of the initiative is to eventually transfer the program to the private sector.
The administration proposes to spend $1,250,000 in federal funds to establish the program in 1995-96. Of this amount, $1 million is available from "discretionary" funds (not earmarked for designated purposes) received under the federal CSBG and $250,000 is available from federal "Safe and Drug Free Schools and Community Grant" funds received through the Department of Alcohol and Drug Programs. The DCSD anticipates funding 15 to 20 contracts in the current year.
The Director of Finance notified the Joint Legislative Budget Committee (JLBC) of this proposal through a Section 28 letter submitted in December 1995. The chairperson of the JLBC responded that, without prejudice to the proposal, he did not concur with the request on the basis that the establishment of a new program through the Section 28 process is inappropriate. Instead, the chairperson advised the administration to provide the budget committees with detailed information about the proposal during the 1996-97 budget hearings. As we discuss below, the department has not submitted a plan for spending its funds in 1996-97.
The budget proposes a total of $15 million from the General Fund for the Mentor Initiative in 1996-97, reflecting a major expansion of the program. Of this amount, $7 million would be spent by DCSD, with the remainder spent by the California Youth Authority and the Office of Child Development and Education. The department anticipates that it will fund 50 to 80 contracts in 1996-97.
The department has not submitted a plan for spending its funds for the Governor's Mentor Initiative. We recommend that the department report during budget hearings on its plans to implement the initiative.
At the time this analysis was prepared, the department did not have detailed information regarding how it would spend the funds proposed for the Mentor Initiative. The Legislature should be fully informed of the objectives, scope, and funding of the initiative in order to ensure that it is consistent with legislative priorities and coordinated with related programs. Thus, in order to facilitate legislative review of the Governor's proposal, we recommend that the department report during budget hearings on its plans for implementation in both the current and budget years.
We recommend that if the proposed expansion of the California Mentor Initiative is approved, the budget be reduced by $1,250,000 from the General Fund, because federal funds could be used for this purpose. (Reduce Item 4700-101-0001 by $1,250,000.)
The budget proposes to support the Mentor Initiative entirely from the General Fund ($7 million) in the budget year. The budget assumes that the state will continue to receive the same level of discretionary federal CSBG and Drug Free grant funds in 1996-97, but does not propose to spend these funds for the Mentor Initiative as it has in the current year.
We find no reason to discontinue the use of available federal funds to support the Mentor Initiative in the budget year. Moreover, the administration has not identified how these federal funds would otherwise be used in the budget year. Thus, if the expansion of the program is approved, we recommend that $1,250,000 in budgeted federal funds be used to support the program. This would result in corresponding General Fund savings of $1,250,000 in 1996-97.
The Employment Development Department (EDD) is responsible for administering the Employment Services (ES), the Unemployment Insurance (UI), and the Disability Insurance (DI) Programs. The ES Program (1) refers qualified applicants to potential employers; (2) places job-ready applicants in jobs; and (3) helps youth, welfare recipients, and economically disadvantaged persons find jobs or prepare themselves for employment by participating in employment and training programs.
In addition, the department collects taxes and pays benefits under the UI and DI Programs. The department collects from employers (1) their UI contributions, (2) the Employment Training Tax, and (3) employee contributions for DI. It also collects personal income tax withholdings. In addition, it pays UI and DI benefits to eligible claimants.
The budget proposes expenditures totaling $6 billion from various funds for support of the EDD in 1996-97. This is a decrease of $473 million, or 7.3 percent, from estimated current-year expenditures, primarily due to an anticipated reduction in federal funds for job training programs and a decrease in projected UI benefits. Of the total amount proposed, $4.9 billion is for UI and DI benefits, and $1.1 billion is for various other programs and administration. The budget proposes $23.5 million from the General Fund in 1996-97, which represents the same level of funding as in the current year.
We recommend the adoption of Budget Bill language to transfer the amount of the year-end balance in excess of $1 million from the Benefit Audit Fund (BAF) to the General Fund, because the revenues are not needed to support BAF expenditures and it is appropriate to consider these revenues as fungible with the General Fund. (Increase General Fund revenues by $3,500,000.)
The Benefit Audit Fund (BAF) consists of penalty assessments paid by persons who receive unemployment insurance benefit overpayments due to unlawful submission of claims. The funds are appropriated to the EDD for enforcement activities related to the discovery and collection of these overpayments. The budget proposes expenditures of $12.3 million from the BAF in 1996-97, leaving a year-end balance of $4.5 million, or 37 percent of expenditures.
Unlike most other special funds, the revenues in the BAF were not generated with the purpose of supporting a particular program. Instead, the penalties were established as a regulatory mechanism to address violations of the law. Consequently, unlike most special funds, if resources exceed expenditure requirements--as is the case in the BAF--it does not necessarily follow that the penalties should be reduced. Instead, we believe that it would be reasonable to transfer unnecessary balances to the General Fund, where the monies would be available for expenditure according to the Legislature's priorities.
We note that there have been similar transfer provisions for other special funds consisting of fines and penalties. For example, state law governing the EDD's Contingent Fund, which consists of interest and penalties on employers, requires that the year-end fund balance in excess of $1 million be transferred to the General Fund. Similarly, the Budget Act of 1993 required the transfer of various special fund revenues from penalties and interest to the General Fund.
Accordingly, we recommend that the Legislature adopt Budget Bill language to transfer to the General Fund all BAF balances in excess of $1 million, as of June 30, 1997. This would maintain a sufficient reserve in the BAF (8 percent of expenditures) for contingencies and expenditure requirements in the subsequent year, and would increase General Fund revenues by $3.5 million.
Our recommendation could be implemented by adoption of the following language in a new Budget Bill item (5100-011-0184):
We withhold recommendation on $2,193,000 proposed for expansion of the Targeted Industries Partnership Program, pending review of information needed from the Department of Industrial Relations.
The budget proposes an augmentation to the EDD of $2,193,000 from the BAF to expand the Targeted Industries Partnership Program (TIPP). The proposal represents a major expansion of the TIPP, under which the Department of Industrial Relations (DIR) and other state and federal agencies conduct joint labor law enforcement activities in the apparel manufacturing and agriculture industries. Of this amount, $1,737,000 would be transferred by the EDD to the DIR, and $456,000 would be retained by the EDD for six positions to audit potential violations of employment and tax laws uncovered by the TIPP investigators. Our analysis of this program expansion appears under the DIR section of the Business and Labor chapter in this Analysis. Pending review of the information discussed in that analysis, we withhold recommendation on the $2,193,000 requested for TIPP expansion in the EDD budget.
The budget assumes a major reduction of $213 million in federal funds under the Job Training Partnership Act and $9 million in federal funds under the Wagner-Peyser Act in 1996-97, due to pending federal appropriations. We recommend that the department report during budget hearings on the impact of the reductions and what efforts the department proposes to minimize this impact.
The federal Job Training Partnership Act (JTPA) authorizes job training programs to prepare youth and unskilled adults for entry into the labor force. The programs primarily serve persons who are economically disadvantaged (including welfare recipients) or face barriers to employment. The JTPA includes the following programs: (1) the Adult Training Program provides basic and occupational skills training, on-the-job training, and supportive services to participants; (2) the Youth Training Program provides similar services to persons 16-21 years of age; (3) the Summer Youth Program provides training and temporary employment for economically disadvantaged youth during the summer; and (4) the Dislocated Worker Program provides readjustment services, such as skills assessment and job search assistance, to dislocated workers.
The state's Job Services Program, which helps to match job seekers with employers, is supported primarily by federal Wagner-Peyser Act funds. Ninety percent of the Wagner-Peyser funds are used to provide labor exchange services such as job search and placement, recruitment services for employers, counseling, testing, referral, and labor market information. The remaining 10 percent of Wagner-Peyser funds are used for various discretionary activities which include model projects, performance incentives, and services to groups with special needs.
The budget assumes a major reduction in JTPA and Wagner-Peyser funds, based on pending federal legislation appropriating funds for federal fiscal year 1996. (While this federal fiscal year overlaps with the state's current year, the department indicates that, for technical reasons, the federal appropriation would not have a fiscal impact in 1995-96.) Figure 25 shows the department's estimate of the reduced funding levels for California and the impact on the number of clients served in the JTPA and Job Services programs in 1996-97.
JTPA and Job Services Programs
Potential Impact of Federal Funds Reductions a
|(Dollars in Millions)|
|Difference|| Impact on
|Job Services Program||$100||$91||-$9||-21,116|
|a Totals may not add due to rounding.|
Reductions of this magnitude could have a significant impact on persons who would otherwise benefit from these programs and on other programs, such as Aid to Families with Dependent Children (AFDC) and county General Assistance programs. Given the potentially significant reduction in federal funds, we recommend that the department report during budget hearings on the potential impact of this reduction and what efforts the department proposes to minimize the impact.
The Department of Rehabilitation (DR) assists disabled persons to achieve social and economic independence by providing vocational rehabilitation and habilitation services and support for community based rehabilitation facilities. Vocational rehabilitation services seek to place disabled individuals in suitable employment; habilitation services help those individuals who are unable to benefit from vocational rehabilitation function at their highest levels. The DR provides assistance to rehabilitation facilities, such as independent living centers, rehabilitation workshops, halfway houses, and alcoholic recovery homes.
The budget proposes $353 million from all funds for support of DR programs in 1996-97, which is an increase of 3.2 percent over estimated current-year expenditures. The budget proposes $114 million from the General Fund in 1996-97, which is $4 million, or 3.2 percent, above estimated current-year expenditures from this funding source.
We recommend that the department report at budget hearings on the feasibility of expanding the use of client fees and copayments for vocational services and the extent to which these revenues could be used to serve additional clients currently waiting for rehabilitation services.
Order of Selection. The department serves disabled individuals who apply for services and are found to be eligible. Federal law specifies that if the state cannot provide vocational rehabilitation services to all eligible individuals who apply, an "order of selection" process must be established to assign priority to the "most severely disabled," as defined by the state.
The federal act requires that on the date the Order of Selection is implemented all persons in a vocational plan must continue to be served. The department implemented the Order of Selection on September 1, 1995 and determined that, due to a lack of funding, services could not be provided to new clients, at least during the current fiscal year. However, new clients will be placed on a waiting list until the department determines it can serve more individuals. Currently, there are 68,660 clients being served and 5,728 clients on a waiting list. The department anticipates that it will continue to have a waiting list in the budget year, but does not have a projection of how many clients will be on the list.
Financial Participation By Clients. Federal law permits the state to charge fees or copayments based on ability to pay (means test) for most vocational rehabilitation services (excluding assessment, counseling, guidance, and work-related placement). The department currently charges fees or copayments in three service areas: physical restoration (which includes corrective surgeries, prosthetic devices, and eyeglasses), living allowance for additional costs incurred while participating in rehabilitation, and vehicle purchases.
Report on Fees and Copayments. The department is currently examining the feasibility of applying fees and copayments to additional services in order to raise revenues for the purpose of expanding services to additional clients on the waiting list. Such services could include employment training, transportation, and supported employment at the job site. The department anticipates that it will be able to report on the results of the review within the next few months.
We believe that it is reasonable to expect clients to pay for part of the cost of providing vocational rehabilitation services, based on their ability to pay. Consequently, in order to facilitate the Legislature's consideration of this issue, we recommend that the DR report at budget hearings on the potential to raise additional fee revenues in order to reduce the waiting list of clients needing rehabilitation services.
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