Legislative Analyst's Office

Analysis of the 2000-01 Budget Bill
Department of Developmental Services (4300)

A developmental disability is defined as a disability, related to certain mental or neurological impairments, that originates before a person's eighteenth birthday, constitutes a substantial handicap, and is expected to continue indefinitely. The Lanterman Developmental Disabilities Services Act of 1969 entitles individuals with developmental disabilities to a variety of services, which are overseen by the state Department of Developmental Services (DDS). The department contracts with 21 nonprofit regional centers (RCs) to coordinate educational, vocational, and residential services for approximately 170,000 clients each year. In addition to providing some services directly, such as intake and assessment, individual program planning, and case management, RCs purchase a variety of services from community-based providers.

Individuals with developmental disabilities have a number of residential options. While most live with their parents or other relatives, thousands live in their own apartments or in group homes that are designed to meet their medical and behavioral needs. The department also operates five developmental centers (DCs) and one 55-bed facility, which provide 24-hour care and supervision to approximately 4,000 individuals.

The budget proposes $2.4 billion from all funds for support of DDS programs in 2000-01, which is a 9 percent increase over estimated current-year expenditures. The budget proposes $997 million from the General Fund, which is $76 million, or 8 percent, above estimated current-year expenditures from this funding source. The increase is primarily due to (1) caseload and cost increases for community-based services, (2) the full-year cost of program augmentations enacted in the current year, and (3) the development of a facility for the developmentally disabled with severe behavioral problems.

Community Services Program

The Community Services Program provides community-based services to clients through the RCs. The RCs are responsible for client assessment and diagnosis, the development of an individualized program plan, case management, and the coordination and purchase of various services. Services fall into three broad categories: residential, supported living, and day program services. Day program services include early intervention services for infants and young children, daytime activity programs for adults, and in-home respite care.

The budget proposes $1.8 billion from all funds ($896 million from the General Fund) for support of the Community Services Program in 2000-01.

Statutorily Required Rate-Setting Methodologies Still Not Established

The department is required, by legislation enacted in 1998, to develop performance-based rate-setting methodologies for residential, supported living, and day program services. The methodology for supported living services is overdue, and all three methodologies are still in the early developmental stage. We recommend that the department report, during budget hearings, on the status of the development of these methodologies. We withhold recommendation on the related $1.1 million request for contract services, pending receipt of additional information on the scope and costs of the proposed contracts.

Background. The rates for supported living, residential, and day program services are determined by different rate-setting methodologies. Rates for supported living services are negotiated between each regional center and the service providers, residential rates are determined by the Alternative Residential Model (ARM), and day program rates are determined by the department based on cost statements from providers.

There were no increases between fiscal years 1992-93 and 1997-98 for day program rates, and residential rates have not been updated to reflect changes in the costs of running these facilities. As a result, service providers and the Association of Regional Center Agencies expressed concerns that inadequate rates resulted in high staff turnover, unqualified staff and, in some cases, a lack of services. In response to these concerns, the Legislature appropriated funds for rate increases ranging up to 13 percent in 1998-99.

New Rate-Setting Methodologies Required. Two pieces of legislation were enacted that required the department to develop performance-based rate-setting methodologies for the residential, supported living, and day program services. Chapter 1043, Statutes of 1998 (SB 1038, Thompson) required such methodologies for residential and supported living services. The 1998-99 budget trailer bill for health programsChapter 310, Statutes of 1998 (AB 2780, Gallegos)required a methodology for day programs. The supported living services rate methodology was to be established by January 1, 2000, and the residential methodology is to be developed by January 1, 2001. No due date for the day program rate methodology was specified. The department indicates that all three methodologies are still in the early developmental stage.

Current-Year Rate Increase Vetoed. Senate Bill 1104 (Chesbro) included a 4 percent rate increase in the current year for direct care staff providing day program services. However, citing the department's effort to establish a new rate-setting methodology for these services, the Governor vetoed the bill, indicating that it was premature to provide additional rate increases before the methodology was developed.

Performance-Based Rate Systems Are Complex. In 1998, the department convened a stakeholder advisory group, the Service Delivery Reform Committee (SDRC), to develop the required rate methodologies. The department envisions the development of the methodologies as a three- to five-year process. This process involves three primary phases: (1) identification of desired client outcomes, (2) development of the personnel and service standards required to obtain the outcomes, and (3) development of a cost model that is based on the costs of meeting the personnel and service standards and that can be adjusted according to vendor size, geographical differences, and economic variables. The department indicates that because they involve sophisticated analysis, the second and third phases require the services of a contractor.

The department has also indicated that it has sought consensus on the desired outcomes--the basis for the cost models--in order for the department to promulgate the new regulations as quickly as possible once a cost model is developed. We note, however, that reaching consensus among a stakeholder group of over 70 participants has been a lengthy process.

As a result of the time and complexity involved in the development of the cost models, the department has been unable to meet the statutory deadline for the rate-setting methodology for supported living services, and the methodologies for day program and residential services remain in the early developmental stage.

The department indicates that consensus on outcomes for residential services has been reached, and that a contract will be signed in February 2000 for the development of a residential cost model. The department proposes to enter into a contract in the budget year for the development of cost models for day program and supported living services. However, at the time this analysis was prepared, consensus on outcomes for day program and supported living services had not been reached.

Consequently, we recommend that the department report, during budget hearings, on the status of the development of all three rate-setting methodologies.

Budget Proposes $1.1 Million For Contract Services. The department proposes to enter into two contracts in 2000-01. The first, as indicated above, is for the development of cost models for day program services and supported living services. The second contract is for the development of a "performance accountability" data system designed to collect data on client outcomes. However, the scope of the contract is yet to be determined. Consequently, the department cannot provide sufficient detail on the scope and costs of this contract. Therefore, pending receipt of additional information, we withhold recommendation on the department's request for $1.1 million for the contracts and a limited-term contract manager.

Developmental Centers Program

The DCs provide residential care for developmentally disabled persons. The budget proposes $613 million from all funds ($71 million from the General Fund) for support of the DCs in 2000-01.

Costs Of Southern California Facility Uncertain

We withhold recommendation on the department's request for $13.2 million ($9.1 million General Fund, including Medi-Cal reimbursements) for the lease and development of a facility to serve individuals with severe behavioral problems, pending an update on the department's progress in finding a site.

Under an interagency agreement, the department contracts with the Department of Mental Health (DMH) to serve 110 forensic developmentally disabled individuals at Napa State Hospital. These are individuals who are found to (1) be gravely disabled and unwilling or incapable of accepting treatment voluntarily, (2) be a danger to self or others, or (3) have committed a crime but are incompetent to stand trial. The department has committed to move these individuals out of Napa by November 1, 2000, so that the DMH can accommodate its own growing forensic population.

Because the 110 individuals require a secured facility, they must be moved to Porterville Developmental Center. Before this can happen, however, the individuals with severe behavioral problems at Porterville must be transferred to another facility. The five developmental centers do not have enough vacant beds to accommodate this transfer. The department has leased a 55-bed facility in Northern California for individuals with behavioral problems who come from this region.

In order to meet the November 1, 2000 deadline to accommodate the persons from Southern California, the budget proposes funds to lease a facility (or, if necessary, more than one facility) with 80 beds in Southern California, to be occupied by September 1, 2000.

In total, the budget requests $5.7 million for 126 new positions and $7.5 million for lease payments, operating expenses, and equipment for the facility.

The cost estimate for lease payments is based on the assumption that 125,000 square feet of space will be required. We note that the Northern California facility, which will serve 55 individuals, is approximately 50,000 square feet. On this basis, considerably less than 125,000 square feet would be needed to house 80 persons. The department acknowledges that if it is able to lease a single facility, or even two smaller facilities, the lease payments will be less than projected because the number of square feet would likely fall between 60,000 and 100,000 square feet.

The department is currently involved in site selection and, because of the urgency involved, will enter into lease negotiations as soon as possible. Thus, pending further information on the development of the negotiations and revised cost projections, we withhold recommendation on the department's request.

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