The Department of Health Services (DHS) has four major responsibilities. First, it provides access to health care for low-income persons through the Medi-Cal Program. Second, it administers a broad range of public health programs in cooperation with local health agencies. Third, it licenses hospitals and certain other health facilities. Fourth, it functions as the state's central agency for vital statistics.
The budget proposes $746 million from all funds ($244 million from the General Fund) and 5,790 personnel-years of staff for DHS state operations in 2000-01. Proposed General Fund spending represents an increase of 13 percent compared with estimated General Fund spending in the current year. This is due primarily to proposed new positions, as discussed below.
In addition to specific recommendations regarding particular staffing requests, we withhold recommendation generally on all of the department's proposals to increase staffing (which result in a net increase of 557 positions in 2000-01) because the department's large number of unfilled existing positions calls into question the need for the requested staffing increases. We recommend that the department evaluate its staffing vacancies in order to identify workload that can be met by filling existing positions instead of adding new positions and funding, and report the results of this review to the budget committees.
Budget Request for New Positions. The budget requests a net increase of 557 authorized positions for DHS in 2000-01, raising the total number of authorized positions in the department to 6,198--an increase of almost 10 percent. The largest of these staffing requests is proposed for the Medi-Cal Fraud and Fiscal Integrity Initiative (255) and for additional staff to monitor the quality of care at nursing homes that are included in the Governor's Aging with Dignity Initiative (153).
Vacant Positions in Department. All departments have some vacant positions due to normal personnel turnover and hiring delays, but generally these unavoidable vacancies are only about 5 percent of total positions. This is normally reflected in the budgeted salary savings for the department.
The requests for the new positions, however, come despite the fact that, as of January 2000, the department had over 900 vacant positions. This represents a current vacancy rate of more than 16 percent. Thus, more than one in every six positions in the department is vacant, on average. The DHS notes that it has had difficulty filling positions for reasons such as tight labor markets, particularly for certain types of health professionals, and administrative backlogs in the department's hiring process.
Department staff indicate that the vacancy rate is somewhat overstated. This is because persons hired under its temporary help "blanket" authority offset some of these vacancies; however, the department currently is unable to quantify this offset. Nevertheless, the department agrees that its vacancy rate is excessive.
The department's high vacancy rate is likely to be causing some of the workload backlogs that the department cites as justification for new additional positions and funding. Accordingly, some of this workload problem could likely be resolved by filling existing positions rather than adding new ones.
Therefore, while we address the merits of some individual budget staffing requests later in this analysis and in our analysis of the Aging with Dignity Initiative, we withhold recommendation generally on all of the department's requests for additional staffing. We recommend that the department evaluate its staffing vacancies in order to identify workload that can be met by filling existing positions instead of adding new positions and funding, and report the results of this review to the budget committees.
We recommend that the Department of Health Services prepare, for the budget committees, a realistic hiring plan for its revised staffing needs and a revised salary savings estimate for 2000-01 that is consistent with that plan, in order to avoid budgeting funds that are not likely to be spent.
In addition to requesting a net increase of 557 new positions, the budget assumes that DHS will fill most of its current vacant positions and reduce its overall vacancy rate in 2000-01 to 6.6 percent. In order to achieve this, the department would have to hire more than 1,000 people by early summer, in addition to replacing personnel who leave due to normal turnover. This appears unrealistic, and we believe that the department is likely to have a higher vacancy rate in 2000-01 than the budget assumes.
The amount of funding requested for staff wages and benefits is the full cost of wages and benefits for all authorized positions for the full year, less an allowance for salary savings that reflects the anticipated vacancy rate. For this reason, an unrealistically low estimate of the vacancy rate for DHS in 2000-01 would result in overbudgeting for staffing costs.
In addition to evaluating the potential workload that can be addressed by filling existing vacancies, as recommended above, we further recommend that DHS prepare, for the budget committees, a realistic hiring plan for its revised staffing needs and a revised salary savings estimate for 2000-01 that is consistent with that plan, in order to avoid budgeting funds that are not likely to be spent.
We recommend reducing the amount budgeted for employer retirement contributions to the correct amounts for proposed new positions in 2000-01, for a total savings of $1.1 million ($442,000 General Fund, $158,000 special funds, $501,000 federal funds, and $27,000 reimbursements), subject to adjustment for other budget actions affecting these proposals.
Employer Retirement Contribution Rates Reduced. Subsequent to the enactment of the 1999-00 Budget Act--which set employer retirement contribution rates to roughly 5 percent of salaries for most types of positions--Chapter 800, Statutes of 1999 (AB 232, Alquist) reduced these rates to approximately1.5 percent. Budget Letter Number 99-31, issued in October 1999, provided departments with instructions for budgeting accordingly.
Old Rate Budgeted for New Positions. The department applied the 5 percent rate rather than the 1.5 percent rate to the retirement contribution costs in its proposals for additional staff in 2000-01. Consequently, the department's personal services costs are overbudgeted. Accordingly, we recommend reducing the employer retirement contributions budgeted in the proposals to reflect the correct rate. The department has identified the overbudgeted amounts as $442,000 General Fund, $501,000 federal funds, $158,000 special funds, and $27,000 reimbursements. Therefore, we recommend reductions to the appropriate items, subject to adjustment for other budget actions affecting the department's proposed new positions.
We withhold recommendation on $26.2 million ($10 million General Fund) and 255 positions requested for the Governor's Medi-Cal Fraud and Fiscal Integrity Initiative, pending further analysis of the proposal and receipt of additional information from the department regarding (1) the potential use of existing vacant positions to address identified workload, and (2) more specific workload justification that relates staffing requests to specific goals and outcomes and recognizes the interactive effects of the components of the Governor's initiative.
The budget requests a total of $26.2 million ($10 million from the General Fund) and 255 positions to expand antifraud activities and improve the fiscal integrity of the Medi-Cal Program. This request is in addition to an augmentation of 41 positions and $3.3 million ($1.6 million from the General Fund) that was provided in the current year by the 1999-00 Budget Act and trailer bill legislation. The requested new positions and funding for 2000-01 would be used for the following purposes:
Vacancies Should Be Addressed. Earlier in this analysis, we discuss the large number of current DHS staff vacancies. Because of this large number of vacancies, we are generally withholding recommendation on proposals for new positions, including the positions requested in the antifraud initiative, pending information from the department on the extent to which filling existing vacant positions can address the workload for which the new positions are being requested.
Specific Concerns With the Antifraud Initiative. In addition to the general issue of how the department's vacancies affect the need for new positions, the antifraud proposal raises a number of specific concerns, including the following:
Pending receipt and analysis of additional information from DHS to address the issues raised above, we withhold recommendation on the proposal.