Legislative Analyst's Office
Analysis of the 2002-03 Budget Bill
The Department of Rehabilitation (DR) provides basic vocational rehabilitation and habilitation services to persons with disabilities. The purpose of vocational rehabilitation services is to place disabled individuals in suitable employment, while habilitation services help individuals who are unable to participate in vocational rehabilitation programs achieve a higher level of functioning. Services are provided in sheltered workshops under the Work Activity Program (WAP) and to groups or individuals at job sites through the Supported Employment Program.
In addition, the department helps legally blind clients support themselves as operators of vending stands, snack bars, and cafeterias throughout the state; provides prevocational rehabilitation services to newly blind adults; develops cooperative agreements with school districts, state and community colleges, and county mental health programs to provide services to mutually served clients; and assists community-based rehabilitation facilities such as independent living program, halfway houses, and alcoholic recovery homes.
The budget proposes an appropriation of $484 million from all funds for support of DR programs in 2002-03. This is an increase of $10 million, or 2.1 percent, over estimated current-year expenditures. The budget proposes $168 million from the General Fund, which is $1 million, or 1 percent, above estimated current-year General Fund expenditures.
The department is statutorily required to adjust rates for Work Activity Program providers every two years. The Governor proposes to suspend the July 1, 2002, rate adjustment, for an estimated General Fund cost avoidance of $3.8 million in 2002-03.
Current law requires the department to adjust rates for WAP providers every two years, based on actual service provider cost statements. The next adjustment is scheduled to take effect July 1, 2002. Based on preliminary estimates, the department projects that WAP rates would increase by approximately 7 percent if the rate adjustment were provided. This would result in increased payments to WAP service providers of approximately $4.9 million ($3.8 million General Fund and $1.1 million federal funds). The Governor proposes budget trailer bill language to suspend the statutory adjustment, resulting in a General Fund cost avoidance of $3.8 million in 2002-03.
The Governor's budget proposes General Fund savings of $6 million in the Habilitation Services Program, associated with an overall reduction of approximately 5 percent. However, the budget does not specify how these savings will be achieved. We withhold recommendation on the proposed savings pending review of a more detailed proposal which should be submitted by the department prior to budget hearings.
After adjusting for caseload growth, the Governor's budget proposes to reduce expenditures in the Habilitation Services Program by 5 percent in 2002-03, resulting in a General Fund savings of $5.9 million. The budget assumes that the department will implement various unspecified cost containment measures in order to achieve this reduction. The department indicates that it has identified several areas where savings could be achieved, and that it will convene a group of stakeholders to develop specific restructuring proposals.
In order for the Legislature to assess both whether the proposed savings can be achieved and the programmatic impact of the proposed reduction, more information is needed. We therefore withhold recommendation on the Governor's proposal pending review of a more specific proposal which should be submitted prior to budget hearings.