Analysis of the 2007-08 Budget Bill: Health and Social Services

Department of Rehabilitation (5160)

The Department of Rehabilitation (DR) provides vocational rehabilitation to persons with disabilities. The purpose of vocational rehabilitation services is to place disabled individuals in suitable employment or to provide short-term, intensive vocational rehabilitation for those with developmental disabilities through supported employment and work activity programs.

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 $390 million from all funds for support of DR programs in 2007-08. This is an increase of about $13 million, or 3 percent, over estimated current-year expenditures. The budget proposes $58 million from the General Fund, which is $2 million, or 3 percent, above estimated current-year General Fund expenditures. The General Fund increase is the result of higher operating costs, and an increase in wages in the Supported Employment program, partially offset by new federal funds.

Automation Proposal Poses Future General Fund Risk

The Governor’s budget proposes to use federal carryover funds to begin development of a new automated system for the Vocational Rehabilitation Services (VRS) program. Our review indicates that this automation proposal (1) is based on an overly optimistic development schedule, and (2) will likely require General Fund support in future years because there is no ongoing federal fund source. We recommend that the department report at budget hearings on the availability of federal funds in subsequent years and how they intend to meet their schedule.

Background. The DR proposes to develop a new Electronic Records System (ERS) to manage and track the activities of the VRS program. The VRS program assists persons with disabilities in preparing for, finding and retaining competitive employment in mainstream work settings. The department provides individual assessments, counseling, job placement, and the purchase of rehabilitation services through a network of 85 branch offices statewide. The ERS would track and report case data required by the federal government, as well as provide the ability to manage consumer and vendor financial data and issue payments. The department has been unable to comply with federal reporting requirements due to the limitations of its existing data tracking system. Inability to provide this data in future years could result in a loss of federal funds. The project is scheduled to be completed in 2010-11 with a total cost of $15.8 million.

Optimistic Project Schedule Poses Risk. The ERS project’s cost is partially dependent on the proposed project schedule. Based on our review, we believe that the schedule provided in the Feasibility Study Report underestimates the time required for certain activities necessary to prepare users for the implementation of a new system. In this regard, the proposed system will require extensive user involvement, along with training, in order for staff to understand business process changes that will occur with the ERS. In addition, the new system will absorb the functionality of a number of other systems, and will require a data conversion effort in order to continue uninterrupted case services and vendor payments. For these reasons, we believe that the proposed project schedule may be significantly underestimated and that project costs will exceed the current estimate of $15.8 million, when the department revises the schedule during the procurement process.

Federal Funds Potentially Unavailable Beyond Budget Year. The department plans to use $465,640 in previously unspent federal carryover funds to support the project in 2007-08. However, because carryover funds vary from year to year, it is unclear to what extent federal funds will be available for the following year’s project requirements. To the extent that federal funds are not available, it is likely that in subsequent years, General Fund support will be required in order to complete the development of the system. If no new federal funds are identified or freed up, the General Fund exposure could be $4.4 million in 2008-09 and $4.6 million in 2009-10.

Analyst’s Recommendation. In order to provide the Legislature with more information regarding future General Fund costs for this automation project, we recommend that the department report at budget hearings on their estimates of the availability of federal funds for this project and their plan for meeting the project schedule.

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