Realignment: Addressing Issues to Promote Its Long-Term Success

2011 Realignment: Addressing Issues to Promote Its Long-Term Success M A C TAy l o r • le g i s lA Ti v e A nAl y sT • A u g u s T 19, 2011 An LAO RepOR t 2 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t ExEcuTIvE SummARy As part of the 2011-12 budget plan, In this report, we explain the construction the Legislature enacted a major shift—or and mechanics of 2011 realignment, as well as “realignment”—of state program responsibilities identify a few pressing implementation issues that and revenues to local governments. In total, the we recommend that the Legislature address before realignment plan provides $6.3 billion to local the end of the current legislative session. This governments (primarily counties) to fund various report also highlights a series of more extensive criminal justice, mental health, and social services program and fiscal issues that we recommend the programs in 2011-12, and ongoing funds for these Legislature address to increase the likelihood of the programs annually thereafter. 2011 realignment plan being a long-term success. The realignment plan adopted by the (These are summarized in the nearby box.) The Legislature is similar to the one proposed by the specific legislative strategies necessary to address Governor, as modified in the May Revision, with these more extensive issues will be complicated respect to the programs shifted and the amount of to design because of the number and types of revenue provided to local governments. However, programs being realigned, as well as entail difficult the adopted realignment package differs in two tradeoffs. Therefore, we do not suggest that the important respects from the administration’s Legislature tackle these issues this year. Instead, proposal. First, the Legislature’s plan relies on we recommend that the Legislature use the time a shift of existing state and local tax revenues remaining during this legislative session to create rather than the extension of expiring tax rates as a fall policy development process. Specifically, we proposed by the Governor. Second, the adopted recommend that the Legislature create a forum budget legislation does not include the Governor’s whereby state, legislative, and local stakeholders proposal for a constitutional amendment to, among consider options and develop policy recommenda- other things, make the funding allocations to local tions for the Legislature to consider when it recon- governments permanent and protect the state from venes in early 2012. potential mandate claims. LAO Recommendations to Promote the Long-Term Success of Realignment • Develop local funding allocation formulas with eye towards the long-term. • Simplify the structure of the realignment accounts to provide financial flexibility. • Enact statutory changes to give counties appropriate program flexibility. • Make sure that local fiscal incentives are aligned with statewide goals. • Promote local accountability. • Clearly define the state’s role and funding responsibilities. • Avoid state-reimbursable mandates. www.lao.ca.gov Legislative Analyst’s Office 3 An LAO RepOR t DEvELOPmEnT Of ThE REALIgnmEnT PAckAgE What Is Realignment? Several times over the of a constitutional amendment which, if ratified last 20 years, the state has achieved significant by voters, would have extended the tax increases policy improvements by reviewing state and local for five years and dedicated the revenue to local government programs and realigning respon- governments for realignment, as well as provided sibilities to a level of government more likely to the state with protection from mandate claims achieve good outcomes. In 1991, the Legislature made by local governments for costs associated enacted a major realignment of health and social with the realigned programs. (As we discuss later services programs and funding responsibilities. in this report, the California Constitution generally This 1991 realignment plan is ongoing and, in requires the state to reimburse local governments if 2011-12, counties will receive over $4 billion to it “mandates” that they provide a new program or a implement the programs that previously were state higher level of service.) funding responsibilities. During years of fiscal Realignment Package Modified Several difficulty, realignment proposals by the Legislature Times. The administration modified its original or administration often have included additional realignment proposal in February and as part of revenues earmarked for the transferred programs. the May Revision. These modifications included In this way, realignment proposals have been technical changes to the administration’s estimates viewed, in part, as budget solutions. (The nearby of program costs, as well as changes to the box on page 6 provides more information about the programs included in realignment. Figure 1 shows 1991 realignment.) some of the major elements of the realignment Realignment Proposed by Governor. In package at various stages. January, the Governor proposed a state-local Final Realignment Package Approved in Two program realignment as part of his 2011-12 Phases. In March, the Legislature passed two bills budget. This initial proposal assumed a total of related to the realignment of certain corrections and $5.9 billion in revenue from extending the 1-cent mental health programs and funding. However, the increase in the state sales tax and 0.5 percent Legislature did not approve the proposed consti- increase in the vehicle license fee (VLF) rates. Both tutional amendment that provided funding for the of these rates had been increased temporarily as realignment package. In June, the Legislature passed part of the 2009-10 budget package and were set to Chapter 40, Statutes of 2011 (AB 118, Committee expire July 1, 2011. The Governor’s proposal also on Budget) and Chapter 35, Statutes of 2011 (SB 89, included the one-time use of $861 million from Committee on Budget and Fiscal Review), which the Mental Health Services Fund. The January provided the revenues for realignment and created budget proposal assumed that, effective July 1, the account structure to allocate the realignment 2011, the total of $6.8 billion in revenues would resources. At that time, the Legislature also fund realignment of various public safety, mental approved several other budget trailer bills related health, health, and social services programs from to realignment. Figure 2 lists the budget trailer bills state to local (primarily county) responsibility. The related to realignment. Governor’s original proposal also assumed passage 4 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t Figure 1 Major Elements of the Realignment Plan at Different Stages Governor’s Proposals Adopted Budget January February May Junea Total Revenues $6.8 billion $6.8 billion $6.4 billion $6.3 billion in 2011-12 Revenue • Extend 1 percent sales and Same as January Same as January, • Shift 1.0625 percent Sources 0.5 percent VLF rate increases except: sales tax and • Proposition 63 transfer • 0.4 percent VLF rate $453 million VLF increase revenues • Proposition 63 transfer Realigned • Fire Same as January, Same as February, Same as May, Programs • Court security adding: subtracting: subtracting: • Public safety grants • State penalty funds • Fire • Expanded juvenile • Low-level • Pre-2011 juvenile • AB 3632 justice offenders and parolees justice • State penalty funds • Expanded juvenile justice realignment • Public safety mandates • EPSDT • Public safety mandates • MHMC • AB 3632b • Community mental health/CalWORKs • Substance abuse treatment • Foster care and child welfare • Adult protective services Constitutional Yes Yes Yes No Amendment a Some of the budget trailer bills related to realignment were adopted in March. b AB 3632 refers to education-related mental health programs. VLF = vehicle license fee; EPSDT = Early and Periodic Screening, Diagnosis, and Treatment; MHMC = Mental Health Managed Care. Figure 2 List of 2011 Realignment Trailer Bills Bill Chapter Legislative Number Number Approval Subject AB 100 5 March 17 Mental health AB 109 15 March 17 Criminal justice SB 89 35 June 28 Vehicle license fee and registration fee SB 92 36 June 28 Criminal justice – Board of State and Community Corrections AB 117 39 June 28 Criminal justice (clean-up legislation) AB 118 40 June 28 Sales tax, Local Revenue Fund 2011, and account structure AB 114 43 June 28 Education www.lao.ca.gov Legislative Analyst’s Office 5 An LAO RepOR t ARchITEcTuRE Of 2011 REALIgnmEnT The 2011 realignment plan shifts the respon- Realigned Programs sibility and funding for a series of major programs The realignment package includes $6.3 billion from the state to local level. The plan allocates the in 2011-12 for court security, adult offenders realignment funding to local governments pursuant and parolees, public safety grants, mental health to a complicated series of accounts and subaccounts. services, substance abuse treatment, child In this section, we describe the fiscal architecture of welfare programs, adult protective services, and 2011 realignment, including the funds provided to California Work Opportunity and Responsibility local governments, the division of these funds among to Kids (CalWORKs). Except for the funding for programs, and the plan’s fiscal effect on the state. the realignment of adult offender and parolee comparing 2011 and 1991 Realignments The realignment package adopted by the Legislature in 2011 is by no means the first significant realignment of state and local programs. For example, the Legislature has previously realigned responsibilities for juvenile offender populations, trial courts, and mental health services. The previous realignment most akin to the 2011 realignment in size and scope is the one implemented in 1991. As is the case with the 2011 realignment, the 1991 realignment was enacted, in part, because of a multibillion-dollar state fiscal shortfall. The 1991 realignment provided counties with dedicated tax revenues to fund the realignment of various mental health, social services, and health programs, including altering cost-sharing ratios. In both realignments, statutes created a complicated series of accounts and subaccounts into which revenues were deposited. Similarly, both realignment plans deposit their revenues into a dedicated local fund and do not count them towards the Proposition 98 minimum guarantee. While similar, the 2011 and 1991 realignments have notable differences. By including criminal justice programs, the 2011 realignment includes a broader scope of government programs. The 1991 realignment was also smaller in size, realigning about $2 billion of program responsibility (about $4 billion in today’s dollars). In 1991, the state provided counties with new tax revenues—increases of a half-cent sales tax and a change in the depreciation schedule for vehicles resulting in an estimated 24.33 percent increase the vehicle license fee—rather than shifting existing state revenues. Because of their similarities, we believe that the 1991 realignment can provide some valuable lessons for the state and counties as they implement 2011 realignment. For example, in our 2001 publication Realignment Revisited: An Evaluation of the 1991 Experiment In State-County Relations, we found that realignment had been largely successful because of its reliable funding stream for counties, increased flexibility, and incentives for innovation and less costly approaches to providing services. However, we also found that some aspects of the 1991 realignment—lack of data and a complicated system of allocation formulas, in particular—reduced the overall effectiveness of the realignment. (To find this 2001 report, go to www.lao.ca.gov/2001/realignment/020601_ realignment.html.) 6 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t populations, which goes Figure 3 into effect October 1, all Expenditures for 2011 Realignment programs were realigned (In Millions) effective July 1. Figure 3 Adult offenders and parolees $1,587 displays the amounts Local public safety grant programs 490 dedicated to each of the Court security 496 realigned programs in Pre-2011 juvenile justice realignment 97 Early and Periodic Screening, Diagnosis, and Treatment 579 2011-12. (We provide Mental Health Managed Care 184 detailed descriptions of Drug and alcohol programs—substance abuse treatment 184 the realigned programs Foster Care and Child Welfare Services 1,567 and their realignment Adult Protective Services 55 CalWORKs/mental health transfer 1,084 funding allocations in the CalWORKs (1,066) Appendix of this report.) Mental health (18) Total $6,322 Realignment Revenues to DMV. The budget also shifts $763 million on a Unlike the Governor’s one-time basis in 2011-12 from the Mental Health realignment proposal, the realignment package Services Fund (established by Proposition 63 in adopted by the Legislature does not extend the November 2004) for support of the Early and temporary sales and VLF tax rate increases Periodic Screening, Diagnosis, and Treatment that expired at the end of 2010-11. Instead, the Program and Mental Health Managed Care budget reallocates $5.6 billion of state sales tax program. and state and local VLF revenues for purposes of realignment in 2011-12. Specifically, the Legislature Account Structure for 2011 Realignment approved the diversion of 1.0625 cents of the state’s The revenues provided for realignment are sales tax rate to counties. This diversion is projected deposited into a new fund, the Local Revenue Fund to generate $5.1 billion for realignment in 2011-12, 2011. The budget package creates eight separate growing to $6.4 billion in 2014-15 (see Figure 4). accounts and 12 subaccounts within this fund In addition, the realignment plan redirects an to pay for the realigned programs. One of the estimated $453 million from the base 0.65 percent accounts, the Mental Health Account, is somewhat VLF rate for local law enforcement grant programs. different than the other accounts because its funds Under prior law, these VLF revenues were support the CalWORKs program and interact allocated to the Department of Motor Vehicles (DMV) ($300 million) for administrative purposes Figure 4 and to cities and Orange Revenues for Realignment County ($153 million) (In Millions) for general purposes. 2011-12 2012-13 2013-14 2014-15 The budget increases the Sales tax $5,106 $5,571 $6,015 $6,388 motor vehicle registration Vehicle license fee 453 453 453 453 fee by $12 per automobile Proposition 63 763 — — — to offset the lost revenue Revenues $6,322 $6,025 $6,468 $6,841 www.lao.ca.gov Legislative Analyst’s Office 7 An LAO RepOR t with accounts created under the 1991 realignment subsequent fiscal years, and (2) sufficient protec- plan. Another account created in the Local Revenue tions be put in place to provide ongoing funding Fund 2011 is the Reserve Account, where revenues and mandate protection for the state and local generated in excess of the amounts projected for governments. Despite uncertainty surrounding some accounts are deposited. The budget legislation these ongoing allocations, the revenues deposited requires revenue deposited into the Reserve Account into the Local Revenue Fund 2011 for purposes of to be used to reimburse counties for programs paid realignment are ongoing. from the Foster Care, Drug Medi-Cal, and Adoption State fiscal Effect of Realignment Assistance Program Subaccounts. In addition, for 2011-12, the budget assumes that about $1.2 billion Most of State Fiscal Benefit Stems From of the funds deposited into the Local Revenue Proposition 98 Savings. The budget assumes that, Fund 2011 will be used to reimburse the state for by depositing the sales tax revenue into a special costs associated with incarcerating and supervising fund for use by local governments for realignment, inmates and parolees who were convicted prior to these funds are not available for the Legislature the implementation of realignment and, therefore, to spend for education purposes and thus are not will not be realigned to local responsibility. Figure 5 counted as state revenue for purposes of calculating illustrates the Local Revenue Fund 2011 and its the Proposition 98 minimum funding guarantee. accounts and subaccounts. As discussed more fully in the education section of our 2011-12 California Spending Plan report, Allocation of Realignment funds this action reduced the Proposition 98 minimum The budget legislation establishes various funding guarantee by $2.1 billion. Budget trailer formulas to determine how much revenue is bill language specifies, however, that the exclusion deposited into each account and subaccount. of these revenues is contingent upon voter approval Several of these accounts and subaccounts have of a ballot measure providing additional funding annual caps on how much funding they can for K-12 school districts and community colleges. receive. The budget package limits the use of funds If no ballot measure is adopted satisfying these deposited into each account and subaccount to requirements, the funds would not be excluded the specific programmatic purpose of the account from the Proposition 98 guarantee moving or subaccount. The budget does not contain any forward and the state would need to repay K-14 provisions allowing local governments flexibility education for the loss of $2.1 billion for the 2011-12 to shift funds among these programs. The budget year over a five-year period. The assumption that legislation also contains some formulas and general the realignment revenues are excluded from the direction to determine how the funding would be calculation of the Proposition 98 minimum funding allocated among local governments. The budget guarantee is subject to some dispute. We note, for legislation does not specify program allocations example, that the Attorney General’s office has been among the various accounts and subaccounts, or requested to issue an opinion regarding this matter. among counties, for 2012-13 and beyond (except Additional State General Fund Savings. for the CalWORKs/mental health transfer, which In addition to the Proposition 98 savings, the appears to be ongoing). It does, however, include realignment plan achieves state General Fund legislative intent language specifying that (1) new savings in two other ways. First, using VLF revenue allocation formulas be developed for 2012-13 and to fund local law enforcement grant programs 8 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t reduces the state’s costs for these programs by realignment in 2011-12. In the longer term, $453 million. Second, the budget assumes about however, the realignment of inmate and parolee $86 million in net savings to the state associated populations has the potential to significantly reduce with realignment of lower-level offenders and cost pressures on the state’s prison system, poten- parolees. Offsetting these savings, however, is tially including costs for construction of new prison $34 million provided in the budget to support local facilities, as well as achieve a large share of the state government hiring, training, and other transition inmate population reduction ordered by the federal costs associated with implementing this corrections court. Figure 5 Account Structure of the Local Revenue Fund 2011a Local Revenue Fund 2011 2011-12 Sales Tax Revenues: $5.1 Billion 2011-12 Vehicle License Fee Revenues: $453 Million District Local Local Law Trial Juvenile Attorney & Mental Community Enforcement Court Mental Health Justice Public Health Corrections Services Security Reimbursements Defender for State Costs 1991 Realignment Youthful Offender Funds Mental Social Block Grant 12 Distinct Health Services Grant Subaccount Subaccount Programs Juvenile (CalWORKs) Reentry Grant Reserve Health and Human Services Adult Child Child Drug Protective Welfare Abuse Court WCRTsb Services Prevention Non Drug Drug Adoptions Foster Care Medi-Cal Medi-Cal Adoptions Assistance Program Account a The one-time transfer of $763 million from the Mental Health Services Account (Proposition 63) is not shown here. b Subaccount Women and Children’s Residential Treatment Services. www.lao.ca.gov Legislative Analyst’s Office 9 An LAO RepOR t PRESSIng ImPLEmEnTATIOn ISSuES TO ADDRESS In 2011 The 2011 realignment legislation is complex Prioritization of Programs if Total and wide sweeping. To ensure that its changes work Revenues Are higher Than Expected as intended, there are a few pressing issues that we As described earlier in this report, revenues in believe the Legislature should address before the excess of those projected are generally deposited end of the current legislative session, as well as a into the Reserve Account, which is to be used series of more extensive issues that the Legislature to fund entitlement programs in the Foster should consider addressing in early 2012. We Care, Adoptions Assistance Program, and Drug discuss the more pressing implementation issues in Medi-Cal Subaccounts. However, it appears that this section. excess revenues would go to these entitlement programs even if those revenues exceeded the costs Allocation of Revenues if Total to provide the programs. It is also worth noting funds Are Less Than Expected that if revenues are high these entitlement program While we believe that the administration’s subaccounts will receive additional funding in two realignment revenue estimates are reasonable, they ways, both the transfers from the Reserve Account, are estimates subject to change based on various as well as getting each subaccount’s proportionate economic factors. Especially given the weakness share of excess revenues deposited into the Local in the current economy, it would be wise to ensure Revenue Fund 2011. The Legislature may want to that revenues are to be allocated in accordance consider whether there is another way it would with legislative priorities in the event that revenues want to prioritize additional revenues. do not reach expectations. Based on our reading of the realignment legislation, the first accounts to minimizing mandate Risk be funded are the Mental Health Account (which Under the California’s Constitution, the state primarily funds CalWORKs) and the Local Law generally must reimburse local governments when Enforcement Services Account (LLESA). If revenues it mandates that they provide a new program, a are lower than anticipated by the end of the year, higher level of service, or an increased share of each program except CalWORKs and the local cost for a state-local program. Government Code public safety grants funded by the LLESA will receive Section 17556 specifies, however, that the state is its proportionate share of the shortfall based on its not required to provide mandate reimbursements share of the Local Revenue Fund 2011 revenues. if the state provides local agencies with additional It is unclear why CalWORKs and the local public revenues “specifically intended to fund the costs of safety grants were chosen to be protected in the the state mandate in an amount sufficient to fund event that revenues are low. Alternative approaches the cost of the state mandate.” the Legislature may wish to consider are prorating Over the years, the Commission on State reductions across all programs, prioritizing program Mandates (CSM) has interpreted Section 17556 funding differently (for example, by prioritizing in a way that often does not give the state credit entitlement programs), or allowing counties some when the state provides resources to local agencies flexibility to shift money among accounts to address without directly linking the funds to an identified shortfalls based on local priorities. 10 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t mandate. In addition, the voters approved which generally are not part of the federal court Proposition 22 in 2010, amending the Constitution order). In addition, the Legislature may want to to prohibit the state from using VLF revenues for specify in statute the rate prisons are to charge mandates. counties for use of state prison beds to ensure that Given the many shifts in program responsi- the state receives reasonable compensation for these bilities and cost shares in the 2011 realignment additional housing and inmate medical costs. package, as well as its reliance on VLF (including Existing community corrections VLF revenues shifted from the 1991 realignment Performance Incentive grant Program plan), the CSM could find that some provisions in the 2011 realignment package constitute state In accordance with Chapter 608, Statutes of reimbursable mandates. If so, the state would 2010 (SB 678, Leno), counties currently receive be required to provide additional funds to local funding based on their success in reducing the governments to reimburse them for these costs. percentage of probationers sent to state prison While addressing this fiscal risk is a compli- compared to a county-specific baseline percentage cated task, the Legislature could take some actions of probationers they sent to prison between to minimize it in the short run. Specifically, we 2006 and 2008. Our analysis indicates that the recommend that the Legislature specify that the realignment of certain adult offenders from the first use of any 2011 realignment account is to offset state to counties will “artificially” reduce the future any mandated costs imposed on local agencies percentage of probationers that counties send to related to the 2011 realignment legislation. Later state prison, thereby unintentionally making them in this report, we recommend that the Legislature eligible for more Chapter 608 funding. This is consider additional actions to minimize its ongoing because the realignment plan will (1) increase the fiscal risks associated with mandates. number of individuals on probation and (2) make certain crimes ineligible for prison sentences. In contracting Back With State for order to account for these impacts, we recommend Incarceration of Adult Offenders that the Legislature revise the funding formula Under the realignment plan, counties could specified in Chapter 608. For example, the contract back with the state to house in state Legislature could freeze the performance incentive prisons certain adult offenders who otherwise grants at their current levels and, over the next would be realigned to county responsibility. several years, collect data to create a new baseline However, at the time of this analysis, how such that reflects the impacts of realignment. While a process would work remains unclear. While the Legislature probably does not need to correct we understand that California Department of the Chapter 608 formula before the end of this Corrections and Rehabilitation (CDCR) is currently session, it may want to at least adopt language working on the administrative details, legislative clarifying that it intends to make such changes. oversight of the process will be important, particu- This is because the current formula is based on larly given that the state is under a federal court data for each calendar year, and it might be helpful order to reduce prison overcrowding. Given this, to counties to provide clarity as to whether the the Legislature may want to place an overall cap formula is going to change for the 2011 calendar on the number of beds that counties can purchase year. in state prison facilities (not including fire camps, www.lao.ca.gov Legislative Analyst’s Office 11 An LAO RepOR t fuRThER AcTIOnS nEEDED TO EnSuRE ThE LOng-TERm SuccESS Of 2011 REALIgnmEnT Major measures revamping state and local the Legislature as it continues to debate different government responsibilities seldom are fully options. (In fact, at the end of this report, we developed and enacted in a single legislative suggest that the Legislature develop a process session. The package of realignment bills enacted by for developing the long-term implementation the Legislature earlier this year is not an exception. details that is inclusive of the many relevant state, As acknowledged in the realignment bills legislative, and local stakeholders.) In order to themselves, the Legislature has additional work that be as useful as possible, we first describe each of it needs to do to develop the financial architecture our recommendations and then provide specific of 2011 realignment, determine the appropriate examples as to how they apply to 2011 realignment. level of financial and programmatic flexibility to Develop Local funding Allocation provide counties, and create the right fiscal incen- formulas With Eye Towards Long Term tives and accountability mechanisms. Thoughtfully addressing these more extensive and complicated The Legislature will need to determine how issues will improve the long-term success of the revenues will be allocated among counties for 2011 realignment package. each realigned program for 2012-13 and beyond. In this section, we describe our major recom- For 2011-12, the Legislature chose to base county mendations for the Legislature to consider as it allocations largely upon historical funding alloca- refines and develops the details of 2011 realignment tions. This probably makes sense for the current (see Figure 6). In general, our recommendations year, a year of transition. However, over the longer do not provide specific solutions to the issues term, it is critical for the success of these programs raised. For example, we do not specify exactly that allocation formulas not be based solely on what percentage of realignment funds should historical allocations. County financial needs go to each county for each realigned program. for each program are going to change over time The number, differences, and complexities of the based on changes in county population, caseloads, programs included in 2011 realignment make such demographics, wealth, cost of living, and other specific recommendations difficult. Instead, our factors. In the future, county allocations should recommendations should be read as guideposts for be based on formulas that are responsive to the specific factors that affect Figure 6 the funding needs of LAO Recommendations to Promote the each program. If, on the Long-Term Success of Realignment other hand, allocation • Develop local funding allocation formulas with eye towards the long-term. formulas are created that • Simplify the structure of the realignment accounts to provide financial flexibility. simply institutionalize • Enact statutory changes to give counties appropriate program flexibility. the funding status quo, • Make sure that local fiscal incentives are aligned with statewide goals. • Promote local accountability. some counties eventually • Clearly define the state’s role and funding responsibilities. will become overfunded • Avoid state-reimbursable mandates. and others underfunded 12 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t relative to their comparative needs and with no to “under-equity” counties based on each county’s rational policy basis to justify the disparities. If this population and poverty population. In 1994-95, were allowed to occur, underfunded counties might there were 22 counties that fit the statutory need to reduce services, seek additional funding definition of being under-equity counties. While from the state, and/or divert funding from other the equity shortfall for these counties was reduced, programs. Further, overfunded counties would there were still 22 under-equity counties in have less fiscal incentives to control costs and run 2000-01, the final year of these equity payments. their programs efficiently. The Legislature and 2011 Realignment Examples: Local stakeholders may have concerns about adopting Corrections and Child Welfare. In determining new allocation formulas that are significantly future allocations for the newly realigned local different than historical funding patterns. For this corrections populations (from state prisons and reason, it may make sense to phase in any changes parole supervision to local jails and community so as not to have an adverse effect on any county in supervision), we recommend that the Legislature any single year. consider specifying an allocation formula in statute In addition, the Legislature needs to consider that is sensitive to future caseload changes at the how best to allocate the growth in realignment county level, rather than one that essentially locks revenues over time, particularly if there are periods in fixed percentages of funding for each county. where revenue growth exceed program needs. For For example, the Legislature could consider example, should funding for certain programs be using a formula that weighs heavily factors such prioritized, or should counties be given flexibility as the number of adults ages 18 through 35. This to allocate increased revenues based on local formula could also include other factors such needs and priorities? Should revenue growth be as the number adult felony convictions in each prioritized to programs that have received baseline county for the crimes specified in the realignment cuts in recent years, or where the Legislature plan. We believe these types of factors would be believes there to be inadequate base funding levels? more responsive to changes in the populations, Should some of the revenue growth be used as an demographics, and caseloads that are likely to vary “incentive pot” to support innovative approaches? by county and change over time. In considering this issue, the Legislature should As another example, the base funding a county strive to avoid some of the allocation mistakes currently receives for Child Welfare Services (CWS) made in the realignment of mental health and is based on social worker caseload standards estab- other programs in 1991. In that realignment, lished in 1984. There is wide variation in average allocation formulas were created based largely funding allocations per child among counties. The on historical funding patterns and reflected a 2011 realignment legislation calls for CWS funding combination of each county’s historical spending in 2011-12 to be distributed among counties based dating from the mid-1970s and caseloads and on the existing allocation structure. Rather than populations in 1991. While a share of the growth tying future CWS funding to a county’s historical in the 1991 realignment revenues was dedicated to spending, the Legislature could develop a funding addressing underlying funding inequities among allocation based on broader measures, including counties, the inequities were never resolved. The factors such as the population of children in a realignment legislation created equity subaccounts county. designed to provide a share of the revenue growth www.lao.ca.gov Legislative Analyst’s Office 13 An LAO RepOR t Simplify the Structure of the funding among programs. The Legislature has given Realignment Accounts/Subaccounts counties responsibility for providing these programs. To Provide financial flexibility It is reasonable, therefore, for the Legislature to also give counties the financial authority and flexibility to As discussed earlier, the 2011-12 budget manage this responsibility. package requires specific amounts of revenues Fiscal flexibility can be particularly important be deposited into 20 different accounts and for counties over the long term. In years in which subaccounts, with additional allocation formulas revenues are down or grow more slowly than antici- dictating the amounts going to a dozen local law pated, fiscal flexibility allows counties some ability enforcement programs. The Legislature should to respond and focus resources on their highest consider simplifying this account structure for priorities. Fiscal flexibility can also help counties 2012-13 and beyond, as well as provide each county respond to unique factors that drive up program with some flexibility to shift funding designated costs in their communities or offer unusual oppor- for one program to another program. The current tunities for cost savings. account structure is unnecessarily complicated and 2011 Realignment Example: Juvenile Justice could be simplified. This simplification should be Grants. Under the realignment plan, county achievable without directly affecting the provision probation departments and other local agencies of programs. Simplifying the accounting structure receive funding from two different accounts—the for 2011 realignment has the potential to reduce Local Law Enforcement Services Account and the the amount of administrative overhead counties Juvenile Justice Account—for five juvenile justice (and the state, potentially) need to provide financial grant programs (shown in Figure 7). These programs accounting and oversight. are the Youthful Offender Block Grant, the Juvenile Simplifying the account structure could involve Reentry Grant, Juvenile Camps and Ranches Grant, the merger of some accounts and subaccounts. the Juvenile Probation Grant, and the Juvenile Merging accounts—or, alternatively, providing Justice and Crime Prevention Act. Specifically, local each county with some level of authority to transfer governments will receive a separate allocation in money among its programs—would permit counties 2011-12 for each program and must use the funds for greater flexibility in how they use the revenues the purposes of that program as specified in statutes. provided for 2011 realignment. This could promote Given that these grant programs have overlapping greater innovation, as well as allow counties to goals and provide similar services, we recommend better respond to local needs and preferences (also that the Legislature consolidate the funding for discussed below). The specific amount of flexibility these programs beginning in 2012-13. Such a change would depend on the final account structure created would increase local flexibility by allowing local but could be increased or limited by statute. For governments to use the funds in ways that meet example, the Legislature could allow counties to shift their unique juvenile justice needs more efficiently no more than a specified percentage of funding from and effectively. In addition, reducing the number one program to others. This may make sense for of program-specific reporting requirements would programs for which the Legislature has significant reduce paperwork and administrative burdens, concerns about county commitment to providing freeing up resources for more supervision, treatment, a minimum level of services. In general, however, and oversight activities designed to achieve we recommend the Legislature limit the number improved public safety results. of constraints it imposes on county ability to move 14 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t Enact Statutory changes to give counties reduce local ability to innovate and increase Appropriate Program flexibility the risk of local governments filing claims for reimbursement of state-mandated costs. Instead, For some of the realigned programs, the we suggest that the state might achieve better Legislature will need to make some policy decisions outcomes by focusing on establishing the right regarding how much programmatic flexibility to fiscal incentives and accountability mechanisms give counties. The Legislature will need to decide (see discussions below). the degree to which counties will be required to Our office found that one of the successes of operate programs consistent with past practices 1991 realignment was the amount of programmatic versus having the authority to provide higher or flexibility provided to counties for community lower levels of service. Generally, we recommend mental health programs. This flexibility was giving local governments flexibility to encourage enhanced because of the more stable stream of innovation and allow for greater responsiveness dedicated revenues provided to a set of programs to local needs and preferences. This flexibility that had previously been subject to annual state will necessarily be limited where federal require- budget allocations. We found that realignment’s ments are in place. The Legislature may also have reliable funding stream and increased flexibility concerns that too much flexibility could mean that allowed counties to develop innovative and less certain programs are not operated at an adequate costly approaches to treating mentally ill patients. level in some counties. In those cases where a This included reduced reliance on more expensive minimum level of service is a priority of the mental health hospitals in favor of less costly Legislature, it can establish minimum standards community-based outpatient and day-treatment or requirements. However, we would caution that programs. Similarly, 2011 realignment has the setting extensive minimum requirements could Figure 7 Realigned Juvenile Justice Programs (In Millions) 2011-12 Population Served Examples of Services Funding Local Law Enforcement Services Account Juvenile Probation Children under the supervision of a juvenile Mental health assessments, family mentoring, $151.8 Grant court or a probation department, or children life skills counseling, gang intervention, and at risk of being wards of the court, and their drug and alcohol education families Juvenile Justice Crime At-risk youth and juvenile offenders and their Mental health services, anger management, 107.1 Prevention Act families gang intervention, and drug and alcohol education Juvenile Camps and Same as the Juvenile Probation Grant Same as the Juvenile Probation Grant 29.4 Ranches Grant program program Juvenile Justice Account Youthful Offender Youthful offenders in need of services from Probation, mental health, and drug and 93.4 Block Grant probation, mental health, drug and alcohol, alcohol services and other county departments Juvenile Reentry Individuals paroled from state juvenile Evidence-based supervision and detention 3.7 Grant detention facilities practices and rehabilitative services Total $385.4 www.lao.ca.gov Legislative Analyst’s Office 15 An LAO RepOR t potential to foster greater local innovation if counties that differ from the current statutory requirements, are provided programmatic flexibility. For example, provided the county can demonstrate that it meets there appear to be few limitations on how counties certain overall standards relating to adult protective choose to manage the newly realigned lower-level services. offender and parolee populations. This program- make Sure That Local fiscal Incentives matic flexibility, particularly when coupled with the Are Aligned With Statewide goals dedicated revenues provided under realignment, should allow local law enforcement agencies to plan One frequently cited premise of realignment for and implement innovative long-term strategies to is that local governments will use their greater better manage offenders in the community based on fiscal and program authority to improve program best practices and local needs. outcomes. For this premise to be realized, 2011 Realignment Example: Adult Protective however, local program funding and authority Services. Although current state law requires all must be linked in ways that provide inherent California counties to operate an APS program, it fiscal incentives for local governments to operate is not a federally required program. Therefore, the successful programs. This works in two ways. First, Legislature has considerable flexibility in deter- realignment should be structured so that local mining how to promote the state’s overall goals governments experience fiscal benefits when they related to elder and dependent adult protection successfully and effectively operate the realigned under realignment. For example, the Legislature programs. Second, the costs associated with could make APS a county optional program, program failures should be borne largely by local but require that counties share information governments and not shifted to the state. Similarly, with their communities regarding the safety of local governments should have fiscal incentives elders and dependent adults in their jurisdiction. to control costs and operate realigned programs In doing so, counties would have flexibility to efficiently. The Legislature should strive to structure invest in an APS program or spend funds on realigned programs and their funding so as to enhancing other county programs serving elders encourage success, efficiency, and innovation. and dependent adults. In granting this level of 2011 Realignment Example: CalWORKs. As flexibility, the Legislature should consider whether described in more detail in the Appendix, 2011 it is comfortable with giving counties the ability realignment provides counties with additional to decide whether to have an APS program, and funding for their CalWORKs grant programs whether local residents would have sufficient infor- through a complicated series of transfers that mation to ensure that the county provided needed include 1991 realignment accounts. The outcome services to the elderly and dependent adults. of these transfers is that annually each county Alternatively, the Legislature could require each receives additional funding for their CalWORKs county to continue to operate an APS program, but programs. The amount a county receives is the give it significantly more authority to structure the same as the amount the county would have program in a way that works best for the individual received for mental health services under the 1991 county. For example, current law requires county realignment. Prior to 2011 realignment, every APS programs to investigate allegations of abuse and county paid the same 2.5 percent fixed share of neglect within certain timeframes. The Legislature costs for its CalWORKs program so that a county’s could give counties authority to establish timeframes costs increased when its program costs increased. 16 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t Under 2011 realignment legislation, each county’s stakeholders should be involved in the creation of share of CalWORKs costs varies each year based these accountability mechanisms to better ensure on its annual program funding from 1991 mental the usefulness of the final requirements. Moreover, health realignment. Under this funding structure, we suggest that any requirements emphasize a county’s CalWORKs costs are not affected by outcome measures and be made available to the its actual caseloads, program costs, or outcomes. general public—for example, on the county website. Consequently, this approach provides counties with In order to ensure that county administrators and no incentive to control their CalWORKs costs. A state officials can effectively compare program better option would be to modify the CalWORKs outcomes across counties, the state should ensure funding formula so there is a fiscal incentive for the uniformity of any reporting requirements. counties to manage program costs. The Legislature For realigned programs, the state’s traditional could direct that any CalWORKs savings be “top down” approach to oversight and account- redirected into (1) CalWORKs services and child ability may not be the most effective or most care, (2) other social services programs within responsive to local needs and pressures. Instead, realignment (such as child welfare), and/or (3) any it may be more effective for accountability to be other local priority. achieved through having the fiscal incentives (rewards and sanctions) for good outcomes, as Promote Local Accountability well as public display of program outcomes for Establishing useful accountability measures review by the public, local media consumption, is critical to the long-term success of realignment and stakeholder groups. For example, there is in several ways. Local program administrators currently a collaborative venture between the responsible for implementing realigned programs University of California at Berkeley and the need information to ascertain how effectively and California Department of Social Services (DSS) efficiently their agencies are operating programs that aggregates statewide child welfare and foster so as to make decisions on how to improve the care data into customizable tables that are updated programs in subsequent years. In addition, state quarterly and made available on a public website. and local officials will want information regarding This data source allows those working at the county the degree to which Realignment 2011 achieves its and state level to examine performance measures intended goals, namely improved programmatic over time. It provides policymakers, child welfare outcomes and less costly program delivery. Perhaps workers, and the public with direct access to infor- most importantly, the general public and their mation on California’s entire child welfare system. elected officials will expect information on how well The program is funded by DSS and the Stuart local agencies are operating the various realigned Foundation. programs in order to hold officials accountable. 2011 Realignment Example: Local In establishing program accountability Corrections. As one example, the Legislature mechanisms for realigned programs, it is important could require that counties make available to that priority be given to creating reporting require- its citizens key outcome data associated with ments and processes that are beneficial to local the realignment of the lower-level offenders and agencies, elected officials, and communities—those parolees realigned to local community supervision, ultimately responsible for the local programs— such as the rate at which these offenders are rather than the state. This suggests that local subsequently rearrested and re-incarcerated for www.lao.ca.gov Legislative Analyst’s Office 17 An LAO RepOR t more serious and violent crimes. Such a process duties to a new 12-member Board of State and would facilitate local accountability by allowing Community Corrections (BSCC) effective July the community and local leaders in each county to 1, 2012. Unlike CSA, this new board will be assess how effectively it is supervising and treating independent of CDCR. The primary goals of BSCC the realigned offenders. Counties would also be are to (1) assist the state and local governments in able to use the data to compare their performance implementing the realignment of various criminal with that of other counties and allow them to justice responsibilities, (2) provide leadership in identify the successful counties from whom to the area of criminal justice policy, and (3) develop learn best practices. In order for counties to make data and information related to the implementation those comparisons, though, it would be necessary of outcome-based measures and evidence-based for the state to ensure that counties are collecting practices in community corrections efforts. The and reporting the data in consistent and uniform Legislature may want to provide more specific ways. Over time, state policymakers could use this guidance in statute on how the board should carry statewide data to evaluate the long-term impacts of out these goals. For example, the Legislature could 2011 realignment on public safety. require the board to compare program outcomes (such as recidivism rates) among counties, as well clearly Define the State’s Role and as formalize a process for identifying and sharing funding Responsibilities best practices used in successful counties. In the As local governments take over more respon- future, BSCC also could be required to aggregate sibility for the operation of realigned programs, county level data to assess the statewide effect of the state’s role necessarily diminishes. Even where realigning certain adult offenders on local public the state transfers significant program authority to safety to assist the Legislature in making subse- counties, however, the Legislature may still desire quent policy decisions. that state agencies retain some roles—such as Avoid State-Reimbursable mandates related to program oversight, technical assistance, statewide coordination, and ensuring federal The Constitution provides financial protections conformity. Defining these specific roles for each to local governments by generally requiring the state agency is important to ensure that state state to reimburse them for the cost of mandated administrators and their agencies adapt to their new programs, increased program responsibilities, new functions and responsibilities. Absent clear and increased shares of costs for state-local legislative direction, it is easy to imagine state programs. As discussed earlier in this report, it is agencies being slow to recognize and embrace these possible that—absent additional legislative action new roles. In addition, defining state agencies’ or constitutional change—some of the changes roles is important so that local agencies know what in 2011 realignment could be considered a “state- resources are to be provided by—or requirements reimbursable mandate.” In general, we recommend imposed by—state agencies. the Legislature avoid funding programs as 2011 Realignment Example: Local mandates because the reimbursement process gives Corrections. In adopting the realignment budget the state little ability to control program costs, is package, the Legislature approved legislation to unduly bureaucratic, and tends to result in some eliminate the Corrections Standards Authority local governments receiving disproportionately (CSA), an office of CDCR, and assign its former higher funding levels than others. 18 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t The clearest way to ensure that the 2011 examine each program to minimize the chance realignment package does not result in state- that 2011 realignment could be viewed as imposing reimbursable mandates would be for the state to a state-reimbursable mandate. Specifically, the pass a constitutional amendment similar to the one Legislature will need to ensure that (1) each proposed by the Governor. That measure excluded county and city receives sufficient funds each year the 2011 realignment program changes from the (from a revenue source that may be used to pay reimbursement requirement. Absent a constitu- for mandates) to offset the cost of any mandated tional change (a possibility that we discuss in the element of the 2011 realignment package and that nearby box), the Legislature will need to carefully (2) these funds are explicitly identified as intended What happens Without a constitutional Amendment? The administration has stated its intent to seek a constitutional amendment similar to what was proposed and considered by the Legislature in February. The details of such an amendment have not been publicly released, and it is unclear if the amendment would be sent to the voters by the Legislature (requiring a two-thirds supermajority vote of both houses of the Legislature) or through the initiative process. The major features of the February constitutional amendment were the approval of tax rate increases, the dedication of those tax revenues to local governments for the purpose of funding realigned programs, protection of those revenues from being diverted by the state, declaration that realignment revenues did not count towards the Proposition 98 minimum guarantee, a state-local risk-sharing formula to address unanticipated costs associated with lawsuits or new federal require- ments, and state protection from local mandate claims associated with realigned programs. If it contained similar provisions, adoption of a constitutional amendment would provide local governments an increased level of certainty and provide the state with protection from new costs. What happens, however, if no constitutional amendment is adopted—either because the proposal does not reach voters or because voters reject it? Based on our understanding of how realignment currently is constructed, all the program realignments would continue, including the statutory policy changes related to the supervision of lower-level offenders and parolees. The diversion of the state’s sales tax and the vehicle license fee funding to the Local Revenue Fund 2011 also would continue. While counties would not have constitutional protection from the state diverting their realignment revenues in the future, the constitution’s existing mandate provisions would offer counties some level of financial protection. The state, on the other hand, would bear some risk that a local government that experienced higher program costs than it received in earmarked program revenues might file a successful claim for mandate reimbursements. Given this risk, the Legislature should explore a range of options to reduce the likelihood that part of the package could be determined to be a state-reimbursable mandate. In the 1991 realignment, for example, the Legislature created a series of “poison pills” to reduce the likelihood of a local government filing a mandate claim. While enacting a similar approach for the 2011 realignment would be difficult, it merits legislative consideration. www.lao.ca.gov Legislative Analyst’s Office 19 An LAO RepOR t by the Legislature to be available to pay for these Under realignment, counties pay for 100 percent costs. of the nonfederal share of most child welfare Counties will likely be concerned that costs. Without a constitutional amendment or stringent state mandate protections may leave other changes, counties could seek mandate them vulnerable to increased costs associated with reimbursement to the extent realignment revenues unanticipated events, such as lawsuits, changes were less than the actual costs to provide these in federal law, or federal performance review programs. This could happen either if the revenues penalties. For this reason the Governor’s proposed provided to the child welfare subaccounts are lower constitutional amendment also included a provision than projected or if caseloads or other costs are that required the state and counties to share in higher than expected. Absent changes that would these increased costs equally should they occur. The protect the state from county mandate claims, not Legislature may wish to consider similar language. only could state General Fund costs increase, but 2011 Realignment Example: Child Welfare. there would also be less incentive for counties to try Under prior law, the state and counties shared to manage their child welfare programs efficiently the nonfederal costs of CWS and Foster Care. within their resources. LOng-TERm DEcISIOnS nEED A ThOughTfuL PROcESS We believe that addressing the longer-term The objective of the process should be for these issues outlined in this report—such as determining participants to reach consensus on how to address ongoing allocation formulas, establishing account- these longer-term issues. They should provide ability mechanisms, and avoiding mandates—are their input to the Legislature by early 2012 so that critical to the long-term success of this realignment. implementation legislation can be adopted before If the Legislature and administration address these the start of the 2012-13 fiscal year. For example, the issues in a thoughtful way, with a long-term vision, Legislature could direct the creation of working there is a greater chance that realignment could groups in each of the major program areas affected result in significant benefits for the state and local by realignment with instruction to meet regularly governments, including improvements in program and report back to the Legislature on its progress outcomes and more efficient delivery of services. periodically over the fall and in January around For this reason, we believe the Legislature the time the Governor releases his 2012-13 budget should use the interim period in the fall of 2011 proposal. The Legislature could also hold interim to establish a thoughtful process for considering hearings to receive the input of the public and how best to address the long-term implementation various stakeholders. Ultimately, we believe that issues outlined in this report. This process should this type of approach has the potential to identify be designed to include the active participation ways to balance the sometimes-competing interests of not only the Legislature, but also the admin- of different stakeholders, avoid mistakes of past istration, county and city representatives, local realignments, and improve fiscal and program- program administrators, and local stakeholders. matic outcomes associated with this realignment. 20 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t APPEnDIx: DETAILED DEScRIPTIOnS Of REALIgnED PROgRAmS The 2011 realignment package includes a (3) pre-2011 juvenile justice realignment, and broader array of programs than any other state- (4) a variety of local public safety grant programs. local realignment in modern California history: Each of the accounts and subaccounts related to criminal justice, health, and social services the realignment of criminal justice programs is programs. In many cases, particularly in the area listed in Figure 1. All of these programs are funded of criminal justice, specific programs were selected from the Local Revenue Fund 2011. The figure also for inclusion in the 2011 realignment package displays some details on how the funding provided based on the belief that local governments have the to these programs is allocated. capacity to operate the programs more effectively Adult Offenders and Parolees ($1.59 Billion) than the state. Similar to the case in 1991, however, the 2011 realignment package also includes some As part of the 2011-12 budget package, the programs where there is much less agreement Legislature shifted the responsibility for certain that greater local control could yield improved lower-level offenders, parole violators, and parolees outcomes. We describe the programs included in from the state to the counties on a prospective basis the realignment package below. effective October 1, 2011. Under the realignment plan, offenders sentenced for certain nonserious, C J P riminal ustiCe rograms nonviolent crimes—who have no prior serious The realigned criminal justice programs are or violent criminal convictions and who are not (1) adult offenders and parolees, (2) court security, required to register as sex offenders—will now Figure 1 Summary of 2011-12 Criminal Justice Allocations in the Local Revenue Fund 2011 (Dollars in Millions) Estimated Allocation Allocation Distribution Account Allocation From LRF 2011 Cap Among Counties Local Community $354 8.89% No Specific allocations Correctionsa District Attorney and Public 13 0.32 Yes Specific allocations Defender Local Law Enforcement 490 Total allocation Yes Various formulas in existing law Services guaranteed Trial Court Security 496 12.45 Yes Discretion of DOF Juvenile Justice 97 2.44 Yes Consistent with existing law Youthful Offender Block (93) (2.35) Yes Formula in existing law Grant Subaccount Juvenile Reentry (4) (0.09) Yes Based on criteria in existing law Grant Subaccount Total $1,450 a Not shown here is estimated $1.2 billion in payments to the state related to housing and supervising offenders and parolees. LRF = Local Revenue Fund; DOF = Department of Finance. www.lao.ca.gov Legislative Analyst’s Office 21 An LAO RepOR t serve their sentence in a county jail and/or under will reimburse the state about $1.2 billion for costs local community supervision rather than in state incurred in 2011-12 for lower-level offenders in state prison. In addition, certain offenders released from prison who were sentenced prior to October 1, 2011. prison will now be supervised in the community by Local Public Safety grant Programs county agencies (such as county probation) instead ($490 million) of by state parole agents. When locally supervised offenders violate the terms and conditions of their Under the realignment plan, funding for supervision, the courts, rather than the Board various local public safety grant programs (such of Parole Hearings, will preside over revocation as the Citizens’ Option for Public Safety Program, hearings to determine if they should be revoked to juvenile justice grant programs, and booking fees) county jail. According to the administration, these will be shifted directly to local governments (cities changes are projected to reduce the state inmate and counties) for the same purposes as specified in population by about 14,000 inmates in 2011-12 and existing statutes. nearly 40,000 inmates (roughly one-fourth of the Under the plan, a total of about $490 million total inmate population) upon full implementation will be transferred to the newly established in 2014-15. The state parolee population is projected Local Law Enforcement Services Account—an to decline by about 25,000 parolees in 2011-12 and estimated $453 million from the redirection of by 77,000 parolees (roughly three-fourths of the existing vehicle license fee revenue and $37 million total parole population) in 2014-15. The budget from the Local Revenue Fund 2011—to support assumes that the reduction in the inmate and the realigned public safety grant programs. For parolee populations will result in state savings 2011-12, the funds in this account will be allocated of about $453 million in 2011-12, growing to to local governments by the State Controller’s $1.5 billion upon full implementation. Office generally based on the level of funding The realignment plan assumes a total of received for each grant program in recent years. $1.6 billion from the Local Revenue Fund 2011 The realignment plan requires that, if there are to support the realignment of adult offenders insufficient revenues to fully fund this account, and parolees in 2011. Of this total, $354 million the Director of Finance shall allocate the funds will be transferred to the newly established Local necessary from the Local Revenue Fund 2011 Community Corrections Account to support the to provide the full allocation. Figure 2 lists the local incarceration and supervision of the realigned 12 grant programs and the level of funding offenders. In addition, the plan estimates that about provided for each. $13 million will be transferred into the District court Security ($496 million) Attorney and Public Defender Account to support the involvement of district attorneys and public Current law generally requires trial courts to defenders in parole revocation proceedings. The contract with their local sheriff’s offices for court funds in these two accounts will be distributed security. Under the realignment plan, the sheriffs in 2011-12 to counties based on a formula that would continue to be responsible for providing takes into account various factors, such as the court security. However, funding to pay for the proportion of the state prison population that is security now will be provided directly to the from a particular county. The realignment plan sheriffs rather than being appropriated in the also assumes that the Local Revenue Fund 2011 annual state budget to the trial courts. Existing 22 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t statutes related to court Figure 2 security (such as the Local Law Enforcement Services Account—2011-12 requirement that each (In Millions) trial court negotiate Program Funding a memorandum of County probation grants $151.8 understanding with the Citizens’ Option for Public Safety 107.1 sheriff specifying the level Juvenile Justice Crime Prevention Act 107.1 of security to be provided) Booking fees 35.0 Juvenile camps and ranches 29.4 are unchanged. War on Methamphetamine grants 19.5 The realignment Small and Rural Sheriffs Grant program 18.5 plan estimates that High-Tech Theft Apprehension 11.0 Sexual Assault Felony Enforcement Program 5.1 $496 million from the Rural Crime Prevention 3.7 Local Revenue Fund Gang Violence Suppression 1.6 2011 will be transferred Multi-Agency Gang Enforcement Consortium Program 0.1 to the newly established Total $489.9 Trial Court Security Youthful Offender Block Grant Program and the Account for allocation to Juvenile Reentry Grant. county sheriffs for the provision of court security. Under the 2011 realignment plan, funding Under the terms of the realignment legislation, the for these grants is shifted directly to counties and Department of Finance (DOF) will determine how may be used for the same purposes as specified in much money is allocated to each county sheriff existing statutes. The realignment plan estimates for these purposes in 2011-12. According to DOF, that $97 million from the Local Revenue Fund 2011 the allocation of funds in 2011-12 will generally be will be transferred to the Juvenile Justice Account determined based on the amount of state funding in support for the grants—$93.4 million for the a given sheriff’s office received in 2010-11 for court Youthful Offender Block Grant Program and security. $3.7 million for the Juvenile Reentry Grant. The Pre-2011 Juvenile Justice Realignment allocation of these grants among the 58 counties is ($97 million) unchanged in 2011-12 from existing law. Under recent statutory changes (enacted H H s P ealtHand uman erviCes rograms prior to the 2011 realignment package), only The 2011 realignment package increases county certain juvenile offenders who are violent, funding responsibility for: (1) Mental Health serious, or sex offenders may be committed to Managed Care (MHMC), (2) Early and Periodic youth correctional facilities operated by the state. Screening, Diagnosis, and Treatment (EPSDT), Counties are responsible for the housing and (3) drug and alcohol programs, (4) Foster Care supervision of all other juvenile offenders, as well and Child Welfare Services (CWS), and (5) Adult as for the community supervision of all offenders Protective Services (APS). The realignment upon their release from state youth correctional package also includes a complex transfer of funds facilities, including some who previously were state related to the 1991 mental health realignment and responsibility. Counties receive state funding from California Work Opportunity and Responsibility two grants to support these responsibilities—the www.lao.ca.gov Legislative Analyst’s Office 23 An LAO RepOR t to Kids (CalWORKs). As shown in Figure 3, most the Medi-Cal Program administered by the of these programs are funded from the Local Department of Health Care Services, which Revenue Fund 2011. (The two programs funded on provides physical health care. County mental health a one-time basis from the Mental Health Services plans generally have responsibility for authorization Fund—MHMC and EPSDT—are not displayed and payment of Medi-Cal covered psychiatric in Figure 3.) The figure identifies each of these inpatient hospital services, and outpatient specialty programs’ 2011 funding by source and provides mental health services. In November 2004, the some additional information regarding how the state’s voters approved Proposition 63, an initiative funding is allocated among counties and accounts. that allocated additional state revenues generated through a surcharge on taxpayers earning more mental health managed care ($184 million) than $1 million annually for various specified County Mental Health Plans administer community mental health programs. MHMC and are responsible for ensuring that Under realignment, in 2011-12 about Medi-Cal beneficiaries receive specialty mental $184 million of Proposition 63 (Mental Health health services. Under a federal waiver, specialty Services Act) funds will be redirected and used in mental health services are “carved out” of lieu of General Fund on a one-time basis to support Figure 3 2011-12 Local Revenue Fund Allocations to Health and Human Services (Dollars in Millions) Account/ Estimated Allocation From Allocation Distribution Among Subaccount Allocation LRF 2011 Cap Counties Health and Human Services $1,806 45.31% No Consistent with prior- Account year allocations Subaccounts: Drug Medi-Cal (131) (3.29) No Discretion of DOF Non Drug Medi-Cal Substance (21) (0.52) No Discretion of DOF Abuse Treatment Services Drug Court (27) (0.68) No Discretion of DOF WCRTS (5) (0.13) No Discretion of DOF Child Welfare (640) (16.05) No Discretion of DOF Foster Care (462) (11.59) No Discretion of DOF Adoptions Assistance (382) (9.56) No Discretion of DOF Adoptions (70) (1.77) No Discretion of DOF Child Abuse Prevention (13) (0.34) No Discretion of DOF Adult Protective Services (55) (1.38) No Consistent with prior- year allocations Mental Health Account $1,084 $90.3 Million Per Yes Based on 1991 Month realignment formula Transfer to CalWORKs (1991 (1,066) Equivalent to amount Yes Equal to 1991 mental Realignment Social Services) deposited into 1991 health formula for Mental Health each county Transfer to Mental Health (1991 (18) Remainder after Yes Not specified Realignment Mental Health) transfer to Social Services LRF = Local Revenue Fund; DOF = Department of Finance; WCRTS = Women and Children’s Residential Treatment Services. 24 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t MHMC. Proposition 63 revenues are not deposited Drug Programs (DADP). While DADP in the into the Local Revenue Fund 2011. Although the past provided funding and state oversight of final budget package did not specify ongoing these programs, the provision of services has long realignment allocations, the administration’s been administered primarily at the county level. plan was for realignment revenues to substitute The major substance abuse treatment programs for the Proposition 63 funds on an ongoing basis realigned are: beginning in 2012-13. • Regular and Perinatal Drug Medi-Cal. The Drug Medi-Cal program provides Early and Periodic Screening, Diagnosis, and drug and alcohol-related treatment services Treatment ($579 million) to Medi-Cal beneficiaries. These include The EPSDT is a federally mandated program outpatient drug free services, narcotic that requires the state to provide Medi-Cal replacement therapy, day care rehabilitative beneficiaries under age 21 with any physical and services, and residential services for mental health services that are deemed medically pregnant and parenting women. necessary to correct or ameliorate a defect, physical or mental illness, including services not otherwise • Regular and Perinatal Non Drug included in the state’s Medicaid plan. The program Medi-Cal. The Non Drug Medi-Cal covers periodic health screening, vision, dental, program provides drug and alcohol-related and hearing services, as well as some mental treatment services generally to individuals health services (including crisis intervention and who do not qualify for Medi-Cal. This medication monitoring). County mental health includes the Women and Children’s plans generally have responsibility for authorization Residential Treatment Services Program. and payment of mental health services provided • Drug Courts. Drug courts link supervision through EPSDT. and treatment of drug users with ongoing Under realignment, in 2011-12 about judicial monitoring and oversight. There $580 million of Proposition 63 funds will be are several different types of drug courts redirected and used in lieu of General Fund on a including: (1) dependency drug courts, one-time basis to support EPSDT. Proposition 63 which focus on cases involving parental funds are not deposited into the Local Revenue rights; (2) adult drug courts, which focus Fund 2011. Although the final budget package on convicted felons or misdemeanants; did not specify ongoing realignment allocations, and (3) juvenile drug courts, which focus similar to the case for MHMC, the administration’s on delinquency matters that involve plan was for realignment revenues to substitute substance-using juveniles. for the Proposition 63 funds on an ongoing basis beginning in 2012-13. The budget plan realigns a total of about $184 million of DADP programs (Regular and Drug and Alcohol Programs— Perinatal Drug Medi-Cal, $131 million; Regular Substance Abuse Treatment ($184 million) and Perinatal Non Drug-Medi-Cal, $26 million; The budget plan realigns several substance and Drug Courts, $27 million) to the counties. abuse treatment programs that were previously Under the realignment plan, funding for these funded through the Department of Alcohol and programs are deposited into four separate www.lao.ca.gov Legislative Analyst’s Office 25 An LAO RepOR t subaccounts within the newly created Health and based on the 2010-11 allocation structure. Funding Human Services Account of the Local Revenue in the other subaccounts will be distributed to Fund 2011. Under realignment, some programs counties based on an allocation provided by DOF. would be supported with a combination of Adult Protective Services ($55 million) realignment funds and federal matching funds, while other programs would be supported mainly County APS agencies investigate reports of by realignment funds. abuse and neglect of elders and dependent adults who live in private settings. Upon investigating foster care and child Welfare these reports, APS social workers may arrange for Services ($1.57 Billion) services such as counseling, money management, California’s child welfare system was created and out-of-home placement for the abused or to prevent, identify, and respond to allegations neglected adult. Although there is no federal of child abuse and neglect. Under prior law, the requirement to operate an APS program, state state and counties shared the nonfederal costs law currently requires that APS be available in all of the child welfare system. Pursuant to the 58 counties. realignment legislation of 2011, counties now The 2011-12 realignment legislation establishes will bear 100 percent of the nonfederal costs for the APS Subaccount within the Health and Human nearly the entire child welfare system, including Services Account for the support of the APS CWS, Foster Care, Adoptions, AAP, and Child program. The APS Subaccount will be allocated Abuse Prevention. (The state will continue to 1.38 percent of the funds available in the Local oversee the CWS Case Management System, social Revenue Fund 2011, which is estimated to be worker training, state-tribal agreements, and some $55 million in 2011-12. The funds from the APS adoptions services.) The realignment legislation Subaccount will be allocated to the local APS does not change the major programmatic functions programs, to the extent possible, in the same way of the child welfare system. Counties, which were they were in 2010-11. already responsible for ensuring the safety of calWORks/mental health children within their communities, will continue Transfer ($1.08 Billion) to make the decision of whether or not to remove a child from a home due to allegations of abuse The CalWORKs program provides cash grants or neglect. Meanwhile, the state will continue to and welfare-to-work services (such as child care, oversee the child welfare system. training, or job readiness) to families whose The budget legislation creates five child welfare incomes are insufficient to meet their basic needs. system program subaccounts within the Health The program is administered by the counties, but and Human Services Account of the Local Revenue the state and federal governments provide the Fund 2011. Under this arrangement, total funding vast majority of funding. Although each county for the child welfare system is estimated to be about must provide grants and services consistent with $1.6 billion in 2011-12. The allocations for each state law, counties have significant control over subaccount are designed to be equal to what the how services are provided and when to sanction programs would have received in General Fund clients for noncompliance. With respect to funding, support absent realignment. Funding in the CWS counties have a fixed maintenance-of-effort level Subaccount will be distributed among counties for administration and welfare-to-work services, 26 Legislative Analyst’s Office www.lao.ca.gov An LAO RepOR t and a 2.5 percent share of grant costs. The 2011 equal to what it would have received in its mental realignment legislation provides counties with health subaccount under the 1991 realignment revenue from the Local Revenue Fund 2011 for formula. Because the new funding is now available mental health programs, which then frees up to pay 1991 realignment-related mental health existing county mental health funding to pay for obligations, there is no detrimental effect on a higher share of CalWORKs grant costs. This support for county mental health programs. The process is described in more detail below. freed-up 1991 funds as a result of these provisions In 1991, the Legislature adopted realignment are then used by counties to pay for increased legislation that, among other changes, established county shares of CalWORKs grant costs. On several local funding streams for various mental average this new county share for CalWORKs health and other programs. This included creation grants will be about 34 percent, but the exact of a mental health subaccount and a social services amount will vary by county and be directly tied subaccount. The 1991 social services subaccount to what the county would have received under the is available to fund several programs including 1991 formula for distribution of funding for mental CalWORKs. The 2011 realignment legislation health services. The amounts provided to counties provides $1,084 million in funding for a new will be recalculated each year to equal whatever Mental Health Account in the Local Revenue they otherwise would have been under the 1991 Fund 2011. From this account, the 2011 legislation formula. allocates to each county new mental health funding www.lao.ca.gov Legislative Analyst’s Office 27 An LAO RepOR t contact Information Brian Brown local government 319-8325 Brian.Brown@lao.ca.gov Todd Bland Director, social services 319-8353 Todd.Bland@lao.ca.gov edgar Cabral Proposition 98 319-8343 edgar.Cabral@lao.ca.gov Aaron edwards local government Public safety grant Programs 319-8351 Aaron.edwards@lao.ca.gov Christine Frey Child Welfare services 319-8342 Christine.Frey@lao.ca.gov Jennifer Kuhn Director, K-12 education 319-8332 Jennifer.Kuhn@lao.ca.gov shawn Martin Director, Health 319-8362 shawn.Martin@lao.ca.gov ginni Bella navarre Adult Protective services 319-8352 ginni.Bella@lao.ca.gov Marianne o’Malley Director, general government 319-8315 Marianne.o’Malley@lao.ca.gov Anthony simbol Director, Criminal Justice 319-8350 Anthony.simbol@lao.ca.gov Drew soderborg Corrections, Courts 319-8346 Drew.soderborg@lao.ca.gov LAO Publications This report was prepared by Brian Brown with contributions from many others, and reviewed by Marianne o’Malley. The legislative Analyst’s office (lAo) is a nonpartisan office which provides fiscal and policy information and advice to the legislature. To request publications call (916) 445-4656. This report and others, as well as an email subscription service, are available on the lAo’s website at www.lao.ca.gov. The lAo is located at 925 l street, suite 1000, sacramento, CA 95814. 28 Legislative Analyst’s Office www.lao.ca.gov