The 2013-14 Budget: California Spending Plan

The 2013-14 Budget: California Spending Plan MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • NOVEMBER 2013 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN 2 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE CONTENTS Chapter 1 Key Features of the 2013-14 Budget Package Budget Overview ......................................................................................................5 Evolution of the Budget ...........................................................................................7 Chapter 2 Major Expenditure and Other Budget Actions Proposition 98 ........................................................................................................11 The Minimum Guarantee .........................................................................................................11 Major Spending Changes ........................................................................................................13 Child Care ................................................................................................................25 Higher Education ....................................................................................................27 Health ......................................................................................................................34 Human Services ......................................................................................................46 Judiciary and Criminal Justice ...............................................................................52 Resources and Environmental Protection ............................................................57 Resources Programs ...................................................................................................................57 Environmental Protection Programs ...................................................................................60 Transportation ........................................................................................................62 Other Major Provisions ..........................................................................................65 www.lao.ca.gov Legislative Analyst’s Office 3 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Legislative Analyst’s Office www.lao.ca.gov (916) 445-4656 Legislative Analyst Mac Taylor State and Local Finance Education Jason Sisney Jennifer Kuhn Marianne O’Malley Edgar Cabral Chas Alamo Carolyn Chu Justin Garosi Natasha Collins Seth Kerstein Rachel Ehlers Ryan Millera Paul Golaszewski Nick Schroeder Judy Heiman Brian Uhler Kenneth Kapphahn Brian Weatherford Jameel Naqvi Paul Steenhausen Corrections, Transportation, and Environment Anthony Simbol Health and Human Services Brian Brown Mark C. Newton Drew Soderborg Shawn Martin Ashley Ames Ross Brown Aaron Edwards Amber Didier Anton Favorini-Csorba Rashi Kesarwani Jeremy Fraysse Sarah Larson Helen Kerstein Lourdes Morales Anita Lee Ginni Bella Navarre Lia Moore Felix Su Jessica Digiambattista Peters Ryan Woolsey Tiffany Roberts Administration and Information Services Support Larry Castro Izet Arriaga Sarah Kleinberg Anthony Lucero Karry Dennis-Fowler Tina McGee Sarah Scanlon Michael Greer Jim Stahley Vu Chu Jim Will Douglas Dixon Sandi Harvey a General Fund Condition analyst, Spending Plan publication coordinator. 4 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE CHAPTER 1 KEY FEATURES OF THE 2013-14 BUDGET PACKAGE This publication summarizes California’s to gubernatorial actions on bills passed by the 2013-14 spending plan, including legislative and Legislature in August and September 2013. This gubernatorial action through October 2013. A final published version reflects gubernatorial action preliminary electronic version was released prior on those bills and various minor changes. BUDGET OVERVIEW Figure 1 displays state and federal spending in to the California Department of Corrections and the 2013‑14 Budget Act. Rehabilitation [CDCR] for 2013-14.) Total State and Federal Funds Spending General Fund Revenues The state spending plan assumes total budget Figure 2 (see next page) displays the key revenue expenditures of $138.3 billion from the General assumptions underlying the 2013‑14 Budget Act. Fund and special funds, an increase of 3 percent Budget Projects Lower Revenues in 2013‑14. over 2012-13. This consists of $96.3 billion from The spending plan estimates General Fund the General Fund and Education Protection and Education Protection Account revenues of Account created by Proposition 30 (2012), as well $97.1 billion in 2013-14, a decrease of 1.1 percent as $42 billion from special funds. The budget over 2012-13. The budget assumes that one-time estimates that spending from federal funds in state revenue associated with the 2012 Facebook 2013-14 will total $87.6 billion, an increase of initial public offering and decisions made by 7.7 percent over 2012-13. (Unless otherwise Figure 1 specified, figures in this Total State and Federal Fund Expenditures publication generally (Dollars in Millions) reflect the administration’s Revised Change From 2012-13 Enacteda official scoring as of late Fund Type 2011-12 2012-13 2013-14 Amount Percent June 2013. As such, figures General Fundb $86,404 $95,665 $96,281 $617 0.6% do not reflect budget- Special funds 33,853 38,656 42,022 3,366 8.7 related legislation enacted Budget Totals $120,257 $134,321 $138,303 $3,982 3.0% between July and October, Selected bond funds $6,104 $12,261 $6,997 -$5,264 -42.9% including Chapter 310, Federal funds 73,063 81,299 87,566 6,266 7.7 a Statutes of 2013 [SB 105, Does not include appropriations authorized in budget-related legislation enacted between July and October, including September’s prison bill, which appropriated $315 million (General Fund) for 2013-14 Steinberg], which to the Department of Corrections and Rehabilitation. b Includes Education Protection Account created by Proposition 30 (2012). appropriated $315 million www.lao.ca.gov Legislative Analyst’s Office 5 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Figure 2 2013‑14 Budget Act Revenue Assumptions General Fund and Education Protection Account Combined (Dollars in Millions) Change From 2012‑13 2011‑12 2012‑13 2013‑14 Estimated Estimated Enacted Amount Percent Personal income tax $54,261 $63,901 $60,827 -$3,074 -4.8% Sales and use tax 18,658 20,240 22,983 2,743 13.6 Corporation tax 7,233 7,509 8,508 999 13.3 Subtotals, “Big Three” taxes ($80,152) ($91,650) ($92,318) ($668) (0.7%) Insurance tax $2,165 $2,156 $2,200 $44 2.0% Other revenues 2,959 2,641 2,249 -392 -14.8 Transfers and loans 1,509 1,748 331 -1,416 -81.0 Totals $86,786 $98,195 $97,098 ‑$1,096 ‑1.1% Note: Department of Finance estimates, as incorporated into 2013-14 budget package. wealthy individuals to accelerate income from revenues were about $2.3 billion higher than when 2013 to 2012 due to changes in federal tax policy the 2012-13 spending plan was adopted last year. will inflate 2012-13 revenues, contributing to a As discussed in “Chapter 2,” these higher revenues year-over-year decline in 2013-14. result in $2.5 billion in additional expenditures under the Proposition 98 minimum funding The Condition of the General Fund guarantee for K-14 education. In addition, higher Figure 3 summarizes the estimated General expenditures in other areas contributed to the Fund condition for 2012-13 and 2013-14. estimated 2012-13 General Fund ending balance 2012‑13 Projected to Be First Year being about $694 million lower than was assumed Since 2007‑08 to End With a Reserve. The in the 2012-13 spending plan. Nevertheless, administration’s May Revision estimates of 2012-13 under the spending plan 2012-13 would end with a $254 million reserve, the first such year-end Figure 3 positive balance in the General Fund Condition reserve since 2007-08. General Fund and Education Protection Account Combined 2013‑14 Projected to (Dollars in Millions) End With a $1.1 Billion Percent 2012‑13 2013‑14a Change Reserve. The spending Prior-year balance -$1,658 $872 plan assumes General Revenues and transfers 98,195 97,098 -1.1% Fund and Education Total resources available $96,537 $97,970 Protection Account Total expenditures $95,665 $96,281 0.6% revenues of $97.1 billion Fund balance $872 $1,689 and expenditures of Encumbrances $618 $618 Reserve $254 $1,071 $96.3 billion. Those a Does not include appropriations authorized in budget-related legislation enacted between July and assumptions, however, October, including September’s prison bill, which appropriated $315 million (General Fund) for 2013-14 to the Department of Corrections and Rehabilitation. are based on the Note: Department of Finance estimates. administration’s official 6 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE scoring as of late June 2013. As such, they do not spending increases for a few programs that were cut include budget-related legislation enacted between or eliminated in recent years. The most significant July and October, including Chapter 310, which of these actions provide a $63 million ongoing appropriated $315 million (General Fund) to CDCR augmentation for the judicial branch and a partial for 2013-14. After accounting for this and other restoration of adult dental benefits under Medi-Cal post-budget act legislation, 2013-14 would end with ($17 million, partial-year effect). a roughly $700 million General Fund reserve. Other Program Augmentations. The spending plan also includes $143 million in one-time funding Major Features of the 2013-14 Budget Plan for mental health services infrastructure and Contrary to recent years in which the state provides enhanced mental health and substance use took actions to address multibillion dollar disorder services ($67 million, partial-year effect). budget shortfalls, the spending plan augments In addition, budget-related legislation augments programmatic spending in a few areas. The major California Work Opportunity and Responsibility features of the spending plan are summarized to Kids (CalWORKs) grants by diverting revenue below. These actions and others are described in growth in the Local Revenue Fund created by 1991 more detail in “Chapter 2.” realignment that otherwise would have increased School Funding. Major features of the funding for county health programs and other Proposition 98 budget include $2.1 billion for a new social services programs. This action is assumed formula to distribute funding amongst schools, to have no General Fund effect in 2013-14. The $1.25 billion in one-time funding to implement the spending plan also creates a new financial aid Common Core State Standards, and $4.3 billion program for certain students at the University in 2012-13 and 2013-14 combined to pay down of California and California State University deferrals to schools and community colleges. beginning in the 2014-15 school year. Medi‑Cal Expansion. Legislation adopted in Changes to 1991 Realignment. The Medi-Cal a special session implements a state-based plan to expansion discussed above shifts much of the expand Medi-Cal. Specifically, the plan exercises responsibility for providing indigents with health an option pursuant to federal health care reform care from the counties to the state. To capture the to expand eligibility for Medi-Cal to cover more savings that counties are expected to experience than one million additional low-income adults who under the expansion, the budget redirects funding will become eligible for health care coverage on from 1991 realignment to the benefit of the General January 1, 2014. Fund. The spending plan assumes the state savings Selected Restorations of Funding From Prior to be $300 million in 2013-14. Year Program Cuts. The budget plan includes EVOLUTION OF THE BUDGET The Governor signed the 2013‑14 Budget Act Significant Operating Surpluses Estimated to on June 27, 2013. Between that date and October Produce $1 Billion Reserve. On January 10, 2013, 2013, the Governor signed 44 budget-related bills the Governor released his 2013-14 budget proposal, into law. The budget and related bills are listed in which included General Fund and Education Figure 4 (see next page). Protection Account revenues of $98.5 billion www.lao.ca.gov Legislative Analyst’s Office 7 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN and expenditures Figure 4 Selected Budget-Related Legislation of $97.7 billion. The administration estimated Bill Number Chapter Author Subject that a $2.4 billion AB 110 20 Blumenfield 2013-14 Budget Act operating surplus AB 74 21 Budget Committee Human services in 2012-13 would be AB 75 22 Budget Committee Transfer of DADP programs to DHCS and DPH sufficient to erase the AB 81 161 Budget Committee Public safety: domestic abuse AB 82 23 Budget Committee Health $2.2 billion 2011-12 AB 85 24 Budget Committee 1991 realignment, CalWORKs grants deficit. The administration AB 86 48 Budget Committee K-14 education and child care also projected that the AB 89 25 Budget Committee Developmental services AB 92 26 Budget Committee State government resulting $167 million AB 93 69 Budget Committee Enterprise zones ending balance AB 94 50 Budget Committee Higher education, MCS for 2012-13 and a AB 97 47 Budget Committee K-12 LCFF AB 98 27 Budget Committee Seismic Safety Commission $851 million operating AB 101 354 Budget Committee Amendments to the 2013-14 Budget Act surplus in 2013-14 would AB 106 355 Budget Committee Enterprise zones produce a $1 billion AB 113 3 Budget Committee Amendments to the 2012-13 Budget Act AB 234 449 Gatto Claims against the state reserve at the end of AB 478 391 Gomez Employee compensation MOU 2013-14. AB 701 393 Quirk-Silva Orange County—property taxes Governor’s SB 67 4 Budget Committee IHSS SB 68 5 Budget Committee Amendments to 2012-13 Budget Act May Revision SB 71 28 Budget Committee State government Revenue Estimates SB 73 29 Budget Committee Proposition 39 implementation Increase Slightly. SB 74 30 Budget Committee Corrections SB 75 31 Budget Committee Courts The administration’s SB 76 32 Budget Committee Public safety revenue estimates at the SB 78 33 Budget Committee Tax on managed care organizations May Revision grew by SB 82 34 Budget Committee Mental health wellness act SB 85 35 Budget Committee Transportation $749 million for 2011-12, SB 89 36 Budget Committee Augmentations to the 2012-13 Budget Act 2012-13, and 2013-14 SB 90 70 Galgiani Economic development combined. (This total SB 91 49 Budget Committee Amendments to LCFF SB 94 37 Budget Committee Medi-Cal managed care, IHSS, and CCI excludes a $500 million SB 96 356 Budget Committee Resources and environmental protection loan to the General Fund SB 97 357 Budget Committee K-12 LCFF, MCS, Proposition 39, and other from cap-and-trade education provisions SB 98 358 Budget Committee Health and human services revenues, which is booked SB 99 359 Budget Committee Active transportation program on the revenue side of SB 100 360 Budget Committee Public finance the state budget.) The SB 101 361 Budget Committee Health SB 102 397 Budget Committee Employee compensation MOU May Revision contained SB 105 310 Steinberg Prisons a few major proposals, SB 239 657 Hernandez Hospital quality assurance fees the most noteworthy of ABX1 1 3 John A. Pérez Medi-Cal ACA implementation SBX1 1 4 Hernandez Medi-Cal ACA implementation which realigned some SCA 3 123 Leno Mandates fiscal responsibilities for DADP = Department of Alcohol and Drug Programs; DHCS = Department of Health Care Services; CalWORKs, CalWORKs- DPH = Department of Public Health; MCS = Middle Class Scholarship; LCFF = Local Control Funding Formula; IHSS = In-Home Supportive Services; CCI = Coordinated Care Initiative; MOU = memorandum of understanding; related child care, and ACA = Patient Protection and Affordable Care Act. 8 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE CalFresh from the state to counties. That proposal correct a technical error in the Franchise Tax Board was estimated to achieve $300 million in General budget, the Governor did not use his line-item veto Fund savings in 2013-14, growing to $1.3 billion in authority to reduce or eliminate non-Proposition 98 savings by 2015-16. General Fund spending. The Governor did, Legislature Passes Budget Package. Our however, reduce spending from other funds by office’s May 2013 revenue forecast projected $5.6 million. considerably higher revenues than did the Legislature Adopts Additional Budget‑Related administration’s May revenue forecast. Specifically, Legislation. The Legislature sent several budget- we estimated about $3.2 billion higher General related bills to the Governor in late June and early Fund and Education Protection Account revenues July. These included bills that addressed issues across 2011-12, 2012-13, and 2013-14 combined. The related to the California Public Records Act and most significant difference in our forecasts was our Local Agency Ethics mandates. In addition, the higher assumed level of capital gains and resulting Legislature passed AB 93 to phase out Enterprise personal income tax revenues in 2013-14. During Zones over several years and replace them with: hearings in late May, the budget committees in the (1) a partial sales tax exemption for purchases of Senate and Assembly adopted our office’s revenue certain manufacturing equipment, (2) a narrowly estimates. After negotiations with the Governor, focused hiring tax credit, and (3) a program however, the Legislature passed a budget package to provide tax credits to select businesses on a that incorporated the administration’s lower case-by-case basis. revenue estimates. As discussed in “Chapter 2,” Governor Signs Legislation to Address Prison that package included a modified version of the Population. In September 2013, the Governor administration’s realignment proposal that did not signed Chapter 310, which provides $315 million affect CalWORKs-related child care or CalFresh. (General Fund) to CDCR to address a federal Budget Package Signed by Governor. The order requireing the state to reduce the prison budget package was signed by the Governor on population. Chapter 310 is described in more detail June 27, 2013. Notably, aside from one action to in “Chapter 2.” www.lao.ca.gov Legislative Analyst’s Office 9 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN 10 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE CHAPTER 2 MAJOR EXPENDITURE AND OTHER BUDGET ACTIONS PROPOSITION 98 Approved by voters in 1988, Proposition 98 The Minimum Guarantee established a set of rules relating to education 2012‑13 Minimum Guarantee Up $2.9 Billion funding. Most importantly, Proposition 98 Due to Increases in Revenues. As Figure 1 shows established a funding requirement commonly (see next page), the revised 2012-13 minimum referred to as the minimum guarantee. Each year guarantee is $56.5 billion—$2.9 billion higher the minimum guarantee is determined by one of than the amount estimated in the 2012‑13 Budget three formulas, known as “tests.” The tests take Act. The bulk of this increase—$2.5 billion—is due into account a number of inputs, including General to General Fund revenues that count toward the Fund revenues, per capita personal income, and guarantee being $2.4 billion higher than estimated K-12 average daily attendance (ADA). In certain in the 2012-13 spending plan. The growth in cases, the state can provide less than otherwise General Fund revenues has such a large effect on required, but it must keep track of a resulting the minimum guarantee (more than dollar for “maintenance factor” obligation. Moving forward, dollar) because of the manner in which the budget the state is required to accelerate growth in plan makes maintenance factor payments. (Test 1 Proposition 98 funding until the maintenance is operative in 2012-13 and the maintenance factor is retired—at which time base funding is at factor is being paid on top of the Test 1 rather least as high as it would have been absent the earlier than Test 2 level.) The minimum guarantee also reduction. The guarantee is met using both state increases by $364 million as a result of higher General Fund and local property tax revenues. baseline property tax revenues. Because 2012-13 Proposition 98 is the main funding source for K-12 is a Test 1 year—in which the state provides education, the California Community Colleges a fixed percentage of General Fund revenues (CCC), and state-subsidized preschool. regardless of property tax revenues—an increase Below, we walk through changes in the 2012-13 in baseline property tax revenues results in an and 2013-14 Proposition 98 minimum guarantees increase in the minimum guarantee. (The budget and describe major changes in Proposition 98 package adopts LAO local property tax estimates spending. In the next two main sections of this in some cases and Department of Finance [DOF] chapter, we discuss the child care and higher estimates in other cases, as described in the box, education budgets in more detail. (In addition, the on the next page.) online version of this report contains a link to a Total 2012‑13 Local Property Tax Revenues packet of detailed tables relating to various aspects Down More Than $700 Million. Despite higher of the education budget.) www.lao.ca.gov Legislative Analyst’s Office 11 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Figure 1 Proposition 98 Funding (In Millions) 2012-13 2013-14 2011-12 Change From Final Budget Act Revised Change Enacted 2012-13 Preschool $368 $481 $481 — $507 $26 K-12 Education General Fund $29,317 $32,828 $36,195 $3,366 $34,693 -$1,502 Local property tax revenue 12,125 14,342 13,760 -582 13,936 175 Subtotals ($41,443) ($47,170) ($49,955) ($2,785) ($48,628) (-$1,327) California Community Colleges General Fund $3,279 $3,415 $3,701 $285 $3,742 $42 Local property tax revenue 1,977 2,403 2,251 -152 2,291 40 Subtotals ($5,256) ($5,818) ($5,951) ($133) ($6,033) ($82) Other Agencies $83 $79 $78 -$1 $78 — Unallocateda — — — — $35 $35 Totals $47,149 $53,549 $56,465 $2,917 $55,281 -$1,184 General Fund $33,047 $36,804 $40,454 $3,651 $39,055 -$1,399 Local property tax revenue 14,102 16,745 16,011 -734 16,226 215 a Reflects Proposition 98 vetoes. baseline property tax revenues, total 2012-13 local The state adjusts the Proposition 98 calculation property tax revenues are $734 million lower such that changes to RDA property tax revenues than in the 2012‑13 Budget Act. This difference is have no effect on the minimum guarantee. These explained by changes in redevelopment agency lower RDA property tax revenues, however, do (RDA) property tax revenues. Actual 2012-13 result in higher General Fund costs. As a result property tax revenues from RDAs are $1.1 billion of the year-over-year increase in the minimum lower than assumed in the 2012-13 budget plan. guarantee coupled with the decrease in overall Budget Package Relies on Combination of Two Offices’ Local Property Tax Estimates The budget package relies on a combination of LAO and Department of Finance (DOF) local property tax estimates. (Both offices prepared revenue forecasts in May 2012.) Specifically, the budget package uses: • LAO estimates for 2012-13 and 2013-14 baseline property tax revenues. • DOF estimates of 2012-13 redevelopment agency (RDA) property tax revenues (both ongoing tax-increment revenues and one-time liquid assets). • LAO estimates of 2013-14 RDA tax-increment revenues. • DOF estimates of 2013-14 RDA liquid assets. 12 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE local property tax revenues, Proposition 98 General to 2012-13, the budget package authorizes a General Fund costs increase $3.7 billion in 2012-13. (The Fund backfill for schools and community colleges budget package allows DOF to authorize up to if RDA property tax revenues come in lower than an additional $100 million in Proposition 98 anticipated in 2013-14.) Because 2013-14 is a Test 3 General Fund spending in 2012-13 if RDA revenues year, the increase in property tax revenues results in for community colleges come in lower than reduced General Fund Proposition 98 costs. anticipated.) Major Spending Changes $1.2 Billion Decrease in 2013‑14 Guarantee Caused by “Spike Protection” Provision. Under Figure 2 (see next page) shows all major the budget plan, General Fund revenues that count Proposition 98 spending changes in 2012-13 and toward the guarantee increase slightly (less than 2013-14. In this section, we highlight the major 1 percent) from 2012-13 to 2013-14. This slight changes each year and describe how those changes year-over-year growth increases the minimum affect per-student funding. In the next section, we guarantee by $300 million. This increase is more discuss the major Proposition 98 augmentations in than offset by a reduction in the guarantee due to the more detail. spike protection provision of Proposition 98. (This Changes in 2012‑13 Spending. As shown in provision will take effect for the first time in 2013-14.) the top part of Figure 2, the $2.9 billion increase In a year when the minimum guarantee increases at in 2012-13 Proposition 98 spending is primarily a much faster rate than per capita personal income, used to pay down deferrals and implement a new the spike protection provision excludes a portion one-time initiative relating to the Common Core of Proposition 98 funding from the calculation State Standards (CCSS). of the minimum guarantee the subsequent year. Major Changes in 2013‑14 Spending—K‑12 This essentially prevents a portion of the prior-year Education. For K-12 education, the largest 2013-14 Proposition 98 appropriation from permanently augmentation ($2.1 billion) is for implementing the increasing the minimum guarantee in future years. Local Control Funding Formula (LCFF) for school Because the minimum guarantee increases much districts. Other major 2013-14 K-12 augmentations faster than per-capita personal income in 2012-13, the include $406 million in grants and loans for energy spike protection provisions require that $1.5 billion projects, an additional $250 million on a one-time in 2012-13 Proposition 98 funding be excluded from basis for the CCSS initiative, $250 million on a the 2013-14 Proposition 98 calculation, reducing one-time basis for a new Career Pathways program, the 2013-14 minimum guarantee by a like amount. $50 million to augment the mandate block grant, Accounting for both changes, the minimum $32 million to implement the LCFF for county offices guarantee is a net $1.2 billion lower in 2013-14 of education (COEs), and $10 million to establish the ($55.3 billion) than 2012-13 ($56.5 billion). California Collaborative for Educational Excellence 2013‑14 Local Property Tax Revenues Up (CCEE) to provide low-performing school districts More Than $200 Million. Under the budget plan, with academic assistance. total property tax revenues increase by $215 million Major Changes in 2013‑14 Spending— from 2012-13. The budget plan assumes baseline Community Colleges. Major CCC augmentations in property tax revenues increase $776 million. This 2013-14 include $88 million for various categorical increase is offset by RDA property tax revenues programs, $50 million in grants and loans for being $561 million lower than in 2012-13. (Similar energy projects, $30 million on a one-time basis for www.lao.ca.gov Legislative Analyst’s Office 13 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN building maintenance projects (including replacing Other Changes in 2013‑14 Spending. The instructional equipment and library materials), budget also further pays down both K-12 and $25 million for adult education planning grants, and CCC deferrals. Additionally, the budget includes $17 million for a new CCC technology initiative. a 1.57 percent cost-of-living adjustment (COLA) for certain K-12 categorical programs and Figure 2 CCC general-purpose Proposition 98 Spending Changes apportionment funding. (In Millions) The budget includes a 2012‑13 Budget Act $53,549 slight increase to reflect Pay down additional deferrals $1,769 0.2 percent growth in K-12 Fund Common Core implementation (one time) 1,000 Revenue limit adjustments 293 ADA and an $89 million Other technical adjustments -145 increase to fund Total 2012‑13 Changes $2,917 1.63 percent enrollment Revised 2012‑13 Spending $56,465 growth at the community Technical Adjustments colleges. The budget also Fund growth and COLA for certain categorical programsa $114 Revenue limit adjustments 43 provides a $26 million Other technical adjustments -26 (5 percent) increase to Use prior-year unspent funds -94 the part-day/part-year Adjust for one-time actions -4,994 State Preschool program K‑12 Education Implement LCFF for districts and charter schools 2,052 to support approximately Allocate funds for energy projectsb 406 7,100 new preschool Fund Common Core implementation (one time) 250 slots. (The Governor Fund Career Pathways program (one time) 250 Pay down deferrals 242 vetoed $5 million for Augment mandate block grant 50 preschool—bringing the Implement LCFF for county offices of education 32 augmentation down from Increase preschool slots 26 Establish CCEE to provide academic advice and assistance 10 $31 million.) Other changesc 37 K‑12 Per‑Student California Community Colleges Funding Up 5.5 Percent Fund enrollment growth 89 Year Over Year. Given the Provide COLA 88 Increase categorical funding 88 budget package devotes Allocate funds for energy projectsb 50 virtually all of the increase Pay down deferrals 30 in 2012-13 funding for Provide building maintenance funding (one time) 30 Fund adult education planning grants 25 one-time purposes, Fund new technology initiative 17 ongoing funding per Total 2013‑14 Changes ‑$1,184 student in 2012-13 2013‑14 Proposition 98 Spending Level $55,281 changes only negligibly a Applies to Special Education, Child Nutrition, and American Indian education programs. b Includes funds transferred to Energy Conservation Assistance Account for new revolving loan program. from the 2012‑13 Budget Of the $28 million transferred, assumes $25 million is for schools and $3 million is for CCCs. c Includes $35 million in unallocated funds resulting from vetoes. This amount reflects elimination of Act. In 2013-14, despite $30 million for special eduction equalization and a reduction of $5 million for preschool slots. fewer overall resources COLA = cost-of-living adjustment; LCFF = local control funding formula; CCEE = California Collaborative for Educational Excellence. compared to 2012-13, 14 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE much less funding is designated for paying New Funding Formula Has Grade‑Span Base down deferrals. This frees up funds in 2013-14 Rates. Figure 3 (see next page) highlights the major that can be used for other purposes. In total, the components of the LCFF. As shown in the figure, budget includes a $2.6 billion increase in K-12 the LCFF establishes base rates for four grade ongoing funding. Ongoing funding per student spans. The LCFF adjusts the base rates by providing (as measured by ADA) increases from $7,590 in additional funding intended to be used for class 2012-13 to $8,005 in 2013-14—an increase of $415 size reduction (CSR) in the K-3 grades and career (5.5 percent). technical education in high school. (Hereafter, the CCC Per‑Student Funding Up 5 Percent term “base rates” includes the additional funding Year Over Year. Like K-12 education, increases for the K-3 and high school adjustments.) Different in 2012-13 funding for CCC are primarily used base rates are intended to reflect the differential for one-time purposes (paying down additional costs of providing education across the grade spans. deferrals), with virtually no change in ongoing Includes Supplemental Funding for English funding per student. In 2013-14, also similar to Learner and Low‑Income (EL/LI) Students. K-12 education, much less funding is designated Under the LCFF, districts and charter schools for paying down CCC deferrals, thereby freeing up receive significantly more funding for EL/LI funds in 2013-14 for other purposes. In total, the students and foster youth. For each of these budget includes a $350 million increase in CCC students, districts receive an additional 20 percent ongoing funding. Ongoing funding per full-time of the base per-pupil amount. For example, an equivalent (FTE) CCC student increases from EL/LI student in grades K-3 would generate an $5,524 in 2012-13 to $5,792 in 2013-14—an increase additional $1,511 for the district (20 percent of of $268 (5 percent). $7,557, which reflects the K-3 base rate adjusted for CSR). In addition, districts whose EL/LI LCFF for School Districts and Charter Schools populations exceed 55 percent of their enrollment Budget Package Contains Major Restructuring receive concentration funding. Specifically, these of K‑12 Funding System. The budget package districts receive an additional 50 percent of the includes a major restructuring of the state’s funding base per-pupil amount for each student above system for school districts and charter schools. the 55 percent threshold. For the purposes of The new LCFF system replaces existing funding generating both supplemental and concentration formulas for revenue limits and most categorical funding, the formula counts each student only programs with a weighted student funding formula. once (regardless of whether they are EL, LI, and/or Over the course of implementation, districts will a foster youth). receive additional funding to reduce the same Guarantees Virtually All Districts Receive share of the gap between their existing per-pupil as Much as They Would Have Under Previous funding rates and their targets under the LCFF. System. To ensure that the vast majority of districts Full implmentation of the LCFF is expected to take receive at least as much as they would have under eight years (with full implementation in 2020-21) the previous system, the new system includes a and cost $18 billion (not accounting for future component called the Economic Recovery Target COLA costs). The 2013‑14 Budget Act provides (ERT). The ERT assumes the revenue limit deficit first-year funding of $2.1 billion. This is expected to factor is retired, categorical programs are restored close 12 percent of each district’s gap. to 2007-08 levels, and revenue limits receive a www.lao.ca.gov Legislative Analyst’s Office 15 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN 1.94 percent COLA every year moving forward. districts will receive additional payments in excess In most cases, if a district’s ERT is greater than of their LCFF payments to get them to their higher its LCFF target, its funding level is to increase by ERT. (Districts that have an ERT above the 90th one-eighth of the amount needed to reach its ERT ERT percentile will receive no additional funding each year for the next eight years. For the vast in excess of the 90th percentile. Approximately majority of districts, the LCFF target for 2020-21 100 districts have rates that are this high.) will be higher than the ERT for 2020-21. For about Special Rules for Four Categorical 230 districts, the ERT, however, will be higher. Programs. Specifically, the Targeted Instructional Over the next eight years, roughly 130 of these Improvement Grant (TIIG) does not apply toward Figure 3 Overview of Local Control Funding Formula for School Districtsa Formula Component Initial base rate(s) (per ADA) K-3: $6,845 4-6: $6,947 7-8: $7,154 9-12: $8,289 Additional funding for K-3 and high school students K-3: 10.4 percent of base rate. (per ADA) 9-12: 2.6 percent of base rate. Supplemental funding for certain student subgroups 20 percent of base rates, as adjusted for K-3 and high school. (per EL/LI student and foster youth) Concentration funding Each EL/LI student above 55 percent of enrollment generates an additional 50 percent of base rates as adjusted for K-3 and high school. Economic Recovery Target (ERT) Establishes an ERT assuming revenue-limit and categorical funding is restored to 2007-08 levels and revenue limits receive COLA from 2008-09 through 2020-21. Provides districts with the greater of their LCFF target or ERT (capped at the 90th percentile of all districts’ ERTs). If a district’s 2020-21 ERT is greater than its LCFF target, one-eighth of the amount needed to reach the district’s ERT is provided each year for the next eight years. Special rules for four existing programs Targeted Instructional Improvement Block Grant, Home-to-School Transportation, Adult Education, and Regional Occupational Centers and Programs (see text for description of the special rules). Programs Kept/Spending Requirements Retained Special Education, After School Education and Safety, State Preschool, Quality Education Investment Act, Child Nutrition, Mandates Block Grant, Assessments, American Indian Education Centers and Early Childhood Education Program, Foster Youth Services, Adults in Correctional Facilities, Partnership Academies, Specialized Secondary Programs, and Agricultural Vocational Education. Programs Eliminated/Spending Requirements Removed Summer School Programs, Grade 7-12 Counseling, Gifted and Talented Education, Economic Impact Aid, Professional Development for Math and English, Principal Training, Educational Technology, Deferred Maintenance, Instructional Materials Block Grant, Community Day School (extra hours), Staff Development, National Board Certification Incentives, California School Age Families Education, California High School Exit Exam, Tutoring, Civic Education, Teacher Dismissal, Charter School Block Grant, Categorical Programs for New Schools, Community-Based English Tutoring, School Safety, High School Class Size Reduction, Advanced Placement Fee Waiver, International Baccalaureate Diploma Program, Student Councils, Teacher Credentialing Block Grant, Professional Development Block Grant, School and Library Improvement Block Grant, School Safety Competitive Grant, Physical Education Block Grant, Certificated Staff Mentoring, Oral Health Assessments, Alternative Credentialing. a Also applies to charter schools. ADA = average daily attendance; EL = English learner; LI = low-income; COLA = cost-of-living adjustment; LCFF = Local Control Funding Formula. 16 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE a district’s LCFF allocation. Instead, the district’s student outcomes, the chartering authority would TIIG allocation is locked in at the 2012-13 level and be responsible for providing or arranging technical treated as an “add-on” to LCFF. No state spending assistance.) A district that displays persistently requirements are associated with this add-on poor student performance also may be subject funding. Home-to-School (HTS) Transportation to more intensive interventions at the discretion funding also does not apply toward a district’s of the State Board of Education (SBE) and State LCFF allocation. The state, however, established Superintendent of Public Instruction (SPI). These an ongoing maintenance-of-effort (MOE) interventions could include the SPI changing the requirement that districts spend as much on HTS LCAP, revising a district’s budget, or exerting Transportation annually moving forward as in control over local school board actions (with 2012-13. Under the new system, existing funding the exception of board actions involving local for adult education and Regional Occupational bargaining agreements). With SBE approval, the Centers and Programs (ROCP) do count toward SPI can assign an academic trustee to the district a district’s LCFF allocation but districts have an to implement these interventions. (For charter MOE requirement that they spend as much on each schools, persistently poor student outcomes can of these two programs in 2013-14 and 2014-15 as in lead to the chartering authority or SBE revoking 2012-13. their charters.) Other Notable Changes in Spending LCFF for COEs Requirements. As shown in the bottom part of Figure 3, the LCFF removes the spending Establishes New Two‑Part Funding Formula requirements associated with most existing for COEs. The budget package also replaces the categorical programs. In lieu of most existing existing COE revenue limit and categorical funding categorical spending requirements, districts will system with a new two-part funding formula (see have to complete Local Control and Accountability Figure 4, next page). The new formula has (1) one Plans (LCAPs). The LCAP is an annual plan in part relating to funding for operational services which districts will specify how they will spend that COEs provide to local educational agencies LCFF funding to improve the education of their (LEAs) within their respective counties and (2) a students and implement state priorities. Districts second part relating to the alternative education are required to make their LCAPs publicly services COEs directly provide to students. Similar available and submit them to their COE for review. to the approach for school districts, the formula Charter schools will annually submit comparable establishes a funding target for each COE, counts reports to their chartering authority. existing funds toward the target, and uses new Develops New Technical Assistance and funding to close the same proportional share of Intervention System. In tandem with the new each COE’s gap between its existing funding level funding formula, the budget package establishes and target funding level. Full implementation a new system of district support and intervention. of the new COE system is expected to take two Under the new system, districts that fail to improve years (with full implementation in 2014-15) student outcomes will receive support from their and cost $50 million. The 2013‑14 Budget Act COE, an academic expert or team of experts provides first-year funding of $32 million—almost assigned by their COE, or the newly established two-thirds of the funding needed to bring COEs up CCEE. (For a charter school that fails to improve to their target levels. www.lao.ca.gov Legislative Analyst’s Office 17 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Figure 4 Overview of Local Control Funding Formula for COEs Operations Grant Funding target Base funding of $655,920 per COE. Additional $109,320 per school district in the county. Additional $40 to $70 per ADA in the county (less populous counties receive higher per-ADA rates). Alternative Education Eligible student population Students who are (1) under the authority of the juvenile justice system, (2) probation-referred, (3) on probation, or (4) mandatorily expelled. Initial base rate $11,045 per ADA. Supplemental funding for EL, LI, and foster youth Additional 35 percent of base rate.a Concentration funding Additional 35 percent of base rate for EL/LI students above 50 percent of enrollment.a a Assumes 100 percent of students at court schools are EL/LI. COE = county office of education; ADA = average daily attendance; EL = English learner; LI = low-income. Funds COE Operational Support. As shown referred by a probation officer, or mandatorily in Figure 4, the new funding formula provides an expelled. (The COEs can serve other types of operations grant for each COE based on the total students through arrangements with a cooperating number of school districts and students within school district to pass through a portion of the the county. This grant is intended to support district’s funding.) As shown in Figure 4, the basic COE operations and services for LEAs in structure of this part of the COE formula is the county. Each COE has considerable discretion similar to the formula for school districts, except over the use of this funding, with most existing that the base rate is significantly higher and categorical spending requirements removed. The different percentages are used for the supplemental COEs, however, must perform certain activities for and concentration grants. As with school districts, school districts within their counties, including the funding generated by the supplemental and providing fiscal oversight and verifying districts’ concentration grants must be used to increase or EL/LI student counts. As described above, the improve services for the students generating the budget package also gives COEs a significant role in funds. the new district academic support and intervention Requires LCAPs for Alternative Education. system, with COEs required to review the LCAPs Somewhat similar to the LCAPs that school submitted by school districts and provide technical districts must develop, the budget package requires assistance to districts whose plans are disapproved. each COE to adopt an LCAP describing its plan for Funds COEs for Alternative Schools. The serving alternative-education students and making other part of the new funding formula is for progress towards state priorities. The COE LCAP COE-operated alternative schools, including also must describe how the COE will coordinate court schools, county community schools, and instruction for expelled pupils (as well as services community day schools. The budget package limits for foster youth) within the county. If the SPI does funding for COEs to those alternative-education not approve a COE’s plan, the SPI must provide students who are incarcerated, on probation, technical assistance to that COE. 18 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE Includes Hold Harmless Provision. Under the submitted by CDE. The budget plan also provides new system, most of the funding COEs currently $2 million in one-time non-Proposition 98 General receive from revenue limits and categorical Fund support to SBE for statutorily required activ- programs becomes unrestricted and is applied ities related to LCFF. Specifically, SBE is required to toward each COE’s funding target. The largest (1) develop regulations regarding the use of supple- categorical program rolled into the formula is mental and concentration funds by January 31, ROCP, for which COEs received about $180 million 2014 and (2) create templates by March 31, 2014 for in 2012-13. (The associated MOE means COEs that school districts, COEs, and charter schools to use ran ROCPs in 2012-13 must continue to support in adopting their LCAPs. those activities for the next two years rather than Deferral Paydowns expanding or enhancing operational services or alternative education.) In 32 of the state’s 58 Total of $4.3 Billion in Deferrals Paid Down counties, existing funding streams exceed the in 2012‑13 and 2013‑14. After four consecutive COEs’ funding target under the LCFF. The COEs years of increasing the amount of deferrals for are allowed to continue to receive funding in excess schools and community colleges—reaching a total of their LCFF target, but the intent is that these of $10.4 billion in outstanding deferrals by the COEs not receive funding increases until their end of 2011-12—the 2012-13 budget plan provided LCFF target exceeds their 2012-13 funding level. $2.2 billion to reduce the amount of outstanding deferrals. As Figure 5 shows, the recently enacted State-Level LCFF Implementation budget plan makes an additional $1.8 billion in Up to $4.7 Million Available for State‑ 2012-13 deferral paydowns as well as $272 million Level LCFF Implementation. In addition to the in paydowns in 2013-14. Under the budget package, Proposition 98 funding provided for LCFF, the $6.2 billion in outstanding deferrals remain as of budget plan includes non-Proposition 98 General the end of 2013-14. Fund augmentations for state operations relating CCSS Implementation to LCFF administration. The budget plan includes up to 22 positions and $2.7 million in ongoing Provides $1.25 Billion for Implementing non-Proposition 98 General Fund support for CCSS. The budget plan provides $1.25 billion in the California Department of Education (CDE) one-time funding to schools for implementing the to implement the new LCFF fiscal provisions CCSS. (Of this amount, the budget plan counts (11 positions, $1.4 million) as well as LCAP-related Figure 5 provisions (11 positions, State Paying Down More Than $4 Billion in Deferrals $1.3 million). Of the (In Millions) combined amount K-12 CCC Totals included in the budget Outstanding Deferrals at End of 2011-12 $9,469 $961 $10,430 plan for CDE, 11 positions Deferral paydowns in 2012-13 budget package 2,065 160 2,225 and $1.2 million are Newly authorized 2012-13 deferral paydowns 1,590 179 1,769 contingent on DOF Deferral paydowns for 2013-14 242 30 272 Total Paydowns $3,898 $369 $4,266 approval of an expen- diture plan to be Outstanding Deferrals at End of 2013-14 $5,571 $592 $6,164 www.lao.ca.gov Legislative Analyst’s Office 19 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN $1 billion towards meeting the 2012-13 minimum to assess the performance of schools or students for guarantee and $250 million towards meeting state or federal accountability purposes. the 2013-14 guarantee.) The CCSS are nationally Proposition 39 developed standards for math and English/ Language Arts that the state adopted in 2010. Creates $467 Million Proposition 39 Spending Under current law, schools are required to align Plan. Passed by the voters in November 2012, instruction to the CCSS beginning in 2014-15. The Proposition 39 increases state corporate tax $1.25 billion in CCSS funding must be spent in revenues and requires for a five-year period, 2013-14 or 2014-15 for professional development, starting in 2013-14, that a portion of these instructional materials, and technology that assist revenues be used to improve energy efficiency schools in aligning instruction to the CCSS. Local and expand the use of alternative energy in public governing boards are required in a series of public buildings. The budget package applies the entire meetings to discuss and adopt a plan for spending increase in associated corporate tax revenues to the funds and must report how the funds were the calculations of the Proposition 98 minimum spent to the CDE by July 1, 2015. guarantee. The budget plan appropriates a total of State Suspends Most Existing Standardized $467 million for Proposition 39-related programs Tests as Part of Transition to CCSS. To begin the and support. The funds support a new grant transition to the CCSS, the Legislature adopted program, new revolving loan program, and energy- Chapter 489, Statutes of 2013 (AB 484, Bonilla), related workforce training. which suspends most of the California Standards Grant Program for Schools and Community Tests (CSTs) in 2013-14. Specifically, Chapter 489: Colleges ($428 Million). The budget provides (1) suspends all CST exams in mathematics and $428 million (Proposition 98 General Fund) for a English-language arts; (2) requires CST science new grant program for schools ($381 million) and exams only in grades 5, 8, and 10; and permanently community colleges ($47 million) to undertake eliminates all CST history/social science exams. energy projects. (The school program allows school (Because student results on these exams are the districts, COEs, and charter schools—referred to as core of the state’s Academic Performance Index, LEAs throughout the rest of this section—to access this index may not be calculated for all schools in funding.) For LEAs, the plan distributes 85 percent 2013-14.) Chapter 489 makes similar changes to the of funding on a per-student basis, with the California Modified Assessment (CMA), an exam remaining 15 percent based on student eligibility taken by some students with disabilities, but makes for free and reduced price meals. The LEAs with no changes to the California Alternate Performance fewer than 2,000 students receive a minimum grant Assessment, an exam for students with the most (ranging from $15,000 to $100,000, depending significant cognitive disabilities. The savings on size) in lieu of the per-student allocation if generated by not administering CSTs and CMA the minimum grant is higher. The LEAs must is to be used to field test CCSS-aligned exams, prioritize projects according to certain criteria also known as the Smarter Balanced Assessment (such as age of facilities) and must receive approval Consortium (SBAC) tests. The field test is primarily from the California Energy Commission (CEC) designed to assess the accuracy and reliability of prior to spending funds. For community colleges, SBAC test items prior to full implementation in the Chancellor’s Office is to allocate funding at its 2014-15. The results of the field test will not be used discretion. The CEC, in consultation with other 20 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE state education and energy agencies, is to develop Adult Education guidelines for LEAs and community colleges to Provides Planning Grants for Adult evaluate energy benefits. Education Providers to Form Regional Consortia. Loan Program for Schools and Community In an effort to improve coordination among Colleges ($28 Million). The budget also provides adult education providers, the budget provides $28 million (Proposition 98 General Fund) to the $25 million (Proposition 98 General Fund) for a CEC to provide low- and no-interest revolving new Adult Education Consortium Program. School loans to LEAs and community colleges for eligible districts and community colleges that form a energy projects and technical assistance. (Though regional consortium are eligible to apply for these CEC has discretion to allocate the $28 million funds. While the monies are in CCC’s budget, among LEAs and community colleges, the budget the budget package charges both CDE and the plan assumes $25 million for LEAs and $3 million CCC Chancellor’s Office with awarding grants to for CCC.) Program documentation and review consortium applicants. The grants, which may be processes are to be coordinated with the grant spent over two years, are to be used by consortium program discussed above. members to develop joint plans for serving adult Workforce Training Programs ($8 Million). learners in their area. The trailer legislation The budget supports two energy-related workforce specifies the content that each consortium must training programs using non-Proposition 98 include in these plans, including (1) a needs General Fund monies. Specifically, it provides assessment of adult education services within the (1) $5 million to the California Conservation region, (2) plans for coordinating and integrating Corps to be used for workforce development, existing programs (such as English as a second such as energy audit and weatherization training, language instruction and vocational training), and (2) $3 million to the California Workforce and (3) strategies for improving student success. Investment Board for a competitive grant program By March 1, 2014, CDE and the CCC Chancellor’s for workforce training organizations to provide Office must submit a report to the Legislature and energy-related work experience and job training to Governor on the status of (1) the formation of disadvantaged youths and veterans. regional consortia across the state and (2) grant Provides $3.1 Million for State Operations. allocations to these regional consortia. By March 1, The budget plan provides a total of $3.1 million for 2015, CDE and the CCC Chancellor’s Office must supporting implementation of the Proposition 39 submit a second report detailing the plans that spending plan. The CEC receives $3 million regional consortia have developed and providing (Energy Resources Program Account) for various recommendations for improving the state’s new administrative and support activities, including regional delivery system. The budget package establishing guidelines, reviewing project also includes intent language for the Legislature expenditure plans, maintaining a database of to (1) work toward establishing common policies projects, and providing technical assistance, affecting adult schools and community colleges particularly to smaller LEAs that need help (such as student fee levels) and (2) appropriate new conducting energy audits. In addition, CDE funds to regional consortia in 2015-16 to “expand receives one new position, at a General Fund cost of and improve” adult education in the state. $109,000. Eliminates School District Adult Education Categorical Program, but Includes MOE www.lao.ca.gov Legislative Analyst’s Office 21 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Requirement. In a related action, the budget New Career Pathways Program package eliminates school districts’ adult education The budget provides $250 million in one-time categorical program and consolidates all associated Proposition 98 funding to create a “California annual funding ($635 million Proposition 98 Career Pathways Trust.” The primary purpose of General Fund) into the school district LCFF. The the new program is to improve linkages between budget package, however, contains a requirement career technical (vocational) programs at schools for school districts (through their adult schools) and community colleges as well as between K-14 to maintain at least their 2012-13 level of state education and local businesses. The program spending on adult education in 2013-14 and authorizes several types of activities, such as 2014-15. creating new technical programs and curriculum. Shifts School Districts’ Apprenticeship The program is open to school districts, COEs, Categorical Funds to CCC. The budget also shifts charter schools, and community colleges. Funds the school district-run apprenticeship program are allocated through a competitive grant process. (a type of adult education instruction related to The SPI, in consultation with the CCC Chancellor’s job training) to the community colleges, thereby Office and interested business organizations, is creating two CCC apprenticeship categorical charged with reviewing grant applications. Grant programs—CCC’s existing program ($7.2 million), funds are available for expenditure from 2013-14 which is reinstated as a restricted CCC program, through 2015-16. As a condition of receiving and the shifted school district program pathway grants, recipients must identify other fund ($15.7 million). Though the latter (renamed sources (such as commitments from businesses) the “Apprenticeship Training and Instruction” that will support the ongoing costs of the program. program) is within CCC’s budget, trailer legislation By December 1, 2016, the SPI and grant recipients permits school districts to continue administering must report to the Legislature and Governor on their existing apprenticeship programs using program outcomes, such as the number of students funds from this categorical program. The trailer making successful transitions to the workforce. Of legislation, however, requires CCC and school the amount provided for this program, $250,000 district apprenticeship programs to adopt common is designated for an independent evaluation. The administrative policies (such as regular visits to budget package also provides CDE with $459,000 apprenticeship classes) by early 2014. (non-Proposition 98 General Fund) for development Retains School Districts’ Adults in of a data repository to track program outcomes and Correctional Facilities Categorical Program. The three staff positions. budget takes a separate approach for the Adults in Correctional Facilities categorical program CCC Categorical Programs (an adult education program operated by school Augments Funding for Several Categorical districts at various county jails). Rather than Programs. The budget contains both one-time and folding the program into LCFF or shifting funds to ongoing increases for CCC categorical programs. CCC, the budget maintains Adults in Correctional Specifically, the budget provides $30 million Facilities as a restricted categorical program within on a one-time basis for CCC’s Physical Plant school districts’ budget and provides $15 million and Instructional Support program to fund (Proposition 98 General Fund) to reimburse primarily facility maintenance projects and 2012-13 program costs. instructional equipment purchases. In addition, 22 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE the budget includes a total of $88.2 million in base college credit. The funds support the development of augmentations for five other categorical programs. a number of projects, with the majority of funding in 2013-14 supporting the acquisition of a common • $50 million for the Student Success and learning management system (LMS) for the CCC Support Program, which funds various system. (An LMS allows faculty to post syllabi, support services such as academic assignments, course material, and instructional counseling and orientation for incoming content such as video presentations. Students use students. Provisional language permits the the LMS to perform functions such as submitting CCC Chancellor to use up to $14 million of their assignments, taking tests, and participating in this augmentation for three new technology online discussions with classmates.) Other projects projects—electronic transcripts, electronic include (1) creation of an inventory of online courses planning tools, and a common assessment that would be offered by a consortium of community system. Provisional language also reinstates colleges and available to students throughout the CCC it as a restricted program. system, (2) a single online portal for students to find • $15 million for Extended Opportunity and access such courses, (3) centralized round-the- Programs and Services, which provides clock technical and tutorial support for these online additional academic and financial support students, (4) additional professional development for to underprepared and financially needy faculty teaching online courses, and (5) development students. of standardized “challenge tests” that allow students to obtain academic credit for learning outside the • $15 million for Disabled Students Programs traditional classroom setting. The budget contains a and Services, which provides support March 1, 2014 requirement for the CCC Chancellor’s services and educational accommodations to Office to submit a report to the Legislature and CCC students with disabilities. Governor on the status of these projects. • $8 million for various services (such as child CCC Chancellor’s Office care and career counseling) provided to CCC students in the California Work Opportunity Funds Five New Positions. The budget provides a and Responsibility to Kids (CalWORKs) total of $508,000 (non-Proposition 98 General Fund) program. to fund five new positions at the CCC Chancellor’s Office—three positions in adult education, one • $150,000 for the CCC Academic Senate position in apprenticeship, and one position to to support the joint CCC-California support primarly the new CCC technology initiative. State University (CSU) common course numbering initiative. Education Mandates Funds New CCC Technology Program. The Adds $50 Million to Block Grant for budget provides $16.9 million in 2013-14 for a new Graduation Requirements Mandate. The budget CCC technology initiative (with an intent to provide plan increases funding for the K-12 mandates block annual ongoing funding of $10 million beginning grant from $167 million to $217 million to account in 2014-15). The stated goal of the initiative is to for the inclusion of the Graduation Requirements increase student access to high-quality online courses mandate. Enacted in 1983, this mandate requires and provide alternative ways for students to earn that schools award a high school diploma to www.lao.ca.gov Legislative Analyst’s Office 23 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN students only if they have met all state graduation Act, Mandate Reimbursement Process, and Sex requirements, including passing a second science Offenders: Disclosures by Law Enforcement. The course. Since the mandate pertains only to high Sex Offenders disclosure mandate applied only to schools, the block grant allocates the $50 million community colleges, with the other three mandates augmentation on a per-student basis for high applying to both schools and community colleges. school students only. All other block grant funding Though the four mandates are removed from the continues to be distributed across all students, block grants, the budget does not decrease block without regard to grade level. As a result, the grant funding. (The budget plan also adds one 2013-14 rates for school districts are $56 per student small mandate relating to pupil expulsions to the in grades 9 through 12 and $28 per student in all schools block grant without adjusting block grant other grades. For charter schools, the rate is $42 per funding.) high school student and $14 per student in all other Removes One Additional Mandate From grades. (Charter schools receive lower rates because Block Grant. The budget removes the Open fewer mandates apply to them.) Meetings/Brown Act mandate from the schools Limits Behavioral Intervention Plans (BIP) and community college block grants since Mandated Activities. The budget plan modifies Proposition 30 eliminated the state’s obligation several state requirements collectively known to pay local governments for performing the as the BIP mandate that specify how schools associated activities. must respond when a student with a disability Special Education exhibits behavioral problems. In general, these modifications conform state BIP requirements Revises Allocation Formulas. The budget more closely with federal BIP requirements, thereby package makes three notable changes to special eliminating most associated state reimbursable education funding. First, the package simplifies the mandate costs. For example, schools no longer will state’s approach to distributing funding to special be required to use specific types of assessments education local plan areas (SELPAs) by delinking and specific types of behavioral interventions. A state and federal special education allocation few state BIP requirements that exceed federal formulas. A conforming change revises the requirements are retained, however, such as “statewide target rate” used to fund new students procedures relating to emergency interventions. to the updated statewide average per-pupil funding The budget provides $230,000 in one-time federal rate. Second, the budget provides $2.6 million special education funds for CDE to provide in Proposition 98 funds to fully offset federal technical assistance to schools regarding the BIP sequestration funding cuts for preschoolers and changes. (The budget package makes no change to infants/toddlers with disabilities and provides existing state law provisions requiring schools to $2.1 million in federal carryover funds to partially use their state special education funds to pay for mitigate federal sequestration funding cuts for any BIP mandated activities.) K-12 students with disabilities. Third, the package Conforms With Other Local Governments consolidates several special education grants, as on Mandate Suspensions. The budget package described below. (As passed by the Legislature, the suspends four education mandates that have budget package also included $30 million to begin been suspended for other local governments in equalizing special education funding rates across recent years: Absentee Ballots, Brendon Maguire SELPAs, but the Governor vetoed these funds.) 24 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE Consolidates Several Special Education and job placements to students with Grants. The budget package consolidates 11 special disabilities. education categorical grants into 5 larger grants. • Combines three grants for students with The consolidations include the following: low-incidence disabilities—materials • Merges funding for SELPA administrative ($13.4 million), services ($1.7 million), and support and regional services ($90 million) ROCP ($2.1 million)—into one grant with and staff development ($2.5 million) fewer spending requirements reserved for into base SELPA funding. Funds will serving the same group of students. be available for any special education purpose. (The budget continues to provide • Combines two extraordinary cost pools $3 million in supplemental funds for small, ($3 million each) for subsidizing high-cost geographically isolated SELPAs.) student placements into one pool with a uniform set of eligibility criteria. • Combines two “WorkAbility” grants into one grant while maintaining the same • Folds funds ($200,000) formerly dedicated programmatic requirements ($40 million) for assessment research into an existing to provide vocational education, training, larger grant ($1.1 million) used to provide technical assistance to SELPAs. CHILD CARE As shown in Figure 6 (see next page), the The budget package for child care contains several 2013‑14 Budget Act authorizes a total of $1.7 billion changes, as discussed below. in federal funds and state non-Proposition 98 Makes Caseload and Statutory Growth funds for subsidized child care programs. (As Adjustments. As shown in the top part of Figure 6, shown earlier in Figure 1, the budget also includes the budget adjusts funding for CalWORKs child $507 million in Proposition 98 funds for the State care based on anticipated changes in eligible Preschool program.) Changes in funding by child caseload, including year-to-year increases for care program vary, but total funding in 2013-14 is Stage 1 ($15 million) and Stage 3 ($21 million), virtually unchanged from 2012-13. As shown in the and a decrease for Stage 2 ($61 million). (The bottom part of the figure, state non-Proposition 98 Stage 3 funding level adopted in the budget was General Fund support for child care programs $15 million too high due to a technical error, which decreases slightly ($3 million) compared to 2012-13. was corrected in Chapter 354, Statutes of 2013 Additionally, the figure shows that funding from [AB 101, Committee on Budget].) The net change the federal Child Care and Development Fund in CalWORKs child care slots due to these caseload (CCDF) is anticipated to drop by $9 million. (This adjustments is a decrease of 2,200 slots. Embedded includes a $16 million reduction associated with in the non-CalWORKs numbers shown in Figure 6 federal sequestration, offset by a base increase of is a $1.3 million increase to fund a statutory $7 million.) The amount of federal Temporary 0.2 percent growth adjustment for the General Assistance for Needy Families (TANF) funding Child Care, Alternative Payment, and migrant dedicated for child care increases by $10 million. child care programs. This adjustment, based on www.lao.ca.gov Legislative Analyst’s Office 25 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Backfills for Federal Sequestration Cuts. projected annual changes in the state’s population of The budget assumes the federal sequester will children under age five, will fund approximately 150 decrease California’s share of the CCDF grant by new slots in these programs. (As discussed next, a $16 million (equivalent to about 1,700 child care separate decision was made to increase slots in these slots), but it provides a like amount of additional programs beyond the statutorily required growth state General Fund to avoid the reduction. (The adjustment.) 2013‑14 Budget Act authorizes DOF to make the Increases Slots. The budget reappropriates associated reductions once the federal government $10 million in unspent 2012-13 child care funds provides final data on the amount of sequestration to provide a total of about 1,100 new slots in the reductions.) General Child Care, Alternative Payment, and migrant child care programs. Figure 6 Child Care and Preschool Budget Summary (Dollars in Millions) Change From 2012‑13 2011‑12a 2012‑13 2013‑14 Amount Percent Child Care Expenditures CalWORKs Child Care Stage 1 $309 $390 $406 $15 4% Stage 2 442 419 358 -61 -15 Stage 3 152 162b 183c 21 13 Subtotals ($903) ($972) ($961) (-$11) (-1%) Non-CalWORKs Child Care General Child Cared $675 $465 $473e $8 2% Alternative Payment 213 174 177e 3 2 Other child care 30 28 28e — 2 Subtotals ($918) ($666) ($678) ($11) (2%) Support programs $76 $76 $74 -$1 -2% Totals $1,897 $1,714 $1,699 ‑$15 ‑1% Child Care Funding State Non-Proposition 98 General Fund $1,059 $779 $776 -$3 — Other state funds 8 14 — -14 — Federal CCDF 533 549 541e -9 -2 Federal TANF 297 372 383 10 3 State Preschoold (Proposition 98) $368 $481 $507 $26 5% a Includes midyear trigger reductions totaling $23 million across all programs. Also includes $8 million midyear augmentation to Stage 3. b Includes $13.5 million augmentation. c Incorporates technical reduction of $15 million included in Chapter 345, Statutes of 2013 (AB 101, Committee on Budget). d Reflects change beginning in 2012-13 to provide $164 million for preschool slots within part-day State Preschool program rather than General Child Care Program. e Includes estimated reductions from federal sequestration. Assumes General Fund provided to backfill reductions. CCDF = Child Care and Development Fund; TANF = Temporary Assistance for Needy Families. 26 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE HIGHER EDUCATION Large General Fund Increase but Smaller UC, CSU, and Hastings Overall Increase. The budget provides a total of Provides $2.8 Billion in General Fund $18.2 billion in support for higher education in Support for UC. The budget provides UC with 2013-14—a 4 percent increase from 2012-13. Of $2.8 billion in General Fund support—an increase this amount, $10.9 billion is state General Fund, of $467 million from 2012-13. Of this increase, $3.6 billion is tuition and fee revenue, $2.3 billion $200 million reflects a shift of funds used for is local property tax revenue, and $1.3 billion is paying general obligation bond debt service from from other sources. As Figure 7 shows (see next a separate budget item to UC’s support item (with page), General Fund support increases $1 billion no corresponding increase in state costs or total from 2012-13. Of this amount, $249 million is UC support and capital funding). The remainder associated with fund swaps whereas $765 million consists of various augmentations, including a reflects an augmentation. Regarding tuition and $125 million increase linked with a prior-year fees, the amount paid by students is projected to budget agreement that the university hold tuition decline slightly in 2013-14 as the amount covered levels flat in 2012-13, a $125 million (5 percent) base by existing financial aid programs grows. Revenue augmentation for 2013-14, a $9 million increase from local property taxes is expected to increase for lease-revenue debt service, and a $6 million modestly at the community colleges whereas increase for retiree health benefits. In addition funding from other sources is expected to decline to state support, UC expects to receive roughly notably, primarily due to a $262 million reduction $2.5 billion in student tuition payments. (The Cal in federal TANF funding for Cal Grants. Grant Program will pay about $760 million of this New Goals Delineated for Higher Education. amount on behalf of students.) Chapter 367, Statutes of 2013 (SB 195, Liu) Provides $2.6 Billion in General Fund establishes three goals for the state to adhere Support for CSU. For CSU, the budget provides to when making budget (and policy) decisions $2.6 billion in General Fund support—an increase for postsecondary education. First, state budget of $304 million from 2012-13. This increase decisions are supposed to improve student consists of various augmentations, including access and success, such as by increasing college $125 million for holding tuition flat in 2012-13, participation and graduation rates. Second, the a $125 million (6 percent) base augmentation state budget is supposed to better align degrees and for 2013-14, an $18 million increase for lease- credentials with the state’s economic, workforce, revenue debt service, and a $34 million increase and civic needs. Lastly, the state budget is supposed in health care costs for retired annuitants. In to ensure the effective and efficient use of resources addition to its General Fund support, CSU expects to improve outcomes and maintain affordability. to receive about $1.9 billion in student tuition The law also states the Legislature’s intent for payments. (The Cal Grant Program will pay metrics to be created to monitor progress toward about $430 million of this amount on behalf of these goals. (These metrics are to take into account students.) the new performance measures for the University Provides $8.4 Million in General Fund of California (UC) and CSU described later in this Support for Hastings College of the Law. The chapter.) www.lao.ca.gov Legislative Analyst’s Office 27 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN budget provides Hastings with $8.4 million in $56,000 is intended to cover increased retiree General Fund support—an increase of $511,000 health care costs. Hastings has discretion in (6.5 percent) from 2012-13. Of this amount, deciding how to use the remaining funding. Figure 7 Higher Education Core Funding (Dollars in Millions) Change From 2012‑13 2011‑12 2012‑13 2013‑14 Amount Percent University of California General Fund $2,272 $2,377 $2,844a $467 20% Net tuitionb 2,506 2,428 2,471 43 2 Other UC core funds 388 441 385 -55 -13 Lottery 30 37 37 — — Subtotals ($5,196) ($5,283) ($5,738) ($455) (9%) California State University General Fundc $2,000 $2,304 $2,607 $304 13% Net tuitionb 1,948 1,885 1,909 24 1 Lottery 42 56 56 — — Subtotals ($3,990) ($4,245) ($4,572) ($327) (8%) California Community Colleges General Fund $3,512 $3,817 $3,861 $44 1% Local property tax 1,977 2,251 2,291 40 2 Fees 361 419 426 7 2 Lottery 197 186 186 — — Subtotals ($6,047) ($6,672) ($6,763) ($91) (1%) Hastings College of the Law Net tuitionb $34 $35 $34 -$1 -3% General Fund 7 8 8 1 7 Subtotalsd ($41) ($43) ($42) (-$1) (-2%) California Student Aid Commission General Fund $1,471 $708 $1,039 $331 47% Student Loan Operating Fund 62 85 98 13 16% TANF funds — 804 542 -262 -33% Subtotals ($1,533) ($1,596) ($1,679) ($82) (5%) General Obligation Bond Debt Service $666 $696 $564 -$132 -19% Totalse $16,490 $17,460 $18,164 $705 4% General Fund $9,928 $9,910 $10,924 $1,014 10% Net tuition/feese 3,866 3,691 3,646 -45 -1 Local property tax 1,977 2,251 2,291 40 2 Other 450 1,329 1,025 -304 -23 Lottery 269 279 279 — — a Includes $200 million in general obligation bond debt service previously reflected in a separate item. b Reflects tuition after discounts provided through institutional financial aid programs from all sources. c Beginning in 2012-13, includes health benefit costs for CSU retired annuitants. d Embedded in the subtotals each year is about $200,000 from Lottery funds. e To avoid double counting, excludes UC and CSU tuition paid on behalf of students from Cal Grants. These payments appear in both UC/CSU net tuition and California Student Aid Commission General Fund. TANF = Temporary Assistance for Needy Families. 28 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE In addition to state support, Hastings expects in 2014 and 2016, may reflect systemwide costs. to receive $34 million in 2013-14 from student Two subsequent reports must include campus-by- tuition payments. campus costs. The reporting requirement sunsets on Provides Base Augmentations. As discussed January 1, 2021, following the fourth report. above, the budget provides base increases Sets No Enrollment Expectations. The budget of $125 million each for UC and CSU. (The act typically specifies the number of FTE students administration derived the dollar increase based the state expects the universities to enroll. For on UC’s budget, with the amount representing a 2013-14, the Legislature adopted budget language 5 percent increase for UC and a 6 percent increase stating its intent that the universities serve no fewer for CSU.) Though the increases are largely students in 2013-14 than in 2012-13. Accordingly, the unallocated, $15 million of UC’s augmentation language included enrollment targets of 211,499 FTE is for the new UC Riverside School of Medicine, students for UC and 342,000 FTE students for CSU. which will begin serving students in 2013-14. The Governor, however, vetoed these provisions. (The Governor proposed to set aside $10 million In his veto message, the Governor stated that of each university’s base increase for improving institutional performance, rather than enrollment, the availability of courses through technology. should drive university funding. Though the Governor ultimately vetoed this Expects No Tuition Increases. The provision, the universities indicate they will honor administration expressed its intent that the the administration’s intent for these funds, as universities not raise student tuition levels in 2013-14 detailed in the box on page 32.) and both UC and CSU have indicated they do not Requires Annual Report on Specified plan to increase tuition for resident students. Tuition Performance Measures. The budget package rates for California resident undergraduates attending establishes a new requirement for UC and CSU to UC and CSU in 2013-14 are expected to remain report annually, beginning on March 1, 2014, on a at $12,192 and $5,476, respectively, for the third number of performance outcomes. Among other consecutive year. (The community colleges also plan metrics, the universities are required to report to hold student fees flat in 2013-14—at $46 per unit.) on graduation rates, spending per degree, and Again Eliminates Earmarks. The Governor the number of transfer and low-income students vetoed virtually all provisions in the 2012‑13 Budget enrolled. See Figure 8 (see next page) for a full list Act that designated funding for specific purposes and of specified performance measures. did not include these spending requirements in his Requires Biennial Reports on Cost of 2013-14 budget proposal. The Legislature restored Education. In addition to annual performance a number of these provisions—most notably a reports, the budget requires biennial reports from $25 million earmark for student outreach programs— UC and CSU, beginning in 2014, on the costs of and stated its expectation that the universities education. The reports are to identify the costs continue supporting other programs—such as UC’s of undergraduate education, graduate academic Subject Matter Projects for K-12 teachers—that education, professional education, and research. previously were specified in budget act provisions. For all four areas, costs are to be disaggregated The Governor again vetoed the earmarking, citing a by (1) Science, Technology, Engineering, and desire to give the universities greater flexibility (with Mathematics (STEM) disciplines; (2) health sciences; the exception of funding for the Riverside Medical and (3) all other disciplines. The first two reports, School) to manage their resources. www.lao.ca.gov Legislative Analyst’s Office 29 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Changes CSU Retirement Funding Model. Contains Intent Language Regarding UC Traditionally, the state has adjusted CSU’s budget Retirement Costs. The budget plan does not to account for changes in its contributions to the designate any funding for UC employer retirement California Public Employees’ Retirement System costs, though the university expects these costs to (CalPERS). Under the traditional model, CSU’s increase by $67 million in 2013-14. Budget trailer CalPERS contributions have been determined by bill language states, however, that the absence multiplying its current payroll costs by its employer of such an earmark does not imply legislative contribution rate. Starting in 2013-14, adjustments support for UC employees paying more toward to CSU’s budget are to be based permanently on the retirement. In addition, trailer legislation requires university’s 2013-14 payroll costs. Because 2013-14 UC to apply any reductions in annual debt-service payroll costs are permanently locked in as a base costs achieved as part of a debt restructuring (as moving forward, CSU will have to fund retirement discussed further below) towards its pension costs, costs on any payroll above that level from its base including its unfunded pension liabilities. budget appropriation. As a result, CSU will have a Authorizes New Capital Outlay Process greater incentive to take into account retirement for UC. As noted earlier, the budget plan shifts costs when it makes its initial hiring decisions. funds for existing debt service on UC capital Figure 8 Performance Metrics for UC and CSU Metric Definition CCC transfers (1) Number of CCC transfers enrolled. (2) CCC transfers as a percent of undergraduate population. Low-income students (1) Number of Pell Grant recipients enrolled. (2) Pell Grant recipients as a percent of total student population. Graduation ratesa (1) Four- and six-year graduation rates for freshmen entrants. (2) Two- and three-year graduation rates for CCC transfers. Both of these measures also calculated separately for low-income students. Degree completions Number of degrees awarded annually in total and for: (1) Freshman entrants. (2) Transfers. (3) Graduate students. (4) Low-income students. First-year students on track to degree Percentage of first-year undergraduates earning enough credits to graduate within four years. Spending per degree (1) Total core funding divided by total degrees. (2) Core funding for undergraduate education divided by total undergraduate degrees. Units per degree Average course units earned at graduation for: (1) Freshman entrants. (2) Transfers. Degree completions in STEM fields Number of STEM degrees awarded annually to: (1) Undergraduate students. (2) Graduate students. (3) Low-income students. a Six- and three-year graduation rates apply only for CSU. STEM = Science, Technology, Engineering, and Mathematics. 30 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE outlay projects from a separate budget item to the bond funding for the planning phases of a building university’s main support appropriation. It does renovation project at Solano Community College.) this as part of a new capital outlay process. Under Financial Aid the new process, UC may pledge its General Fund support appropriation (excluding the amounts Provides $1 Billion in General Fund Support necessary to repay existing debt service) to issue its for Cal Grants. The spending plan provides a total own debt for capital projects involving academic of $1.7 billion for Cal Grants, including $1 billion facilities. In addition, the new process allows UC to in General Fund support, $542 million in federal restructure some of the state’s outstanding debt on TANF funds, and $98 million from the Student UC projects. The new process limits the university Loan Operating Fund. This is an $82 million to spending at most 15 percent of its pledgeable (5 percent) overall spending increase for Cal Grants General Fund on (1) debt service on new bonds for from 2012-13. Though General Fund spending academic facilities, (2) pay-as-you-go academic- increases by $331 million from 2012-13 to 2013-14, facility projects, and (3) existing state lease-revenue a large part of this increase offsets a reduction in debt. In order to use the new authority, the federal funding. Though virtually all state support university is required to submit certain information for financial aid currently is for the Cal Grant about its capital plans to the Legislature and DOF program, the budget package creates a new state- for review and approval. supported financial aid program to be implemented Funds a Few Capital Outlay Projects. beginning in 2014-15. In addition, the budget The budget plan authorizes UC to construct a makes two changes to California Student Aid $45.1 million classroom and academic office Commission (CSAC) operations. The components building at the Merced campus using the of the budget package are discussed below. new capital outlay authority discussed above. Creates New Financial Aid Program. In addition, the budget provides UC with The budget package creates the Middle Class (1) $5 million from resources bond funds to replace Scholarship Program, a new financial aid a pier and wharf located at the Scripps Institution program for certain UC and CSU students. The of Oceanography at the San Diego campus program is designed for undergraduate students and (2) $4.2 million in general obligation bond who do not have at least 40 percent of their funding for the equipment phase of a science and tuition covered by Cal Grants and other public engineering building located at the Merced campus. financial aid programs. Specifically, students For CSU, the budget authorizes (1) $76.5 million with family incomes up to $100,000 qualify to in lease-revenue bond funding to replace academic have 40 percent of their tuition covered (when and classroom space found to be seismically unsafe combined with all other public financial aid). at the Pomona campus, (2) $5.9 million from The percent of tuition covered declines for general obligation bond funds for the equipment students with family income between $100,000 phases of five previously approved capital outlay and $150,000, such that a student with a family projects, and (3) $1.8 million from general income of $150,000 qualifies to have 10 percent obligation bond funds to upgrade the structural of tuition covered. The program is to be phased systems of the Dore Theatre at CSU Bakersfield in over four years, beginning in 2014-15, with to correct seismic deficiencies. (The budget also awards in 2014-15 set at 35 percent of full appropriates $1.3 million in general obligation award levels, then 50 percent, 75 percent, and www.lao.ca.gov Legislative Analyst’s Office 31 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN 100 percent of full award levels the following by about one-third if the May Revision projects three years, respectively. Budget legislation a budget deficit for the next fiscal year. (The provides $107 million for the program in 2014-15, budget also provides CSAC with $250,000 for two $152 million in 2015-16, and $228 million in permanent positions, one limited-term position, 2016-17, with funding for the program capped and associated implementation costs, as well as at $305 million beginning in 2017-18. If the $500,000 in ongoing funding for the California appropriation is insufficient to provide full Student Opportunity and Access Program to awards to all eligible applicants, CSAC is to conduct outreach.) reduce award amounts proportionately. In Transfers Support Services to CSAC. For addition, the budget package authorizes the about 15 years, several of CSAC’s administrative Director of Finance to reduce the appropriation support services have been provided by the UC and CSU Technology Initiatives Both the University of California (UC) and California State University (CSU) will use a portion of their base funding increase to improve course availability through technology, as described below. UC to Develop New Innovative Learning Technology Initiative. The goal of the initiative is to help undergraduates enroll in the courses they need to satisfy degree requirements and graduate in a timely manner. The UC plans to spread $10 million across the following components. • Course Development ($4.6 Million to $5.6 Million). The UC plans to develop 150 online and hybrid courses over the next three years. These courses will be credit-bearing and meet general education or major requirements. The university will select the courses using a competitive process run through the Academic Senate. • Technological and Instructional Support ($1 Million to $2 Million). The UC plans to make technological support available to faculty developing the hybrid and online courses. The UC also plans to fund teaching assistants to help students taking courses remotely. • Cross-Campus Registration and Course Catalog Database ($3 Million). The UC plans to develop a new data “hub” to support cross-campus registration. The UC also plans to develop a searchable database of the new courses. • Evaluation ($0.4 Million). The UC plans to collect data from students and faculty to determine the effectiveness of the new courses. CSU to Focus on Reducing Bottlenecks and Improving Student Success. The CSU Chancellor’s Office plans to distribute $17.2 million among its campuses to promote five objectives. (In addition to $10 million for technology-specific activities, CSU plans to spend $7.2 million specifically for the student success programs described below.) The amount allocated to each objective will depend on the proposals the Chancellor’s Office receives from campuses. The five objectives are: • Increasing Enrollment in Successful Online Courses. Beginning fall 2013, CSU will expand enrollment in about two dozen existing, fully online courses. The courses, 32 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE agency administering the federal guaranteed Creates Reimbursement Mechanism for student loan program in California—initially CSAC to Provide Technical Assistance to EdFund, and more recently ECMC (previously Other States. Since enactment of the California the Education Credit Management Corporation). Dream Act—Chapter 604, Statutes of 2011 These services include printing, warehouse, (AB 131, Cedillo)—CSAC has developed mailroom, courier, and information technology an online application that mirrors the Free (IT) services. The agreement with ECMC is to Application for Federal Student Aid (FAFSA) terminate June 30. The budget provides $610,000 for students who are unable to use the FAFSA and seven positions to transfer these services back due to their immigration status. Several other to CSAC, effective July 1. states have enacted legislation similar to the nominated by campuses and selected by the Chancellor’s Office, are in high-demand subjects and have shown better completion rates and student learning outcomes. Students throughout the system will be able to enroll in these courses and receive credit at their home campuses. The Chancellor’s Office will support the development of processes that streamline registration and transfer of course credits for students. • Replicating Successful Courses and Teaching Methods. Through a review process, the Chancellor’s Office selected several courses that showed improved student outcomes following changes in teaching methods and technology. The university plans to hold six associated summer institutes that will bring faculty who have successfully redesigned courses together with faculty from other campuses who are interested in adopting new approaches. Participating faculty (and their campus departments) must indicate that they intend to transform an existing course from face-to-face to online, hybrid, or technology- enhanced and offer the revised course in 2013-14. • Advancing Course Redesign. Campuses will compete for funds to redesign 22 existing courses that are high-demand and have high failure rates systemwide. Redesigned courses will be piloted beginning in spring 2014. Successful approaches will be expanded and disseminated in future faculty institutes. • Implementing Student Success Programs. The goal of this component is to improve overall student success and graduation rates and reduce disparities in these rates between under- represented students and other students. Campuses will compete for grants to implement various student success strategies such as developing or expanding summer bridge programs, freshman seminars and learning communities, writing-intensive courses, and undergraduate research opportunities. • Using Technology to Improve Student Advising. Campuses will compete for funds to implement automated degree audits, e-advising, and other planning tools for students. www.lao.ca.gov Legislative Analyst’s Office 33 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN California Dream Act and are working to implementation. The budget package creates a implement expanded aid eligibility. At least mechanism for CSAC to provide assistance to one state (Minnesota) has requested technical other states and recover the costs of doing so by assistance from CSAC for its initial Dream Act charging fees for services. HEALTH The spending plan provides $20.7 billion ACA—also known as federal health care reform. from the General Fund for health programs. This Below, we describe some of the major ACA-related is an increase of $1.2 billion, or about 6 percent, changes with significant effects on the state’s compared to the revised 2012-13 spending level, spending plan. as shown in Figure 9. The net increase reflects Expands Medi‑Cal Eligibility to Include both increases in caseload and utilization of Adults Up to 133 Percent of the Federal Poverty services, implementation of the Patient Protection Level (FPL). Beginning January 1, 2014, the ACA and Affordable Care Act (ACA), also known as gives the state the option to expand Medi-Cal federal health care reform, and other health care eligibility to include over one million adults with initiatives. The major program-specific changes are incomes up to 133 percent of the FPL who are summarized in Figure 10 and discussed in more currently ineligible—also known as the optional detail below. Medi-Cal expansion. (The FPL is currently $23,550 in annual income for a family of four.) For three Affordable Care Act years, the federal government will pay 100 percent The spending plan includes several significant of the costs of health care services provided to the changes associated with implementation of the newly eligible population. Beginning January 1, Figure 9 Major Health Programs and Departments—Spending Trends General Fund (Dollars in Millions) Change From 2012‑13 to 2013‑14 2011‑12 2012‑13 2013‑14 Amount Percent Medi-Cal—local assistance $15,156 $14,928 $16,094 $1,166 7.8% Department of Developmental Services 2,563 2,677 2,802 125 4.7 Department of State Hospitals — 1,351 1,453 102 7.5 Department of Mental Health 1,329a — — — — Healthy Families Program—local assistance 271 163 20 -143 -87.7 Department of Public Health 125 131 114 -17 -13.0 Department of Alcohol and Drug Programs 37 34 — -34 — Other Department of Health Care Services programs 59 96 93 -3 -3.1 Emergency Medical Services Authority 7 7 7 — — All other health programs (including state support) 76 161 165 4 2.5 Totals $19,623 $19,548 $20,748 $1,200 6.1% a Includes almost $1.3 billion for support of state hospitals. 34 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE 2017, the federal share of costs associated with offered to Medi-Cal beneficiaries, with a couple of the expansion will be decreased over a three-year exceptions. period until the state pays for 10 percent of the • Long-Term Services and Supports (LTSS) expansion and the federal government pays the will generally be an excluded benefit. remaining 90 percent. However, the state will seek federal Enacted legislation adopts the optional approval to provide LTSS to newly eligible Medi-Cal expansion and the budget assumes beneficiaries who are able to demonstrate roughly $1.7 billion in federal funds will be used that they have limited financial assets— to provide health coverage to the newly eligible also known as an asset test. population in 2013-14. The state will provide a set of benefits to the newly eligible population • Some mental health and substance use that largely mirrors the benefit package currently disorder services that are not currently covered under Medi-Cal managed care (but Figure 10 Major Changes—State Health Programs 2013‑14 General Fund Effect (In Millions) Program Amount Medi‑Cal—Department of Health Care Services (DHCS) Implements Coordinated Care Initiative $21 Restores some, but not all, adult dental services 17 Lifts restriction on enteral nutrition benefit 2 Assumes savings from hospital fee extension -310 Imposes a tax on Medi-Cal managed care organizationsa -340 Medi‑Cal—DHCS Patient Protection and Affordable Care Act Implementation Expands Medi-Cal eligibility to include adults up to 133 percent of federal poverty levelb — Assumes costs from increased enrollment from currently eligible populations $104 Provides funding for county administration costs 87 Enhances mental health and substance use disorder services 67 Receives additional federal funding for preventative services -8 Shifts certain Medi-Cal enrollees to Covered California -29 Changes to 1991 Health Realignment Redirects 1991 Health Realignment Funds to offset state General Fund costs -$300 Department of Developmental Services Sunsets regional center and provider payment reduction $32 Addresses decertification of residential units at Sonoma Developmental Center 19 Regional centers will cover managed care copayments and coinsurance 10 Eliminates sunset for annual family program fee -4 Department of State Hospitals Funds California Health Care Facility Stockton startup costs $101 Continues to install personal duress alarm system 17 Activates new state hospital units 16 Investment in Mental Health Wellness Improves the state’s mental health infrastructurec $143 a A 2012-13 tax, to be applied retroactively, is expected to generate an additional $166 million in General Fund savings. b Budget includes $1.7 billion in federal funds associated with providing health coverage to the expansion population. c General Fund spending is one time for grants. www.lao.ca.gov Legislative Analyst’s Office 35 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN that will be covered effective January 1, • Eliminating the asset test for certain 2014, as described below) will be included populations. as benefits. These services are those that • Eliminating semiannual reporting are included in the state’s essential health requirements. benefits (EHB) package contained in plans sold on Covered California (California’s • Creating a new annual redetermination Health Benefit Exchange). process that reduces the amount of Enacted legislation makes ongoing information that must be provided by implementation of the optional expansion beneficiaries and, instead, relies on contingent on minimum level of federal financial available electronic data. support. If the federal government reduces the These changes will likely increase the federal matching rate for the expansion population number of currently eligible persons who enroll to 70 percent or less prior to January 1, 2018, the in Medi-Cal. In addition to these changes, other optional Medi-Cal expansion will be terminated aspects of the ACA—such as the penalties for within 12 months. individuals without health coverage (also known Enhances Mental Health and Substance as the individual mandate) and enhanced outreach Use Disorder Services for Currently Eligible activities—are expected to encourage greater Populations. The budget includes $67 million enrollment from currently eligible, but unenrolled, General Fund to provide enhanced mental health populations. Unlike health care services provided and substance use disorder services to currently to the optional expansion population, the state eligible Medi-Cal enrollees beginning January 1, will generally be responsible for 50 percent of the 2014. Currently eligible populations will be provided costs for services provided to individuals who mental health and substance use disorder services would have been eligible under current Medi-Cal contained in the state’s EHB package, thereby eligibility standards. making the level of mental health and substance use Provides Funding for County Administration disorder services consistent across currently eligible Costs Related to the ACA. The budget includes and newly eligible Medi-Cal populations. $87.3 million General Fund to pay for county Assumes Costs From Increased Enrollment administration workload associated with From Currently Eligible Populations. The implementing various provisions of the ACA, spending plan assumes an additional $104 million including processing applications and eligibility in General Fund costs in 2013-14 largely associated redeterminations for newly enrolled populations with providing health coverage to additional and training eligibility workers. (This amount currently eligible persons expected to enroll in includes a $15.4 million General Fund COLA Medi-Cal under the ACA. The ACA and state for Medi-Cal county administration.) The legislation enacted during a special session contain budget also provides authority to spend an several provisions that are expected to simplify and additional $32.7 million General Fund (up to a streamline the Medi-Cal eligibility and enrollment combined $120 million General Fund) for county process, including: administration activities needed to implement the • Requiring greater use of electronic data to ACA in 2013-14. verify eligibility. 36 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE Makes Changes Needed to Receive Additional offered through Covered California. The state will Federal Funding for Preventative Services. The cover all beneficiary out-of-pocket expenditures— budget assumes $7.5 million General Fund savings such as premiums and copayments—as well as any from a higher federal matching rate for preventative benefits that otherwise would have been covered services authorized under the ACA. Effective in Medi-Cal, but that are not provided through January 1, 2013, the ACA established a 1 percentage Covered California plans. point increase in the federal matching rate for Provides Funding for Other State Administrative preventative services and adult vaccines in states Costs. The budget includes $9.5 million General that meet certain requirements. In order to qualify Fund for state administrative costs associated with for the increase, a state must cover all preventative the ACA, including IT consultant services, IT services assigned a grade A or B by the United system modifications, and managed care plan rate States Preventative Services Task Force and all development. The budget also makes permanent or approved vaccines recommended by the Advisory extends 21 limited-term positions ($893,000 General Committee on Immunization Practices. Also, Fund) within the Department of Health Care Services states may not impose beneficiary cost-sharing on (DHCS) to perform various administrative activities such services. Medi-Cal currently covers all of the related to the ACA. qualifying preventative services and vaccines and The California Health Benefit budget-related legislation specifies that Medi-Cal Exchange (Covered California) will not impose beneficiary cost-sharing for these services. The California Healthcare Eligibility, Shifts Certain Medi‑Cal Enrollees to Covered Enrollment, and Retention System (CalHEERS) California. The budget assumes $29.1 million in Project. The spending plan includes $119.2 million net General Fund savings associated with shifting (primarily federal funds) for the development, the following populations from Medi-Cal to implementation, maintenance, and operation Covered California beginning January 1, 2014. phases of the CalHEERS Project. The ACA establishes Health Benefit Exchanges through • Newly Qualified Aliens. The budget which individuals and small businesses will includes $2.7 million in General Fund be able to purchase health coverage. Covered savings from shifting certain qualified California, jointly with DHCS, sponsored the aliens who have been in the country for CalHEERS Project to meet the requirements of the less than five years, also known as newly ACA. Specifically, the CalHEERS Project builds qualified aliens. a web-based portal designed to allow individuals • Certain Pregnant Women. The budget and small businesses to research, compare, check assumes $26.4 million in General Fund their eligibility for, and purchase health coverage. savings from shifting pregnant women The CalHEERS must be operational by the federal with incomes from 100 percent to deadline of January 1, 2014 to meet the goals and 200 percent of the FPL. (At the time of this requirements of the ACA. This implementation date report, legislation that would authorize requires an aggressive schedule, which increases such a shift has not been enacted.) the risk of missing deadlines and successfully completing the project. Consequently, CalHEERS Individuals will be shifted only if they are functionality was prioritized so that federally eligible for federally subsidized coverage from plans www.lao.ca.gov Legislative Analyst’s Office 37 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN mandated functionality is available by designated be redirected to help pay CalWORKs grant costs deadlines, while additional functionality, such as in each county. It is important to note that this integration of CalHEERS with human services approach does not fundamentally increase county programs, is scheduled for later. financial responsibility for supporting CalWORKs or change the authority or programmatic Changes to 1991 Health Realignment responsibility for CalWORKs. Rather, it simply Currently, counties have the fiscal and requires that any redirected health realignment programmatic responsibility for providing health funds be used for the purposes of paying care for low-income populations without health CalWORKs grants, thereby offsetting state General coverage—also known as indigent health care. Fund costs. As part of 1991 realignment, the state provided a Amount of Redirected Health Realignment dedicated funding stream to counties for indigent Funds Will Be Determined by County‑Specific health care and public health—hereafter referred Methods and Decisions. As shown in Figure 11, to as health realignment funds. In addition, 1991 the manner in which counties currently deliver realignment required counties to meet MOE indigent health services varies from county to requirements by spending a specified amount of county. In recognition of the significant differences county general purpose revenues on indigent health among counties and the Legislature’s interest care and public health programs. in protecting the county health care safety net, Medi‑Cal Expansion Is Expected to Reduce the budget establishes a complex structure to County Indigent Responsibilities. Counties determine the amount of redirected health are likely to experience significant savings realignment funds. The methods used to determine in their indigent health care programs with the redirected amount differ among counties and the implementation of the optional Medi-Cal many counties will have the option to choose expansion. The optional Medi-Cal expansion shifts between two different approaches. We discuss these much of the responsibility for indigent health care county-specific methods and choices in more detail to the state. This shift of responsibility will reduce below. the need for county expenditures on indigent Provider Counties Given Option to Choose health care and eventually create new state costs Method for Determining the Redirected Amount. as the enhanced federal matching rate for the For each of the 12 provider counties, the budget expansion population is phased down in future establishes two options for determining the amount years as described earlier in this report. of county savings available for redirection. The first Budget Establishes a Structure for Redirecting option, the “60 percent option,” redirects 60 percent Some Health Realignment Funds to Offset State of the sum of: (1) the 1991 health realignment funds General Fund Costs. In recognition of the shifting that would have otherwise been allocated to the responsibilities for indigent health care under county and (2) the 1991 health MOE in the county. the optional Medi-Cal expansion, the budget The second option consists of a “shared savings” establishes a structure under which a portion formula. The formula, which contains many of county health realignment dollars will be complex details, generally calculates total county redirected to benefit the state General Fund. To savings as the difference between the county’s generate state General Fund savings, the budget revenues and costs associated with providing requires that a portion of health realignment funds health care services (except for mental health and 38 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE Figure 11 County Systems for Delivery of Indigent Health Care Vary Widely Del Norte Siskiyou Modoc CMSP Provider Shasta Lassen Humboldt Trinity Payer Hybrid Tehama Plumas Glenn Butte Sierra Mendocino Nevada Lake Colusa Yuba Placer Sutter Yolo El Dorado Sonoma Alpine Napa Sacramento Amador Solano Calaveras Marin San Tuolumne C C o o n st t a ra Joaquin Mono San Francisco Alameda Stanislaus Mariposa Santa San Mateo Clara Merced Madera Santa Cruz San Fresno Inyo Benito Monterey Tulare Kings San Luis Obispo Kern San Bernardino Santa Barbara Ventura Los Angeles CMSP Counties (34) A group of rural and/or small counties that contract with a third-party administrator (currently Anthem Blue Cross) that pays Riverside Orange for medical care for medically indigent persons in participating counties. Provider Counties (12) Counties that own and operate inpatient hospitals and clinics that provide care San Diego Imperial to essentially all individuals, whether or not they have health coverage. Payer Counties (6) Counties that pay for medically indigent care services through contracts with private or University of California hospitals, community clinics, and/or private physicians. Hybrid Counties (6) Counties that do not operate a hospital, but that operate outpatient clinics that provide care to low-income populations. Hybrid counties also have contracts with hospitals and, in some cases, other community clinics and/or private physicians. CMSP = County Medical Services Program. ARTWORwwKw#.1la3o.0c4a.1go2v Legislative Analyst’s Office 39 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN substance use disorder services) to Medi-Cal and Seventy percent of the county savings estimated uninsured patients. Below, we briefly describe these under the shared savings formula would be two main components of the formula. redirected to generate state General Fund savings in 2013-14 and 80 percent would be redirected • Revenues. For each fiscal year, the formula each year thereafter—subject to a cap that is incorporates most federal, state, and based on the historical proportion of 1991 health private payments associated with Medi-Cal realignment funds that were being used to fund and uninsured patients (including direct indigent health programs. payments for services and supplemental CMSP Counties Redirect a Predetermined payments such as Disproportionate Share Percentage of 1991 Health Realignment Funds. Hospital payments). Revenues under Unlike the other counties, County Medical Service the formula also include each county’s Program (CMSP) counties do not have the option historical use of 1991 health realignment to use the shared savings formula to determine funds and county general purpose funds the redirected amount. The amount of health for indigent health care, trended forward to realignment funds redirected from CMSP and its the current fiscal year. participating counties will be 60 percent of the • Costs. For each fiscal year, the formula sum of: (1) the 1991 health realignment funds incorporates certain operating costs that would have otherwise been allocated to those incurred by county hospitals and clinics counties, (2) the health MOE in those counties, for providing services to Medi-Cal and and (3) the amount that would otherwise have been uninsured patients, up to a specified cap allocated directly to CMSP. based on spending levels in prior years. Total Amount Redirected in 2013‑14 Will Not Costs under the formula include only Exceed $300 Million. The budget assumes that 50 percent of any operating costs above this the total amount redirected from county health cap. programs—and the associated General Fund savings—will be $300 million in 2013-14. The The formula defines the amount of county portion of the $300 million that will be redirected savings available for redirection as the lesser of from each county will be based on a schedule (1) 80 percent of total county savings as calculated determined by DOF, in consultation with the by the formula or (2) the county’s historical use of California State Association of Counties. In May 1991 health realignment funds for indigent health 2014, if DHCS estimates that an individual county’s care, trended forward to the current fiscal year. shared savings is less than the amount that was Hybrid and Payer Counties Also Given Option initially scheduled, then the redirected amount will to Choose Method for Determining Redirected be adjusted downward to reflect the updated shared Amount. Similar to the provider counties, hybrid savings estimate. Shared savings estimates will be counties and payer counties also will have the reconciled with actual county savings within two option to redirect funds under the 60 percent years of the close of a fiscal year, as described in option or a variation of the shared savings formula. more detail below. Generally, the shared savings formula for hybrid Creates County “True‑Up” Process Used to and payer counties attempts to calculate the Reconcile Estimated Savings With Actual Savings. difference between historic county indigent health Beginning in 2014-15, in counties that elect the revenues and ongoing county indigent health costs. 40 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE shared savings formula, the amount that is initially for seniors and persons with disabilities who redirected each fiscal year will be based on savings are enrolled in both programs—known as estimates provided by DHCS. Within two years of “dual eligibles”—under the same managed care the end of each fiscal year, counties must submit plans (hereinafter referred to as “demonstration documentation of county revenues and expenses plans”)—this duals demonstration component of that will be used to calculate actual county savings CCI is known as Cal MediConnect; (2) requiring and adjust the redirected amount accordingly. mandatory enrollment of dual eligibles into demonstration plans for their Medi-Cal benefits DHCS—Medi-Cal (dual eligibles are passively enrolled into these The spending plan provides $16.1 billion from plans for Medicare benefits, meaning they the General Fund for Medi-Cal local assistance will be enrolled unless they actively opt out); expenditures administered by DHCS. This is an and (3) shifting Medi-Cal LTSS—including increase of $1.2 billion, or 7.8 percent, in General In-Home Supportive Service (IHSS)—to managed Fund support for Medi-Cal local assistance care benefits available exclusively through compared to the revised prior-year spending level. demonstration plans. For a brief overview of the Spending in 2012-13 was about $483 million greater CCI implementation plan assumed under the than the amount appropriated in the 2012-13 2012‑13 Budget Act, please see our October 2012 budget. Some of the major factors that contributed report The 2012‑13 Budget: California Spending to the higher-than-expected 2012-13 spending Plan. For general background on CCI, please see levels in the Medi-Cal Program were: (1) legal our February 2013 report The 2013‑14 Budget: challenges prevented $300 million in General Coordinated Care Initiative Update. Fund savings from reducing certain Medi-Cal In March 2013, the administration announced provider payments up to 10 percent, (2) failure to the signing of a memorandum of understanding obtain federal approval for changes to payments (MOU) with the federal Centers for Medicare to non-designated public hospitals prevented and Medicaid Services (CMS) to implement Cal $94 million in General Fund savings, and (3) failure MediConnect. The administration also announced to obtain federal approval for a seven-visit limit on that CCI enrollment would begin no sooner physician and clinic visits prevented $19 million in than January 1, 2014. Major differences between General Fund savings. the terms and conditions of the MOU and the Differences in Medi-Cal spending between implementation plan assumed under the 2012-13 2012-13 and 2013-14 are in large part the result of spending plan include: underlying cost drivers in the program, such as • No Medicare Shared Savings. The MOU changes to caseload and utilization of services. We does not allow the state to share any discuss the major policy-driven spending changes savings resulting from Cal MediConnect that were adopted as part of the 2013-14 Medi-Cal that would otherwise accrue to Medicare. Program budget below. Compared to the Governor’s January Coordinated Care Initiative (CCI) budget proposal for 2013-14, which Implementation. The 2012-13 budget package assumed $63 million in Medicare shared authorized CCI as an eight-county demonstration savings in 2013-14 and $253 million project consisting of three main components: annually under full CCI implementation, (1) integrating Medi-Cal and Medicare benefits the spending plan assumes none. www.lao.ca.gov Legislative Analyst’s Office 41 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN • No Six‑Month Stable Enrollment. The • Modified “Poison Pill” Provision. The MOU does not require dual eligibles to legislation modifies criteria for the state to remain in demonstration plans for their proceed with CCI implementation. Under Medicare benefits for six months before these changes, the Director of Finance they may opt out. Instead, dual eligibles will provide a net fiscal estimate of CCI may elect to opt out of the Medicare by (1) 30 days prior to the planned start portion of the demonstration plans on a date for enrollment into Cal MediConnect, month-by-month basis. and (2) January 10 of each fiscal year thereafter. This estimate will compare • Passive Enrollment Capped for Los General Fund costs under CCI to assumed Angeles County. The MOU caps baseline costs if CCI were not operative. passive enrollment of dual eligibles into The legislation also requires the fiscal demonstration plans for their Medicare estimate to incorporate General Fund benefits at 200,000 for Los Angeles savings from imposing a 3.9 percent County. This brings total estimated managed care organization (MCO) tax enrollment in Cal MediConnect (under full on Medi-Cal managed care plans. If the implementation in the eight pilot counties) Director of Finance’s fiscal estimate does to approximately 456,000. not project net General Fund savings The spending plan assumes a net General Fund from CCI implementation, all three cost of $21 million related to the first six months major components of CCI would become of CCI implementation beginning January 1, 2014. inoperative. For IHSS, collective bargaining (The Governor’s January budget proposal for 2013-14 at the state level and the existing county assumed savings of $171 million General Fund.) MOE for IHSS program costs would both Once fully implemented in 2016-17, CCI is expected become inoperative. to save $141 million General Fund annually. Assumes Savings From Hospital Fee Extension. As part of the budget package, the Legislature The budget package includes $310 million in enacted statutory changes to CCI partly to comply savings during the last six months of 2013-14 from with the MOU with the federal government. These extending the existing hospital quality assurance changes include: fee. The state currently assesses this fee on private • Delinked Implementation of Three CCI hospitals and uses most of the proceeds to draw Components. Under budget-related down federal matching funds to increase Medi-Cal legislation, mandatory enrollment of dual payments to private hospitals. The state also retains eligibles into Medi-Cal managed care and a portion of the fee revenue to offset General Fund the shift of LTSS to managed care benefits costs for children’s health coverage. are not required to occur simultaneously Lifts Restriction on Enteral Nutrition Benefit. with Cal MediConnect in the eight pilot Beginning in May 2014, the spending plan assumes counties. However, at least one of these partial-year costs of $1.7 million General Fund three components must proceed in a from restoring orally consumed enteral nutrition county before IHSS collective bargaining products that were eliminated as a Medi-Cal benefit responsibilities in that county can (with exceptions for individuals with certain transition to the state level. 42 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE diagnoses) as part of the 2011-12 budget package. Department of Developmental Services (DDS) The estimated full-year cost to restore this benefit is Under the budget plan, General Fund spending roughly $14 million General Fund. for DDS will increase from $2.7 billion in 2012-13 Restores Some Adult Dental Services That to $2.8 billion in 2013-14, or 4.7 percent. The net Were Eliminated in 2009. The spending plan year-over-year increase in General Fund support is assumes partial-year costs of $17 million General partly due to increases in caseload and utilization Fund from restoring certain adult dental services of services and partly due to other factors. Below, that were eliminated as a Medi-Cal benefit in 2009. we discuss the most significant spending changes Beginning in May 2014, Medi-Cal will restore that were adopted in the DDS budget. coverage for a portion of the previously eliminated Sunsets Regional Center (RC) and Provider adult dental services, including preventative and Payment Reduction. The budget provides an diagnostic services, services needed to restore increase of $32 million General Fund to reflect the damaged teeth, and full mouth dentures. These June 30, 2013 sunset of a 1.25 percent reduction to services will be available for currently eligible RC operations and the rates paid to community- adult populations, as well as individuals who based providers of services. become newly eligible under the optional Medi-Cal RCs Will Cover Managed Care Copayments expansion beginning in 2014 (discussed in more and Coinsurance. The budget provides almost detail earlier). Other dental services, such as $10 million General Fund in 2013-14 to support implants, will continue to be excluded benefits for payments by RCs of health insurance copayments adults in Medi-Cal. The estimated full-year cost and coinsurance for services identified as necessary of partially restoring adult dental services is about in a consumer’s individual program plan. $85 million General Fund. Eliminates Sunset for Annual Family Program Imposes a Tax on Medi‑Cal MCOs. The Fee (AFPF). The budget plan assumes almost spending plan assumes roughly $506 million in $4 million in General Fund savings by eliminating reduced General Fund spending from establishing the June 30, 2013 sunset date for the AFPF. This fee two separate taxes on Medi-Cal MCOs. The state’s is generally paid by families with adjusted gross gross premium tax rate of 2.35 percent will be family incomes at or above 400 percent of the FPL. applied retroactively to premium revenues collected Addresses Decertification of Residential during 2012-13 and a tax rate of 3.9 percent (equal Units at Sonoma Developmental Center (DC). to the current state sales tax rate) will be applied The budget provides a total of almost $19 million to premium revenues collected from July 1, 2013 General Fund in 2013-14 to fund ongoing through June 30, 2016. The revenue from these taxes operations and address deficiencies at Sonoma DC. will be matched with federal Medicaid funds and In January 2013, the Department of Public Health will be used to: (1) increase Medi-Cal managed care (DPH) announced that it was taking significant capitated rates by an amount that offsets the tax actions action to protect Sonoma DC residents due paid by MCOs and (2) fund state health programs. to deficient practices at the DC that have harmed The 2012-13 tax is estimated to offset General some residents. (The DPH licenses health facilities Fund spending by $166 million—primarily in the and certifies them on behalf of CMS—facilities Healthy Families Program (HFP). The 2013-14 tax must be certified to receive federal Medicaid is estimated to offset General Fund spending by funding.) $340 million in the Medi-Cal Program. www.lao.ca.gov Legislative Analyst’s Office 43 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Backfills Federal Sequester. The spending PDAS is one of the major safety initiatives being plan includes an increase of roughly $12 million implemented at the state hospitals, with each staff General Fund in 2013-14 to backfill federal person wearing a personal alarm. sequestration reductions to federal grants that are Investment in Mental Health used to partially fund RC purchase of services for Wellness—Infrastructure Grants consumers. The budget plan includes a total of Department of State Hospitals (DSH) $206 million ($143 million General Fund) Under the budget plan, General Fund spending to make improvements to the state’s mental for DSH will increase from about $1.4 billion in health infrastructure. The responsibility for the 2012-13 to $1.5 billion in 2013-14 (7.5 percent). administration of this initiative is placed in three The net year-over-year increase in General Fund state agencies: the California Health Facilities support is due to several factors, including the Financing Authority (CHFFA), the Mental Health startup of the new California Health Care Facility Services Oversight and Accountability Commission (CHCF) in Stockton and the activation of new units (MHSOAC), and the Office of Statewide Health within the state hospitals. Planning and Development (OSHPD). The CHCF Startup. The budget plan includes initiative includes a total of $500,000 in one-time almost $101 million General Fund for the ongoing Proposition 63 Mental Health Services Act (MHSA) activation of 514 beds within the new CHCF funds to cover state administrative costs of the in Stockton. The total includes $68 million initiative. for additional staff in 2013-14 to complete the CHFFA. The budget includes almost activation and $33 million to recognize the $143 million in one-time General Fund spending full-year costs of positions approved in the 2012‑13 and $6.8 million in other funds to build capacity Budget Act. The CHCF is operated by the California for mental health treatment services. The CHFFA Department of Corrections and Rehabilitation will administer the following: (CDCR). However, DSH staff will provide mental • $125 million General Fund for grants to health services at the facility. expand capacity by at least 2,000 crisis Activates New State Hospital Units. The stabilization and residential treatment beds budget includes $16 million General Fund to fund over the next two years. the activation of four new units at three state hospitals. (The new units have between 35 and 50 • $15 million General Fund for grants to beds each.) In addition, DSH will convert one unit expand crisis stabilization units that from treating mentally disordered offenders to provide expedited services lasting less than treating persons found incompetent to stand trial. 24 hours to mentally ill persons that have Continues to Install Personal Duress Alarm an urgent condition requiring immediate System (PDAS). The budget includes about attention. $17 million General Fund to continue to install • $2.5 million General Fund and $6.8 million and support the operation of a new PDAS at state other funds ($4 million MHSA funds and hospitals. The state hospitals have experienced a $2.8 million federal funds) for grants to substantial increase in violence in recent years fund mobile crisis teams that can provide as the forensic population has increased. The 44 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE crisis intervention, family support, and and made the ultimate placement of DADP’s certain types of evaluations. programmatic and administrative functions contingent upon enactment of the 2013‑14 Budget MHSOAC. The budget includes $54 million in Act and implementing legislation. ongoing funding ($32 million MHSA funds and The budget shifts almost $314 million $22 million federal funds) for the MHSOAC to in all funds ($34 million General Fund) and provide funding for 600 triage personnel in select 225.5 positions from DADP to DHCS to reflect rural, urban, and suburban areas. The budget also the shift of the following programs and functions: includes $400,000 in one-time MHSA funds for the (1) federal grants administration, (2) licensing MHSOAC to develop consensus guidelines and best activities, (3) Driving Under the Influence practices for involuntary commitment care and Program, (4) narcotic treatment programs, and provide applicable training. (5) parolee services programs. The budget also OSHPD. The budget includes $2 million in shifts $3.7 million (all funds) and four positions ongoing MHSA funds for OSHPD to provide peer from DADP to DPH to reflect the transfer of the support training in the areas of crisis management, Office of Problem Gambling. The budget assumes suicide prevention, recovery planning, and targeted that the year-over-year net fiscal effect of the shift case management. of DADP’s functions, programs, and positions is Department Eliminations, Program neutral. Shifts, and Other Transfers Continues to Shift Children Enrolled in HFP to Medi‑Cal. As part of the 2012-13 budget plan, The budget plan completes the elimination the Governor proposed shifting all enrollees in of the Department of Alcohol and Drug HFP—administered by the Managed Risk Medical Programs (DADP), shifts some programs from Insurance Board—to Medi-Cal—administered one department to another, and transfers state- by DHCS—over a nine-month period beginning level administration of some functions between in October 2012. In response, the Legislature departments. We discuss these organizational enacted Chapter 28, Statutes of 2012 (AB 1494, changes below. Committee on Budget), to implement a modified Eliminates DADP. As part of its 2011-12 budget version of the Governor’s proposal to shift all HFP proposal, the administration stated its intent to enrollees into Medi-Cal (hereinafter referred to as eventually eliminate DADP. State-level oversight the “transition”). The Legislature’s plan delayed the of the Drug Medi-Cal program was shifted from start of the transition to January 2013, included DADP to DHCS effective July 1, 2012, and budget direction on how the transition is to be conducted, legislation transferred other administrative and provided for legislative oversight. Beginning and programmatic functions of DADP to January 1, 2013, the transition started to take place unspecified departments within the California in four phases throughout 2013. Phases one and Health and Human Services Agency (HHSA) two are underway and include more than 600,000 effective July 1, 2013. The legislation required that children. Phase three is scheduled to begin no HHSA, in consultation with stakeholders and sooner than August 1, 2013 and includes about affected departments, submit a detailed plan for 135,000 children. Phase four is scheduled to begin the reorganization of DADP’s functions to the no earlier than September 1, 2013 and includes Legislature as part of the 2013‑14 Governor’s Budget about 43,000 children. www.lao.ca.gov Legislative Analyst’s Office 45 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Shifts Access for Infants and Mothers whose mothers have incomes up to 250 percent of (AIM)‑Linked Infants to DHCS. Children born the FPL are scheduled to transition to Medi-Cal to women in the AIM program, which covers as part of the shift of HFP to Medi-Cal. The families whose incomes are up to 300 percent of budget plan transfers the remaining AIM-linked the FPL, are eligible for health, dental, and vision infants between 250 percent and 300 percent of services for two years. The AIM-linked infants the FPL to DHCS. HUMAN SERVICES Overview of Total Spending. The spending expenditures for human services programs in plan provides $7.3 billion from the General Fund 2013-14, reflecting a number of policy changes and for human services programs. This is a decrease other adjustments resulting in General Fund costs, of $118 million, or 1.6 percent, compared to the mainly in the CalWORKs program. revised prior-year spending level, as shown in Summary of Major Changes. Figure 13 shows Figure 12. This net decrease largely reflects a the major General Fund changes in the 2013‑14 decrease in the General Fund support for the Budget Act for human services programs. Most of CalWORKs program due to the shifting of the budget changes were in the CalWORKs and $562 million of costs from the General Fund to IHSS programs. Absent the changes shown in the other fund sources (1991 realignment revenues and figure, General Fund spending for human services federal funds) without a corresponding reduction programs in 2013-14 would have been almost in program levels. If not for these funding shifts, $200 million lower. Below, we discuss the major there would be a net increase in General Fund changes in each program area. Figure 12 Major Human Services Programs and Departments—Spending Trends General Fund (Dollars in Millions) Change From 2012-13 to 2013-14 2011-12 2012-13 2013-14 Amount Percent SSI/SSP $2,721.6 $2,752.8 $2,787.0 $34.1 1.2% CalWORKs 1,156.9 1,521.4a 1,194.9b -326.5 -21.5 In-Home Supportive Services 1,725.9 1,792.9 1,874.9 81.9 4.6 County Administration/Automation 569.4 684.4 742.5 58.1 8.5 Department of Child Support Services 306.6 306.8 312.6 5.8 1.9 Department of Rehabilitation 54.5 55.3 56.6 1.3 2.4 Department of Aging 31.8 32.1 32.2 0.1 0.4 All other social services (including state support) 232.2 240.2 267.6 27.4 11.4 Totals $6,798.9 $7,385.9 $7,268.2 -$117.7 -1.6% a Reflects the impact of a funding swap between CalWORKs and the California Student Aid Commission (CSAC), which increased General Fund expenditures in CalWORKs by $804 million. b Reflects the impact of (1) an estimated $300 million shift of CalWORKs General Fund costs to counties in connection with the Medi-Cal expansion and (2) the continuation of a funding swap between CalWORKs and CSAC, which increases General Fund expenditures in CalWORKs by $542 million above what they would have been without the transfer. The year-over-year reduction in the size of this transfer results in a year-over-year decrease in General Fund support for CalWORKs of $262 million. 46 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE CalWORKs Figure 13 The budget provides Major Changes—Human Services Programs $1.2 billion from the 2013‑14 General Fund Effect (In Millions) General Fund ($5.5 billion Program Amount total funds) in support CalWORKs of the CalWORKs 5 percent grant increase —a program. This is roughly Updated employment services budgeting methodology $142.8 Funding for early engagement strategies 48.3 $240 million (all funds) In‑Home Supportive Services more than would have 8 percent across-the-board reduction in service hours -175.0 been spent absent the Repeal of 20 percent across-the-board reduction in service hours 180.0 policy changes discussed Total $196.1 a This grant increase is to be funded with redirected 1991 realignment revenues (at an estimated partial- below. The General year cost of $50.8 million). In the event that redirected funds dedicated to supporting the increase are Fund amount for less than estimated, the General Fund would make up the shortfall. CalWORKs reflects an approximately $30 of additional cash assistance per estimated $300 million month for a family of three with no income. This shift of CalWORKs General Fund responsibility increase will be partially offset by a corresponding to counties in connection with the Medi-Cal decrease in food assistance through the CalFresh expansion (for more information, see the “Health” program. For background on 1991 realignment section earlier in this report). In addition, the and a discussion of these changes, see the box on 2013-14 spending plan partially reverses a 2012-13 page 49. funding swap between CSAC and CalWORKs that The new statutory mechanism requires that decreased federal funding for CalWORKs and DOF regularly perform certain calculations to increased the amount of General Fund provided determine the level of grant increase, if any, to to CalWORKs by a like amount, with no net be provided each year. Each January and May, effect overall on total CalWORKs expenditures or in connection with the release of the Governor’s General Fund spending. The smaller swap results in budget and May Revision, DOF will estimate a year‑over‑year decrease in General Fund support (1) the amount of redirected realignment revenues for CalWORKs ($262 million) and a like increase in available to support grant increases and (2) the federal funding for the program. cumulative cost of all grant increases previously New Grant Increase Mechanism Funded provided under the new mechanism. If the available With Redirected Realignment Revenues. Budget funds exceed the cost of previous grant increases, legislation creates a new statutory mechanism to DOF will calculate the percentage increase in redirect the growth in certain 1991 realignment CalWORKs grants that can be supported on an revenues to offset the General Fund costs of ongoing basis by these excess funds. Such an providing future CalWORKs grant increases. The increase would take effect the following October. If, budget package begins this process by providing on the other hand, no excess funds are estimated a 5 percent grant increase, effective March 2014, to be available, no additional grant increase will be at an estimated partial-year cost of $50.9 million. provided. In the event that redirected realignment The estimated full-year cost of this increase revenues are estimated to be insufficient to cover is $150 million. As displayed in Figure 14 (see the costs of previous grant increases, the previous next page), the increase is estimated to result in www.lao.ca.gov Legislative Analyst’s Office 47 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Figure 14 Monthly CalWORKs Grant and CalFresh Benefitsa Change February 2014 March 2014b Amount Percent High‑Cost Counties Grant $638 $670 $32 5% CalFresh benefit 494 485 -9 -2 Totals $1,132 $1,155 $23 2% Grant as percent of FPL 39% 41% Grant and CalFresh benefit as percent of FPL 70 71 Low‑Cost Counties Grant $608 $638 $30 5% CalFresh benefit 497 494 -3 -1 Totals $1,105 $1,132 $27 2% Grant as percent of FPL 37% 39% Grant and CalFresh benefit as percent of FPL 68 70 a For a family of three with no income. b The 2013-14 budget package provides for a 5 percent grant increase, effective March 2014. FPL = federal poverty level. increases will remain in effect and the shortfall methodology that ties back to average funding will be paid for out of the General Fund. In this levels used before these changes were made. scenario, no additional grant increases would Transitioning to this new methodology results be provided under the mechanism until the in additional ongoing General Fund costs of previous grant increases are fully supported by the $142.8 million. redirected funds. Early Engagement Strategies Adopted. The While the new mechanism will provide 2012-13 budget package made significant changes automatic grant increases to the extent that funding to the CalWORKs program that resulted, among is available from a dedicated revenue source outside other things, in increased flexibility in the state of the General Fund, the Legislature and Governor rules governing mandatory work participation retain the ability to make changes to CalWORKs and a new 24-month limit on adult eligibility for grant levels through the annual budget process that aid under these more flexible rules. The 2013-14 are separate from increases provided under the new budget package includes $48.3 million General mechanism. Costs and savings associated with such Fund (partial-year effect, with an estimated changes would accrue to the General Fund. full-year cost of $134 million) for three strategies Increased Employment Services Funding intended to help recipients more effectively engage From a Higher Budgeted Cost Per Case. with the CalWORKs program in light of the The methodology historically used to budget prior-year’s program changes. Specifically, the CalWORKs employment services became less budget provides the following spending increases reliable in recent years due to short-term changes from the General Fund: (1) $9.4 million to develop in work exemption policies that were intended and implement a new statewide welfare-to-work to achieve General Fund savings to mitigate the appraisal tool, (2) $10.8 million for counties to state’s recent budget problems. The budget plan provide enhanced services to certain CalWORKs addresses this issue by adopting a new cost-per-case families, and (3) $39.3 million to fund additional 48 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE subsidized employment positions (with offsetting other changes to state law that clarify how existing grant savings of $11.2 million). Budget legislation welfare-to-work processes will be modified to defines these strategies in statute and also makes accommodate the new strategies. 1991 Realignment Program Changes. In 1991, the state enacted a major change in the state and local government relationship, known as realignment. The 1991 realignment package: (1) transferred several programs from the state to the counties, including indigent health, public health, and mental health programs; (2) changed the way state and county costs are shared for certain social services and health programs termed the “Social Service Subaccount programs” (In-Home Supportive Services [IHSS], California Children’s Services, welfare-to-work programs, and child welfare programs); and (3) increased the sales tax and vehicle license fee and dedicated these increased revenues for the increased financial obligations of counties. Funding Allocations Laws. The original 1991 realignment allocated revenues to counties based on the amount of funding each county received from the state for the realigned programs just prior to realignment. State law specified, however, that future growth in these realignment revenues was to be allocated based on a separate set of formulas. Under these formulas, revenue growth is first used to fund prior-year increases in county costs for the Social Service Subaccount programs. Then, all remaining revenue growth—known as “General Growth”—was allocated to counties in proportion to their historical share of state funding for the realigned programs. 2012 Changes to IHSS. In 2012, as part of the Coordinated Care Initiative, the state made several major changes to IHSS, including the creation of a county maintenance-of-effort (MOE) requirement. Specifically, counties previously paid 17.5 percent of IHSS program costs, using 1991 realignment revenues for the vast majority of those costs. The county MOE established in 2012 replaced this 17.5 percent share of costs with a requirement that counties generally maintain their 2011-12 expenditure levels for IHSS beginning in 2012-13, to be adjusted annually by 3.5 percent beginning in 2014-15. Although the county MOE will continue to be funded from 1991 realignment revenues, county costs are expected to grow more slowly in future years under the MOE than under the prior funding arrangement because IHSS program costs have historically grown faster than the 3.5 percent annual adjustment. As less realignment revenue growth is needed to satisfy county IHSS costs, more revenue growth should be available for allocation as General Growth. 2013‑14 Budget Changes General Growth Allocation. Under prior law, the additional General Growth funds made available by the creation of the IHSS MOE would have been distributed across all 1991 realignment programs based on historical formulas. However, the budget package redirects a portion of these General Growth funds to pay for California Work Opportunity and Responsibility to Kids (CalWORKs) grant increases. Specifically, the share of General Growth allocated to county indigent health and public health programs will be cut by roughly two-thirds, while Social Services Subaccount programs will no longer receive General Growth allocations. These funds instead will be used to pay for future CalWORKs grant increases. www.lao.ca.gov Legislative Analyst’s Office 49 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Changes to Vehicle Asset Limit. Budget please see our Analysis of Settlement Agreement legislation also increases the limit on the value for In‑Home Supportive Services (IHSS) Lawsuits. of a vehicle that a family can own and qualify The repeal of these three previously enacted for CalWORKs assistance. Going forward, the reductions is estimated to result in General Fund limit will be automatically adjusted for inflation. costs of approximately $180 million in 2013-14. This change will result in increased costs as more (This estimate reflects the Governor’s January families qualify under the higher vehicle asset budget assumption that the 20 percent reduction limit, but the budget assumes that these costs will in authorized hours would have been implemented be fully offset by county administrative savings, for eight months in 2013-14.) This loss of General resulting in no net effect on program spending. Fund savings in 2013-14 is almost entirely offset by an alternative savings mechanism that is part of In-Home Supportive Services the settlement agreement and is discussed further The budget increases General Fund support for below. IHSS by $82 million (4.6 percent) in 2013-14 when One‑Time 8 Percent Across‑the‑Board compared to the revised 2012-13 level. The major Reduction in Authorized Hours. In accordance budgetary changes for IHSS relate to (1) enacting with the terms of the settlement agreement, and implementing the terms of an IHSS litigation the budget plan enacts an 8 percent across-the- settlement agreement and (2) enacting legislation board reduction in authorized hours for 2013-14. that makes changes to the conditions under which The 8 percent reduction is estimated to result IHSS may shift from a fee-for-service benefit to a in net General Fund savings of approximately managed care plan benefit in eight counties under $175 million in 2013-14. The repealed 20 percent CCI. Below, we describe the major changes to the reduction and the new 8 percent reduction yield IHSS program. almost the same level of savings in 2013-14 Repeals Three Enacted IHSS Reductions. primarily because (1) the 20 percent reduction The budget plan enacts the terms of a settlement was assumed to be implemented for only eight agreement reached between the state and plaintiffs months—versus 12 months of implementation for in March 2013, effectively settling two IHSS-related the 8 percent reduction—and (2) the 20 percent lawsuits. This settlement agreement provides for the reduction included a supplemental process to fully repeal of three previously enacted IHSS program or partially restore hours for certain recipients, reductions that had been legally challenged and while the 8 percent reduction does not. Because preliminarily enjoined by court orders. In their IHSS recipients experienced a 3.6 percent reduction place, the settlement agreement provides for a in authorized hours in 2012-13, they will experience compromise reduction plan intended to realize an additional 4.4 percentage point reduction in some General Fund savings while lessening the 2013-14. magnitude of IHSS program reductions. The three Ongoing 7 Percent Across‑the‑Board enacted-but-enjoined reductions repealed by the Reduction in Authorized Hours Beginning in budget plan include: (1) establishing a stricter 2014‑15. The budget plan also enacts an ongoing threshold of need to receive IHSS, (2) reducing 7 percent across-the-board reduction in authorized IHSS hours by 20 percent, and (3) reducing state hours beginning in 2014-15—another aspect of participation in IHSS provider wages and benefits. the IHSS settlement agreement. (In effect, IHSS (For further background on these three reductions, recipients will experience a 1 percentage point 50 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE restoration of authorized hours beginning July 1, Department of Social Services (DSS) and the 2014.) This ongoing across-the-board reduction is Office of Systems Integration (OSI), in consultation estimated to result in net General Fund savings of with stakeholders, to recommend an option for approximately $172 million in 2014-15. addressing the deficiencies. Intent to Implement Assessment on Home In their 2012 report to the Legislature, DSS and Care Services. Reflecting the terms of the OSI stated that it was neither technically feasible settlement agreement, the budget plan enacts intent nor cost-effective to maintain and upgrade the language specifying that the ongoing 7 percent existing system. Instead, they recommended its reduction will be fully or partially rescinded replacement using a “buy/build approach,” which if the costs are offset by General Fund savings would involve the purchase of an application (or resulting from an assessment on home care services a suite of applications) that is already available in (including home health care and IHSS). Additional the marketplace. Additional functionally would be legislation will be required to authorize this identified and built over time, so as to customize assessment on home care services. the system for California’s program needs. The The IHSS Program as a Managed Care Plan replacement system project is referred to as Benefit in Eight Counties. The 2012-13 budget CWS-NS. plan enacted a transition of IHSS to a managed The spending plan includes $9.8 million care plan benefit in the eight CCI counties. For a ($4.4 million General Fund) for planning and full discussion of the budgetary plan adopted in procurement activities associated with the 2013-14 for CCI, please refer to the CCI write-up CWS-NS. The resources are intended to provide under the “Health” section of this chapter. the necessary project management, fiscal, procurement and contracting, business analysis, County Welfare Automation Projects and technical expertise to support the development The Child Welfare Services‑New System of the CWS-NS project during the planning and (CWS‑NS) Project. The 2011‑12 Budget Act procurement phase. The CWS-NS is estimated to indefinitely suspended the Child Welfare Services cost $392.7 million (all funds), including one full Web (CWS/Web) project proposed to replace the year of maintenance and operations, and planned current child welfare case management system, to be fully implemented by September 2017. The which is based on outdated technology and not successful implementation of CWS-NS is intended fully compliant with federal system requirements. to meet the business needs of CWS, comply with The CWS/Web project was suspended due to state and federal laws and regulations, result in escalating project costs. However, the Legislature enhanced data reliability and availability, allow user made clear its continued interest in addressing mobility, and allow for automated system interfaces the deficiencies in the existing system through with other state partners for data sharing. 2011-12 budget legislation that directed the www.lao.ca.gov Legislative Analyst’s Office 51 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN JUDICIARY AND CRIMINAL JUSTICE The budget act and subsequent legislation Trial Court Operations. The budget package provides $10.3 billion from the General Fund for fully restores a one-time $418 million General judicial and criminal justice programs, including Fund reduction made to the trial courts in support for ongoing programs and capital outlay 2012-13. The budget also provides an ongoing projects (see Figure 15). This is an increase of $60 million General Fund augmentation for $936 million, or 9.6 percent, above the revised increasing public access to trial court services and 2012-13 General Fund spending level. Figure 16 requires that these funds be allocated based on the summarizes the major General Fund changes new workload-driven funding formula recently adopted by the Legislature in the criminal justice adopted by the judicial branch. (The statewide area, which we discuss in more detail below. courts—the Supreme Court, Courts of Appeal, and Habeas Corpus Resource Center—received an Judicial Branch augmentation of $3 million for their operations.) As The budget provides nearly $3.2 billion for shown in Figure 17, the $60 million augmentation support of the judicial branch—an increase of reduces the amount of ongoing prior-year $268 million, or 9.2 percent, from the revised reductions to the trial courts to $664 million in 2012-13 level. This amount includes $1.2 billion 2013-14. The budget also assumes that $446 million from the General Fund and $499 million from the in actions—including local trial court reserves, counties, with most of the remaining balance of transfers from various special funds, and revenues nearly $1.5 billion derived from fine, penalty, and from fine and fee increases made in prior years— court fee revenues. The General Fund amount is will be taken to help offset a large portion of this an increase of $463 million, or 61 percent, from reduction. On net, this leaves $218 million in the revised 2012-13 amount. Funding for trial reductions allocated to the trial courts in 2013-14, a court operations is the single largest component of similar amount as taken in recent years. the judicial branch budget, accounting for nearly As described below, the final budget package four-fifths of total spending. also includes a number of policy changes related to court operations. Figure 15 Judicial and Criminal Justice Budget Summarya General Fund (Dollars in Millions) Change From 2012-13 Program/Department 2011-12 2012-13 2013-14 Amount Percent Department of Corrections and Rehabilitationb $9,206 $8,698 $9,199 $501 5.8% Judicial branch 1,215 755 1,218 463 61.3 Department of Justice 101 167 174 8 4.6 Board of State and Community Corrections — 42 44 3 6.7 Other criminal justice programsc 53 51 13 -38 -74.6 Totals $10,576 $9,712 $10,649 $936 9.6% a Amounts do not reflect various fund shifts, which make year-to-year comparisons difficult. b Includes $315 million for 2013-14 to comply with prison population cap. c Includes debt service on general obligation bonds, Office of the Inspector General, and State Public Defender. 52 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE Trial Court Reserves Figure 16 and Cash Management. Major General Fund Changes—Judicial and Criminal Justice Programs The budget package 2013-14 (In Millions) maintains the new trial Program Amount court reserves policy Judicial Branch enacted in 2012-13, Restore one-time reductions $418 which limits trial court Increase funding for court operations 63 reserves—unspent funds California Department of Corrections and Rehabilitation Increase funding to comply with prison population cap 315 from prior years—to Increase funding for employee compensation (expiration of PLP) 258 1 percent of prior-year Begin activation of Correctional Health Care Facility and DeWitt Annex 151 operating budgets Increase funding for debt service on lease-revenue costs 45 Expand fire camps 15 beginning in 2014-15. (As Additional savings from 2011 realignment of adult offenders -225 noted above, $200 million Modify probation incentive grant funding formula -30 in trial court reserves is PLP = personal leave program. assumed to be used to offset ongoing prior-year and user fee increases to help courts operate reductions on a one-time basis in 2013-14.) The more efficiently or recover costs: (1) limiting budget package also includes legislation that the information courts are required to provide provides some fiscal tools to help trial courts to state agencies for the state’s Tax Intercept manage their cash under this reserves policy. Program as operated by the Franchise Tax Board, Specifically, the budget (1) authorizes intra-branch (2) expanding administrative authority to waive special fund loans totaling up to $150 million repayment of court-ordered dependency counsel to trial courts for cash management purposes, Figure 17 (2) requires annual Trial Court Budget Reductions reporting regarding the (In Millions) amount of loans made, 2012‑13 2013‑14 and (3) exempts reserves 2011‑12 Estimated Budgeted which must be used for General Fund Reductions specific statutory purposes One-time reduction — -$418 — from the calculation of Ongoing reductions (cumulative) -$606 -724 -$664 a trial court’s 1 percent Total Reductions ‑$606 ‑$1,142 ‑$664 Actions to Address Reduction limit. Construction fund transfers $213 $299 $55 Administrative Other special fund transfers 89 102 52 Efficiencies and User Trial court reserves — 385 200 Increased fines and fees 71 121 121 Fee Increases. To Statewide programmatic changes 19 21 18 further assist trial courts Total Actions $392 $928 $446 address their ongoing Net Reductions Allocated to ‑$214 ‑$214 ‑$218 budget reductions, the the Trial Courtsa a budget authorizes four Addressed using various actions taken by individual trial courts, such as the implementation of furlough days and reduced clerk hours, as well as use of reserves (separate from those mandated by budget administrative efficiencies language or Judicial Council). www.lao.ca.gov Legislative Analyst’s Office 53 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN fees, (3) increasing the fee for “exemplification” of delay of four additional construction projects. records (involving triple certification of records, (Earlier in 2012-13, the Judicial Council indefinitely generally for use as evidence in jurisdictions delayed eight projects to address prior redirections outside of California) from $20 to $50, and of ICNA funds to trial court operations or the (4) increasing the fee for mailing claims to General Fund.) Finally, the budget includes the defendants in small claims actions from $10 to $15. reversion of $30 million in unspent ICNA funds Other Provisions. Other major policy changes due to lower-than-anticipated acquisition costs as included in the final budget package include: well as the indefinite delay of certain projects. (1) limiting audits conducted by the California State Corrections and Rehabilitation Auditor to five judicial branch entities biennially and requiring their selection to be based on The budget act and related legislation contains certain risk factors, (2) requiring reporting on the $9.2 billion from the General Fund for support Judicial Council’s policy regarding public access to of CDCR. This is a net increase of $501 million, committee meetings, and (3) making permanent or 5.8 percent, above the revised 2012-13 level of the current requirement that trial courts publicly spending. This increase primarily reflects (1) costs report their budgets prior to adoption. to expand the use of contracted beds, (2) additional Capital Outlay. The budget provides roughly employee compensation costs due to the expiration $830 million for various court construction of the personal leave program (PLP), and (3) costs projects. This amount consists of: (1) $752 million associated with the activation of CHCF and the in lease-revenue bond authority for the DeWitt Nelson Correctional Annex in Stockton. construction of two previously approved projects The budget package also includes $5 million for (San Diego and Stockton); (2) $75 million from CDCR to expand the provision of sex offender the Immediate and Critical Needs Account treatment to all sex offenders on parole. These (ICNA) for acquisition, design, and construction increases are partially offset by additional savings activities for 13 projects; and (3) $4 million in local from the decline of the state inmate and parolee reimbursements to ICNA for design activities for populations due to the 2011 realignment, which one project. (In accordance to Chapter 311, Statutes shifted responsibility for managing many lower- of 2008 [SB 1407, Perata], ICNA receives revenue level adult offenders from the state to counties. from certain court fee and fine increases.) Adult Correctional Population. Figure 18 The budget also transfers $200 million from shows the recent and projected changes in the ICNA to the General Fund on a one-time basis, inmate and parolee populations. As shown in the resulting in the design activities of 12 projects figure, these populations are projected to decline being delayed for up to a year. Additionally, the through 2015 and then grow slightly in subsequent budget authorizes $35 million from ICNA for years. The reductions are due largely to the effect the first service payment for the Long Beach of the 2011 realignment. The prison population is Courthouse, commencing upon occupancy in projected to decline to about 129,000 inmates by September 2013, and requires the Judicial Council the end of 2013-14, and the parole population is to complete a report assessing the public-private projected to decline to about 37,000 parolees. partnership delivery method used for the project’s Meeting the Prison Population Cap. In construction. The use of ICNA funds for Long September 2013, the Legislature passed and the Beach service payments will result in the indefinite Governor signed Chapter 310, Statutes of 2013 54 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE (SB 105, Steinberg) to address the federal three- Fund and the General Fund. The measure provides judge panel order requiring the state to reduce the that any money deposited into the Recidivism prison population to no more than 137.5 percent of Reduction Fund is for activities designed to reduce design capacity by December 31, 2013. Chapter 310 the state prison population, including recidivism provides CDCR with an additional $315 million reduction programs. (General Fund) and authorizes the department to In addition, Chapter 310 includes a provision enter into contracts to secure a sufficient amount suspending the closure of the California of inmate housing to meet the court order and Rehabilitation Center (Norco), which was to avoid the early release of inmates which might scheduled to occur by December 31, 2016. otherwise be necessary to comply with the order. Chapter 310 also requires that the administration The administration estimates that this funding submit reports to the Legislature by April 2014 and would allow it to contract for about 12,500 beds. January 2015 regarding the prison overcrowding The types of contracted beds could include problem and that provide recommendations that those operated by public or private providers in are cost-effective and protect public safety. California or other states. In addition, Chapter 310 On September 24, 2013, the three-judge panel authorizes CDCR to lease a private facility in issued an order directing the state to meet with California City and convert the facility’s existing inmate attorneys to discuss how to implement a staff to state employees. The authority provided long-term overcrowding solution. The order also to CDCR to expand its contract capacity expires prohibits the state from entering into any new January 1, 2017. contracts for out-of-state housing during this The measure also requires that if the federal meeting process. A subsequent order moved back court modifies its order capping the prison population, a share Figure 18 of the $315 million Inmate and Parolee Populations Projected to Decline Further appropriation in As of June 30 Each Year Chapter 310 would be 350,000 Parolees deposited into a newly Inmates established Recidivism 300,000 Reduction Fund. Specifically, the measure 250,000 requires that the first $75 million of freed up 200,000 funds resulting from having to contract for 150,000 fewer beds than projected 100,000 would be deposited into the fund. Any remaining 50,000 funds would be split evenly between the 2002 2004 2006 2008 2010 2012 2014 2016 2018 Recidivism Reduction www.lao.ca.gov Legislative Analyst’s Office 55 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN the deadline for meeting the population cap to for the fact that fewer probationers can come to February 24, 2014. state prison under realignment. These savings are Operational Impacts of Realignment. The partially offset by changes to expand the program budget package also includes several changes to reward counties when they successfully send related to realignment consistent with previous fewer felony probation failures to jail. In addition, administration implementation plans. Specifically, Chapter 310 increases the amount provided the budget includes $225 million in net savings to counties per failure reduced beginning in in 2013-14 related to the 2011 realignment. This 2014-15. In total, counties are budgeted to receive includes reduced parolee-related costs and savings $108 million in SB 678 grant funds in 2013-14. related to parole revocation hearings. (Under Employee Compensation Cost Increases. realignment, trial courts, rather than the Board of The budget includes an increase of $258 million Parole Hearings, will conduct parole revocation associated with increased employee compensation hearings beginning in 2013-14.) In addition, the costs. Most of this increase is a result of the budget includes $15 million to expand inmate fire expiration of the PLP, which reduced affected camps capacity, roughly to their levels prior to employees’ pay by about 5 percent and gave them realignment. Funding for this program had been eight hours of leave each month in 2012-13. cut previously because of anticipated population Correctional Health Care. The budget package reductions due to realignment. However, the includes $151 million from the General Fund population of inmates eligible for the camps has for CDCR to begin operating the CHCF and the been higher than was originally expected. The adjacent Dewitt Nelson Correctional Annex in budget package also includes other realignment- Stockton, both of which are scheduled to open related policy changes, such as a requirement that in 2013-14. The budget also includes funding to CDCR share with counties certain health records make permanent 211 existing nursing positions of offenders being released from prison to county for distributing medications to inmates. The supervision, as well as authorization for CDCR to annual General Fund cost of the positions, which establish a pilot reentry program to transfer some were initially approved on a two-year limited inmates to county jail up to 60 days prior to their term basis in 2011-12, is $15 million. In addition, release from prison. the budget provides $7 million to expand (1) the Probation Incentive Program. As part of the Transitional Case Management Program to 2013-14 budget package, the Legislature adopted pre-enroll all eligible inmates into Medi-Cal before statutory changes to the grant program authorized they leave prison, and (2) the Integrated Services by Chapter 608, Statutes of 2009 (SB 678, Leno). for Mentally Ill Parolees program, which provides The SB 678 grant program was enacted to improve mental health treatment and other wraparound outcomes for adult felony probationers by giving services to parolees. Increasing prerelease counties a share of the state prison and parole Medi-Cal enrollment is expected to allow the savings that occurs when fewer felony probation state to draw down about $7 million in increased failures are sent to state prison. Collectively, the federal Medi-Cal reimbursements for parolees’ adopted changes to this program have the net medications, offsetting existing General Fund effect of reducing total program funding by about costs. $30 million. This reduction largely reflects savings Division of Juvenile Justice (DJJ). The budget from changes in the grant formula to account provides $170.9 million in General Fund support 56 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE of DJJ. This includes a reduction of $8.7 million Enforcement of Firearms Laws. The budget related to the juvenile ward population. The average includes an augmentation of $3.2 million from the daily ward population is projected to decline by Dealers’ Record of Sale (DROS) Special Account 17 percent, from 821 wards in 2012-13 to 679 primarily to support increased Department of wards in 2013-14. These savings are partly offset Justice (DOJ) workload related to conducting by an increase of $8.1 million to reflect actual background checks of persons seeking to purchase expenditures that had not been accounted for in firearms. In addition, Chapter 2, Statutes of 2013 prior budgets, specifically higher-than-average (SB 140, Leno), provides a one-time supplemental salaries for security staff and a contract with DSH appropriation of $24 million in 2012-13 from the to provide inpatient mental health services to DROS Special Account to reduce a backlog of cases wards. in DOJ’s Armed Prohibited Persons System (APPS). The APPS confiscates firearms from persons legally Other Criminal Justice Programs prohibited from possessing them due to criminal Board of State and Community Corrections history, mental illness, or other prohibiting factors. (BSCC). The budget includes $129 million Public Safety Communications Office. As part ($44 million from the General Fund and of the budget package, the Legislature approved the $85 million from other funds) for BSCC, which is Governor’s proposal to transfer the Public Safety responsible for administering various public safety Communications Office and $187 million in various grants, overseeing local correctional standards, special funds from the Department of Technology providing technical assistance to local criminal to the Office of Emergency Services (OES). (The justice agencies, and collecting data. Compared California Emergency Management Agency became to the revised spending estimates for 2012-13, OES on July 1, 2013, pursuant to the Governor’s the budget increases support for law enforcement Reorganization Plan Number 2 of 2012.) This office grants to cities by $3.5 million. The budget package supports the state’s 911 system and public safety also adds a new member to BSCC’s board to act as a radio infrastructure. The Legislature also approved full-time chairperson and authorizes an additional budget trailer legislation to transfer to OES the four administrative and five research positions, authority to set the amount of the surcharge levied which are funded by redirecting some of BSCC’s on certain telecommunication services to support existing spending authority. the 911 system. RESOURCES AND ENVIRONMENTAL PROTECTION The 2013-14 budget provides a total of Public Utilities Commission [CPUC] in the “Other $7.2 billion from various funds for programs Major Provisions” section of this report.) administered by the Natural Resources and Resources Programs Environmental Protection Agencies. This is a decrease of $2.7 billion, or 27 percent, when As shown in Figure 19 (see next page), the compared to revised 2012-13 expenditures. Most budget includes $4.4 billion (including $2.1 billion of this reduction reflects lower bond expenditures from the General Fund) for the support of various in 2013-14. (We discuss funding for the California resources programs in 2013-14. This is a decrease www.lao.ca.gov Legislative Analyst’s Office 57 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Figure 19 Resources Budget Summary (Dollars in Millions) Change From 2012‑13 2011‑12 2012‑13 2013‑14 Amount Percent Expenditures Department of Water Resources $732 $2,108 $733 -$1,375 -65% General obligation bond debt service 898 890 1,000 109 12 Department of Forestry and Fire Protection 734 877 846 -31 -4 Department of Parks and Recreation 648 778 530 -249 -32 Energy Resources Conservation 321 499 489 -10 -2 Department of Fish and Wildlife 321 428 364 -64 -15 Department of Conservation 85 106 83 -23 -21 California Conservation Corps 72 84 71 -12 -14 Wildlife Conservation Board 112 672 66 -606 -90 Other resources programs 309 530 197 -333 -63 Totals $4,231 $6,973 $4,379 ‑$2,594 ‑37% Funding General Fund $1,909 $2,030 $2,124 $94 5% Special funds 939 1,179 1,227 48 4 Bond funds 1,223 3,447 823 -2,624 -76 Federal funds 161 316 205 -111 -35 of $2.6 billion, or 37 percent, from the revised 2013-14, with the remaining costs to be paid by the 2012-13 spending level. Most of this reduction in state’s water contractors. (The state’s share of costs year-over-year spending is attributable to a decline is based on the Davis-Dolwig Act of 1961, which in bond fund spending. The largest single General establishes that contractors should not be charged Fund expenditure in the resources area is debt for the costs incurred to enhance fish and wildlife service on general obligation bonds—totaling or provide recreation on the State Water Project $1 billion in 2013-14. [SWP].) According to DWR, the estimated total cost of the Lake Perris dam project is $287 million. Department of Water Resources (DWR) However, the total cost of the project may be The budget includes $733 million from various determined to be less in the future if certain parts fund sources to support DWR, a net reduction of the remediation are unnecessary. This would of $1.4 billion, or 65 percent, from the revised reduce the overall amount of state funding needed. 2012-13 level. This is primarily due to a reduction In addition, the budget provides $10 million in in planned bond expenditures. The budget does, bond funds for a grant to several local agencies to however, include funding increases for certain fund a fish screen for a new water project along DWR-related programs. For example, the budget the Sacramento River that will serve the cities of provides $11.3 million in Proposition 84 bond Davis and Woodland. The fish screen would protect funds to begin the remediation of the Lake migrating fish (such as salmon). The $10 million Perris dam in order to ensure its seismic safety. appropriation provides a match to secure federal Specifically, the funding provided in the budget funding. reflects the state’s share of the total repair costs in 58 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE Delta-Related Expenditures visitors, $197 million in other special funds, $82 million in bond funds, and $34 million in The budget provides a total of $270 million federal funds. in state funds—mainly SWP funds and various Boating and Waterways. The DPR budget bond funds—across nine state entities (such as includes a fund shift of $33.7 million in special DWR, the Department of Fish and Wildlife [DFW], funds (mainly boat fuel taxes and registration and the Delta Stewardship Council) to address fees) to support the newly created Division of a number of interrelated water problems in the Boating and Waterways within DPR. Under the Sacramento-San Joaquin Delta region. The largest Governor’s Reorganization Plan Number 2 of 2012, program expenditures are for improvements to the responsibilities of the Department of Boating and existing conveyance system ($158 million) as part Waterways were transferred to DPR effective July 1, of the Bay Delta Conservation Plan and ecosystem 2013. restoration ($41 million). Funding for Maintenance at Goat Canyon. Forestry and Fire Protection The budget provides $1 million from the State Parks Recreation Fund each year for three years The budget includes total expenditures of to perform maintenance on the Goat Canyon $846 million for the California Department of Sediment Basins at Border Fields State Park, Forestry and Fire Protection (CalFire) from various which must be cleared of trash that flows in funding sources, a decrease of $31 million, or from the Tijuana River in order to comply with 4 percent, from the revised 2012-13 level. Of this various state environmental regulations. The total, $654 million is for fire protection activities. budget package also requires DPR to provide a (This does not include reimbursements from report to the Legislature in 2015-16 on alternative local governments for cooperative fire protection, funding sources to support the ongoing annual which is expected to be $301 million in 2013-14.) maintenance costs at the Goat Canyon Sediment The General Fund provides $661 million for Basins. CalFire operations, which is a net decrease of $80 million from the prior year. As has been Energy Commission the case in previous years, the budget includes The budget provides a total of $489 million for $177 million from the General Fund for emergency the support of the Energy Resources Conservation fire protection activities and allows the Director and Development Commission (commonly referred of Finance to augment this amount to pay for to as the California Energy Commission, or CEC). additional fire protection expenses, as needed. This is a decrease of $10 million, or 2 percent, from Department of Parks and Recreation (DPR) the revised 2012-13 budget. The budget authorizes the expenditure of $193 million from the Electric The budget provides a total of $530 million Procurement Investment Charge established by for the support of DPR. This is a decrease of the CPUC. Specifically, this surcharge is intended $249 million, or 32 percent, from the revised to support those activities previously funded by 2012-13 level, mainly due to a reduction in bond the “public goods charge,” such as investments fund expenditures for local assistance grants. The in public interest energy research and incentive budget includes $116 million from the General payments for renewable energy production. Fund, about $100 million from fees paid by park www.lao.ca.gov Legislative Analyst’s Office 59 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Department of Fish and Wildlife for THP regulation at these departments to their 2007 staffing levels in order to ensure that THPs The budget includes $364 million from various receive the legally required reviews. Additional fund sources to support DFW, a net reduction positions are also provided to CalFire to allow of $64 million, or 15 percent, from the revised the department to complete additional reporting 2012-13 level. This is primarily due to a reduction requirements. in planned bond expenditures and federal funding. California Coastal Commission. The budget The budget does, however, include increased provides a one-time increase of $4 million in reimbursements of $2.5 million in revenues General Fund support for the California Coastal generated from agricultural and grazing leases Commission to review and certify the plans that (Wildlife Restoration Fund), as well as trailer bill local governments within the coastal zone develop language that allows these revenues to be used to govern land use in those areas. The increase for improving and maintaining the land. These includes $3 million to fund 25 limited-term changes were adopted in response to concerns that positions and $1 million for grants to local revenues from leases had been improperly used or governments. The additional funding is intended to never collected. help ensure that all local plans are completed and Other Resources Programs up to date. Salton Sea Restoration. The budget provides Environmental a total of $32.4 million for activities related to Protection Programs the restoration of the Salton Sea. Specifically, the As shown in Figure 20, the budget includes budget includes: (1) $28.4 million in reimbursement $2.8 billion (mostly from special funds) for various authority for DWR to construct 800 to 1,200 acres environmental protection programs. This is a of habitat to test future restoration concepts for decrease in spending of $111 million, or 4 percent, the Salton Sea, (2) $2 million in local assistance from the revised 2012-13 spending level. to the Secretary of Natural Resources from the Salton Sea Restoration Fund for a study to Resources, Recycling, and Recovery develop a financially feasible restoration plan, and The budget provides a total of $1.5 billion (3) $2 million to DWR in reimbursement authority to the Department of Resources, Recycling, and to support program administration. Recovery (CalRecycle) for waste management and Timber Harvest Plan (THP) Regulation. The recycling efforts. Of this amount, $1.2 billion is budget provides a $6.6 million augmentation from to support the department’s Beverage Container the Timber Regulation and Forest Restoration Recycling Program (BCRP), which is funded Fund to support 49.3 additional positions for THP from beverage container redemption payments regulation, which reflects a 35 percent increase that are collected and deposited into the Beverage from 2012-13 staffing levels. The additional Container Recycling Fund (BCRF). Specifically, positions will be allocated across the four the budget provides eight, three-year limited-term departments responsible for reviewing THPs— positions and $984,000 from the fund to develop CalFire, DFW, the State Water Resources Control new procedures for certifying recyclers. Board, and the Department of Conservation—as The budget package also includes funding and well as the Natural Resources Agency. Some of the trailer bill language for the department to begin additional positions are intended to restore staffing 60 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE Figure 20 Environmental Protection Budget Summary (Dollars in Millions) Change From 2012‑13 2011‑12 2012‑13 2013‑14 Amount Percent Expenditures Department of Resources, Recycling, and Recovery $1,445 $1,460 $1,485 $25 2% State Water Resources Control Board 698 763 629 -134 -18 Air Resources Board 474 405 422 17 4 Department of Toxic Substances Control 159 190 177 -13 -7 Department of Pesticide Regulation 78 82 81 -1 -1 Other environmental programs 32 40 36 -4 -11 Totals $2,886 $2,941 $2,830 ‑$111 ‑4% Funding General Fund $40 $47 $46 -$1 -2% Special funds 2,448 2,484 2,454 -30 -1 Bond funds 180 210 127 -83 -39 Federal funds 218 199 202 3 1 the process of reforming BCRP to address both to reduce GHG emissions to 1990 levels by 2020. the program’s structural deficit and recycling Figure 21 (see next page) lists expenditures, number fraud. Specifically, the budget provides eight of positions, funding sources, and activities three-year, limited-term positions and $984,000 funded on an agency-by-agency basis for the from the BCRF to develop new procedures for implementation of AB 32 in 2013-14. Expenditures certifying recyclers, as well as eliminates the use of include about $33 million for ARB to continue a comingled rate for returned beverage containers, implementation of various measures, such as the and mandates the use of CalRecycle’s data cap-and-trade program discussed below. The reporting system for all program participants. budget also includes $649,000 and five positions for the Department of Housing and Community Air Resources Board (ARB) Development to review the housing elements of The budget provides a total of $422 million to local governments’ general plans. The balance of the ARB, an increase of $17 million, or roughly the expenditures is to be used primarily to fund 4 percent, from the revised 2012-13 level. This research and planning of other GHG emission amount includes Proposition 1B bond funds for reduction activities. As shown in the figure, the infrastructure projects, activities related to freight funding source for AB 32 implementation is the movement, and programs to reduce the state’s AB 32 cost of implementation fee that ARB began emission of greenhouse gases (GHGs). assessing in 2010-11 on major GHG emitters Climate Change. The budget provides who are subject to the cap-and-trade regulation. $38 million in special funds across eight state For 2013-14, the fee is also intended to repay agencies for implementation of the California various special fund loans that supported the Global Warming Solutions Act of 2006 implementation of AB 32 between 2007-08 and (Chapter 488, Statues of 2006 [AB 32, Núñez]) 2009-10. www.lao.ca.gov Legislative Analyst’s Office 61 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Figure 21 Allocation of AB 32 Implementation Fee for 2013-14 (Dollars in Thousands) Agency Positions Expenditures Activity Air Resources Board 158 $35,894 Implement GHG emission reduction regulations. Department of Housing and Community Development 6 783 Review housing elements for local governments. Secretary for Environmental Protection 4 586 Oversee Climate Action Team activities. State Water Resources Control Board 2 578 Implement and monitor GHG emission reduction measures. Department of Forestry and Fire Protection 1 576 Conduct carbon sequestration analysis. Department of Resources, Recycling, and Recovery 6 515 Implement and monitor GHG emission reduction measures. Department of Public Health — 348 Develop sustainable community modeling. Department of Water Resources 2 324 Conduct SWP climate change/energy program activities. Totals 179 $39,694 GHG = greenhouse gas; SWP = State Water Project. Cap‑and‑Trade. In order to achieve the state’s expected to raise additional revenue. The budget emission reduction goal (as specified in AB 32), plan authorizes the Director of Finance to loan ARB implemented a cap-and-trade program up to $500 million in cap-and-trade auction that places a “cap” on aggregate GHG emissions revenues to the General Fund. The budget also from entities responsible for roughly 80 percent provides $577,000 in auction revenue to the Office of the state’s emissions. As part of this program, of Environmental Health Hazard Assessment ARB began holding quarterly auctions in 2012-13 to identify disadvantaged communities that for entities to obtain carbon allowances. As of can benefit from investments of cap-and- June 2013, these auctions have raised a total of trade revenues. In addition, two positions and $257 million. Planned auctions for 2013-14 are $1.3 million in auction revenue is provided to ARB to enhance oversight of auction activities. TRANSPORTATION The spending plan provides $19.8 billion from Caltrans. This level of expenditures is less than in various fund sources for transportation programs. 2012-13 by roughly $500 million (or 3.8 percent). As shown in Figure 22, this is an increase of The budget provides approximately $4.6 billion for $273 million, or 1.4 percent, when compared to the transportation capital outlay, $3.2 billion for local revised level of spending in the prior year. assistance, $1.8 billion for capital outlay support (COS), and $1.7 billion for highway maintenance Department of Transportation (Caltrans) and operations. The budget also provides $1 billion The budget plan includes total expenditures for Caltrans’ mass transportation and rail of $12.8 billion from various fund sources for programs and $218 million for transportation 62 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE planning. The balance of funding goes for program debt-service costs on transportation bonds in development, legal services, and other purposes. 2013-14. These particular revenues come from Active Transportation Program. Active miscellaneous sources, such as rental income transportation involves the traveler being and the sale of surplus property. In addition, the physically active, such as biking and walking. Legislature adopted budget trailer legislation The budget package consolidates three existing to permanently dedicate all such revenues active transportation programs—the federal collected in future years to pay debt service on Transportation Alternatives Program, Safe transportation bonds. Routes to Schools, and the Bicycle Transportation COS Program Review. The budget provides Account—into a single active transportation $1.8 billion for 10,149 FTE staff in the COS program and provides a total of $129.5 million program to support Caltrans’ capital outlay annually for this new program. As specified projects. Staff in the COS program conduct in budget trailer legislation, 50 percent of the environmental reviews, design and engineer funds are available for statewide projects, projects, oversee construction, and perform 40 percent available for large urban areas through various other related activities. Due to concerns metropolitan planning organizations, and regarding the lack of workload information to 10 percent available for rural areas. The legislation fully justify the actual level of COS resources that also specifies that at least $24 million of the Caltrans needs each year, the Legislature adopted program funding must be spent on Safe Routes to supplemental report language requiring DOF Schools projects for each of the first three years and our office to jointly conduct a comprehensive of the program (2013-14 through 2015-16). The review of Caltrans’ COS program. The review is to California Transportation Commission is required focus on identifying workload metrics, improving to develop guidelines and select projects for the program processes, and achieving a transparent state’s share of the funding. and standardized workload-based assessment Continued Use of Transportation Funds to of staffing needs. The Legislature’s intent is that Pay Debt Service. The budget uses $67 million the results of the review be incorporated into the in transportation revenues that are not 2014-15 budget. constitutionally restricted to pay General Fund Figure 22 Transportation Program Expenditures Various Funds (Dollars in Millions) Change From 2012‑13 Program/Department 2011‑12 2012‑13 2013‑14 Amount Percent Department of Transportation $11,416 $13,261 $12,757 -$504 -3.8% High-Speed Rail Authority 112 2,432 3,247 815 33.5 California Highway Patrol 1,809 1,805 1,879 74 4.1 Department of Motor Vehicles 915 951 979 28 2.9 Transit Capital 767 598 480 -118 -19.7 State Transit Assistance 396 415 392 -23 -5.5 California Transportation Commission 53 28 29 1 3.6 Totals $15,468 $19,490 $19,763 $273 1.4% www.lao.ca.gov Legislative Analyst’s Office 63 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Proposition 1B Appropriations. Fund. This loan will provide short-term funding for Proposition 1B, a ballot measure approved by the cost of state operations as the HSRA pursues a voters in November 2006, authorized the issuance validation action. These funds are to be repaid with of $20 billion in general obligations bonds for interest when the state is once again able to sell state and local transportation improvements. All Proposition 1A bonds. Proposition 1B funds are subject to appropriation California Highway Patrol (CHP) by the Legislature. The budget appropriates $258 million of Proposition 1B funds for various The budget provides $1.9 billion to fund CHP transportation programs. This appropriation level operations, $74 million, or 4 percent, more than in is significantly lower than the appropriations 2012-13. Virtually all of this amount is from the made in recent years because the majority of Motor Vehicle Account (MVA), which generates funds have already been appropriated. its revenues primarily from driver license and vehicle registration fees. The budget includes High-Speed Rail Authority (HSRA) $17 million for CHP to replace three helicopters The budget plan includes total expenditures and one airplane. In addition, the budget of $3.2 billion from various fund sources for provides $4.9 million to fund the acquisition HSRA. This is an increase of $815 million, or and preliminary plans for a new CHP area office 34 percent, compared to the level of spending in Santa Fe Springs, as well as $1.5 million for in 2012-13, which is mainly due to the timing advanced planning and site selection to replace up of the expenditure of funds available for the to five unspecified CHP area offices. high-speed rail project. Of the $3.2 billion in total Department of Motor Vehicles (DMV) expenditures, the budget plan assumes $2.3 billion will be from the sale of Proposition 1A (2008) The budget provides $979 million for DMV bonds and $900 million from federal funds. We operations, $28 million, or 3 percent, more than note, however, that Proposition 1A funds will not in 2012-13. Of this total amount, 96 percent is be available for expenditure until the state court from the MVA. The budget includes $6.5 million affirms through a validation action that the overall in funding for the construction phase of the project is consistent with the funding requirements replacement DMV field office in Grass Valley. In of Proposition 1A. addition, the budget includes nearly $1 million for Increased Funding for Additional Staffing. DMV to develop regulations for the safe operation The budget provides $10.5 million to fund an of autonomous vehicles by January 1, 2015, as additional 105 positions at HSRA—more than required by Chapter 570, Statutes of 2012 (SB 1298, double the number of positions funded in 2012-13. Padilla). The additional staff will handle increasing workload Information Technology Modernization related to procurements, IT, human resources, and (ITM) Project Terminated. The ITM Project’s moving some project management and oversight goal was to modernize the DMV’s core driver activities from external consultants to in-house staff. license and vehicle registration systems. In 2012, Public Transportation Account Loan. The disagreements arose between the department and budget plan authorizes a one-time loan of up to the primary vendor on how to effectively manage $26.2 million from the Public Transportation the workload and maintain the project on schedule, Account to the High-Speed Passenger Train Bond including the quantity of vendor staff necessary 64 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE and their required experience. According to the on the vehicle registration component of the ITM department, the disagreements seriously and Project, and there is no current plan to address negatively affected the project schedule. Based on necessary upgrades. Of the estimated $242 million concerns regarding the lack of progress towards in total project costs, a total of $140 million reaching an agreement on a path forward for (MVA) has been spent on the project. The DMV the project, the California Technology Agency anticipates that $11 million of the $16 million terminated the ITM Project on January 31, 2013. 2012-13 appropriation for the project will remain The termination notice directed DMV to complete unspent due to its termination, resulting in savings. a small amount of remaining work on the driver Going forward, DMV plans to evaluate options for license component of the project. That work has addressing the continued need for a modernized since been completed and the driver license system vehicle registration system. is fully upgraded. Minimal work was completed OTHER MAJOR PROVISIONS Enterprise Zones Chapter 70, Statutes of 2013 (SB 90, Galgiani) also establish a package of new tax expenditure For about three decades, the Enterprise Zone programs to replace the Enterprise Zone program. program has provided a collection of tax benefits— This package includes a sales tax exemption for most significantly tax credits for recently hired certain equipment purchases. Specifically, business employees and purchases of certain equipment—to expenditures on qualified manufacturing and businesses that operate or hire employees residing research and development equipment are exempt in specifically defined geographical areas. In 2010, from the state General Fund portion of the sales the most recent year for which data are available, tax rate (3.94 percent). This exemption expires the Enterprise Zone program reduced General on January 1, 2022. As described below, the tax Fund revenues by more than $700 million. expenditure package also includes a new hiring Enterprise Zones Eliminated. Legislation credit and tax credit agreements. enacted shortly after the 2013‑14 Budget Act— New Hiring Credit. Certain businesses Chapter 69, Statutes of 2013 (AB 93, Committee on operating in former Enterprise Zones or newly Budget)—eliminates the Enterprise Zone program designated areas (census tracts which are in the on January 1, 2014. No new Enterprise Zone tax top 25 percent of the state in both unemployment credits will be issued for new hires or equipment and poverty rates) are eligible to receive a tax credit purchases occuring after January 1, 2014. However, for each newly hired full-time employee earning businesses are permitted to “carry forward” hiring a minimum of 150 percent of the state minimum and sales tax credits received prior to that date to wage ($12 per hour) who is: (1) unemployed offset future tax liabilities for a period of ten years. for more than six months, (2) a veteran who is Therefore, the state will continue experiencing unemployed following discharge, (3) a recipient some Enterprise Zone-related revenue losses for the of the federal Earned Income Tax Credit or cash next decade. assistance through CalWORKs or county General New Tax Expenditure Programs Adopted. Assistance programs, or (4) an ex-offender. The Effective January 1, 2014, Chapter 69 and new employee must also represent an increase www.lao.ca.gov Legislative Analyst’s Office 65 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN in the firm’s total statewide employment. The End of PLP and Furloughs. For 2012-13, all hiring credit is equal to 35 percent of wages paid state employees were subject to PLP or furloughs. above 150 percent (or $10 per hour, in some cases) The two policies are similar—employees receive and below 350 percent of the state minimum eight hours of unpaid leave, corresponding with wage and may be received for up to five years per a 4.6 percent reduction in pay. June 2013 was new employee. Temporary help, retail, food and the last month of PLP/furloughs. As a result of beverage service, and certain other entertainment these policies ending, departmental General businesses would not be eligible for the hiring Fund employee compensation costs increase by credit. The tax credit program would expire on $370 million in 2013-14. January 1, 2021. “Top Step” Pay Increase. Employees at the GO-Biz Tax Credit Agreements. General top step of their pay ranges received a pay increase Fund savings resulting from the elimination of in July 2013. Depending on their MOU, affected Enterprise Zones in excess of the cost of the new employees received between a 2 percent and sales tax exemption and hiring credit—up to 5 percent pay increase—for a total of $221 million $30 million in 2013-14, $150 million in 2014-15, increased state General Fund costs. and $200 million thereafter—are allocated to a new Rising Health Care Costs. For 14 of the state’s tax credit program administered by the Governor’s 21 bargaining units and the state’s managerial and Office of Business and Economic Development supervisorial employees, the state pays a percentage (GO-Biz). Under this new program, GO-Biz will of a weighted average of the premiums for the four negotiate agreements with targeted businesses to state health plans with the largest enrollment, plus provide tax credits under certain circumstances. a percentage of the average additional premiums The amount and extent of the tax credits are to be to enroll dependent family members. For these based on criteria specified in state law. Additionally, employees, the state’s contributions automatically a business’ receipt of the tax credits is contingent increase to reflect any increases in premium costs. upon its fulfilling predefined employment and The budget assumes that these General Fund costs compensation targets. A new five-member will increase by about $20 million in 2013-14. committee (California Competes Tax Credit The budget assumes that the state’s contributions Committee) must approve all tax credit agreements. toward health premium costs for all other state The State Treasurer, DOF, GO-Biz, Senate, and employees will not increase in 2013-14. Assembly each appoint one representative to the New MOUs Will Increase State Costs Relative committee. to Budget Assumptions. Shortly after the budget was passed, the Legislature ratified new MOUs Employee Compensation for 16 bargaining units. Beginning in 2013-14, the Increased Employee Compensation Costs. new MOUs change the state’s contribution towards Relative to 2012-13, the budget package provides health premiums for some employees and their about $600 million in increased General Fund dependents, increase pay for certain classifications, support for employee compensation. As described and increase travel reimbursement rates available below, these increased resources offset state to employees when they travel on state business. departments’ costs associated with the end of These changes increase state 2013-14 General Fund furloughs, pay increases, and health care cost costs by about $20 million relative to the amounts increases. included in the budget package. The new MOUs 66 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE also provide pay increases in 2015-16. (Some of oversight hearing. Funding for the remainder of the the MOUs would provide pay increases in 2014-15 fiscal year—$12.1 million General Fund—was made if DOF determines that the state revenues are available in August after a legislative hearing and sufficient.) By 2015-16, these pay changes and upon notification of the Joint Legislative Budget other changes will increase ongoing state General Committee and the appropriations committees in Fund costs by about $400 million annually. Three each house. bargaining units have expired MOUs. New MOUs FI$Cal with these other bargaining units could further increase state employee compensation costs beyond Financial Information System for California what is assumed in the budget and in future years. (FI$Cal). The FI$Cal project seeks to build an integrated financial information system for the 21st Century Project state to replace the current systems, which are Project Suspended. In February 2013, the fragmented and outdated. In his 2012‑13 May California Technology Agency suspended the Revision, the Governor proposed eliminating 21st Century Project, an IT effort by the State all General Fund support for FI$Cal in 2012-13, Controller’s Office (SCO) to replace the state’s aging proposing instead to accelerate special fund payroll systems. The state suspended the project contributions and defer General Fund expenditures because the initial pilot phase of the project was to future project years. The 2012‑13 Budget Act unable to issue accurate payroll. System errors reflected the adoption of the Governor’s proposal, included under- and over-compensation of wages, providing $89 million (special and other funds) failure to issue payments to retirement accounts, to continue with FI$Cal development. The and erroneous deductions related to employee 2013‑14 Budget Act continues to reflect General insurance. At the same time, SCO terminated its Fund savings through accelerated special fund contract with the project’s primary vendor, SAP contributions for support of FI$Cal. The spending Public Services Inc. To date, the state has spent over plan includes $84.8 million ($2.1 million General $262 million of the estimated $373 million total Fund) for the continuation of the design, project costs. development, and implementation of FI$Cal. One‑Year Proposal to Reconcile Payroll Errors The FI$Cal project implemented the new and Prepare for Litigation. In a May Revision financial information system within the first group letter submitted to the Legislature, the Governor of departments (what is known as the pre-wave proposed $14.6 million ($11.9 million General group of departments), as scheduled in July 2013 Fund) in 2013-14 to (1) ensure SCO employees without incident. The project will continue to and vendors received accurate payments and implement the system in a growing number of information during the pilot period, (2) archive departments through subsequent deployments. The the pilot system for record-keeping purposes, and FI$Cal project is estimated to cost $617 million (all (3) prepare for contractually mandated mediation funds) and is planned to be fully implemented in and potential legal proceedings with SAP. The July 2016. 2013‑14 Budget Act reflects these changes in full, Labor Programs but limits funding for these activities to the first two months of the fiscal year ($2.4 million General Interest Payment for Federal Unemployment Fund), which correspond with a planned legislative Insurance Loan. California’s Unemployment www.lao.ca.gov Legislative Analyst’s Office 67 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN Insurance (UI) fund has been insolvent since 2009, Four Mandates Eliminated. Budget trailer requiring the state to borrow from the federal legislation (Chapter 28, Statutes of 2013 [SB 71, government to continue payment of UI benefits. Committee on Budget and Fiscal Review], as California’s outstanding federal loan is about modified by Chapter 161, Statutes of 2013 [AB 81, $10 billion. The state is required to make annual Committee on Budget and Fiscal Review]) modifies interest payments on this federal loan, and the state statutes to prospectively eliminate four interest costs are estimated to be $261.5 million mandates that have been suspended annually (General Fund) in 2013-14. for two decades. These state mandates were recast as recommended “best practices” for local State Mandates (Non-Education) governments. Few Mandates Funded. The budget plan Two Open Government Measures Included provides $48.4 million from the General Fund in Proposed Constitutional Amendment. The for 13 mandates primarily related to criminal California Public Records Act and Open Meetings justice and tax administration. The budget bill Act were included in a legislative constitutional suspends 59 non-education mandates, including amendment. If approved by the state’s voters in the mandates related to elections, local coastal plans, June 2014 primary election, Senate Constitutional and animal shelters. When a mandate is suspended, Amendment 3 would eliminate the state’s local government compliance with the mandate’s obligation to reimburse local governments for their provisions is optional during the budget year. future costs to implement the California Public Backlog Payments Deferred. Similar to Records Act. (The state’s obligation to reimburse state budget actions in recent years, the budget local governments for their future costs to deferred payment for two labor relations mandates: implement the Open Meetings Act was eliminated Peace Officer Procedural Bill of Rights and Local under Proposition 30 of 2012.) In 2013-14, the Government Employment Relations. The budget budget package specifies that these measures’ also deferred making payments towards retiring requirements are: the state’s accumulated non-education mandate • California Public Records Act—in effect debt (owed primarily to counties). This debt for all local governments, including schools consists of approximately: and community college districts. • $1.1 billion for claims submitted by local • Open Meetings Act—in effect for schools governments in or after 2004. Almost all and community college districts, but of these claims are for mandates that the suspended for cities, counties, and special state has subsequently suspended, repealed, districts. or substantially revised. State law does not specify a payment plan for retiring these California Public Utilities Commission mandate obligations. The budget provides a total of $1.3 billion to • $800 million for claims submitted before the CPUC, an increase of $60 million, or roughly 2004. State law specifies a 15-year payment 5 percent, from the revised 2012-13 level. This plan for these mandates, but the state has amount reflects an increase in programmatic not made a payment on this plan since spending in Universal Lifeline and Deaf and 2006-07. Disabled Teleconnect programs. Budget-related 68 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE legislation adopts a series of changes to increase Seismic Safety Commission transparency and oversight of the CPUC’s Budget legislation establishes a $0.15 annual regulatory activities. In addition, the Legislature assessment on the owners of each commercial approved supplemental report language requiring and residential property insured by a property the CPUC to provide a report regarding each insurance policy. The funds raised from the pending administrative or judicial action involving assessment will be deposited into a special account claims arising from the energy crisis of 2000-02 in within the Insurance Fund and used to pay the which the commission is a party. The Legislature ongoing operating costs of the Seismic Safety also requested that the California State Auditor Commission. audit the CPUC’s books and records to ensure appropriate accounting processes are being used. www.lao.ca.gov Legislative Analyst’s Office 69 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN 70 Legislative Analyst’s Office www.lao.ca.gov LEGISLATIVE ANALYST’S OFFICE www.lao.ca.gov Legislative Analyst’s Office 71 THE 2013-14 BUDGET: CALIFORNIA SPENDING PLAN LAO Publications The Legislative Analyst’s Office (LAO) is a nonpartisan office that 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 e-mail 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. 72 Legislative Analyst’s Office www.lao.ca.gov